Arnott argued that while Nvidia is a great company, it is currently priced beyond perfection. He suggested that investors are flocking to Nvidia due to its $1.2 trillion market cap, viewing it as a "safe play." However, he warned that Nvidia is not "too big to fail," but rather "too big to succeed." While acknowledging the possibility of Nvidia achieving incredible things and increasing tenfold in the next decade, Arnott deemed this scenario implausible and is comfortable labeling the situation as a bubble.
Key takeaways:
- Investing legend Rob Arnott has warned that Nvidia's stock has formed a bubble and its popping could trigger a total market crash.
- Arnott classifies Nvidia as a "textbook story of a Big Market Delusion" due to its extremely high valuation, driven by investor excitement over artificial intelligence.
- Nvidia's shares have rallied 232% so far this year, outperforming all other S&P 500 index constituents by a big margin, with a price-to-earnings ratio of around 117, compared to 26 for the whole S&P 500 index.
- Despite its market cap size of $1.2 trillion, Arnott warns that Nvidia is not "too big to fail," but rather "too big to succeed," and he is comfortable calling it a bubble.