Despite its soaring stock price, I remain bearish on Nvidia Corporation (NASDAQ: NVDA). While the company is a key player in the AI boom, its role as an infrastructure provider raises concerns about its long-term prospects. Historical parallels with railroads suggest that infrastructure companies often face stagnation after initial growth, questioning Nvidia’s ability to sustain its revenue trajectory.
The market’s uncertainty about AI capacity requirements may be inflating Nvidia’s valuation. While demand for AI is currently high, it’s unclear how much capacity will ultimately be needed. This uncertainty has allowed the market to speculate on the company’s future, driving up its stock price. However, as demand for AI eventually plateaus, the market’s optimism may fade, leading to a potential decline in Nvidia’s stock price.
Given its high market cap and potential downside risks, investors should exercise caution when considering Nvidia. Those with significant exposure to the stock may want to reconsider their positions. While it’s possible that Nvidia will continue to defy expectations, the historical precedent suggests that infrastructure companies often face challenges in sustaining long-term growth.