Nvidia stock accounts for more than a third of the S&P 500's gains this year—and it's a big risk for investors, top economist says
What are the contrasting views on Wall Street regarding Nvidia's current valuation and its potential for future growth?
There are contrasting views on Wall Street regarding Nvidia's current valuation and its potential for future growth. Some analysts believe that Nvidia's stock is overvalued after its recent rally, while others remain bullish on the company's prospects.
On one hand, Nvidia's market cap has surged past $3 trillion, and its shares have soared 166% this year, driven by the artificial intelligence craze. The company's quarterly earnings show no sign that the rush to stock up on AI chips is slowing down. Nvidia CEO Jensen Huang has also laid out a rapid cadence of new AI platforms, including the Blackwell Ultra chip for 2025 and a next-generation platform in development called Rubin for 2026.
However, there are concerns about the stock market's dependence on a few big tech companies like Nvidia. Apollo Chief Economist Torsten Sløk has warned that such a high concentration of returns in the S&P 500 makes investors more vulnerable to single headlines impacting the one stock driving index returns. He has also compared tech valuations to the bubble seen during the dot-com era, stating that the top 10 companies in the S&P 500 today are more overvalued than the top 10 companies were during the tech bubble in the mid-1990s.
Despite these concerns, some analysts remain optimistic about Nvidia's future growth. Beth Kindig, lead tech analyst at the I/O Fund, predicts that Nvidia's market cap will surge more than triple again to $10 trillion by 2030.
What is the current valuation of Nvidia, and how does it compare to its position in the S&P 500 index?
Nvidia's current valuation is over $3 trillion, making it a significant presence in the S&P 500 index. In fact, 34.5% of the S&P 500's market cap gains so far this year can be attributed to Nvidia alone, according to Apollo Chief Economist Torsten Sløk. The company's impressive performance is largely driven by the artificial intelligence craze that has gripped Wall Street, and Nvidia's quarterly earnings show no sign of slowing down in the rush to stock up on AI chips. However, this heavy reliance on one stock also represents a big risk for the S&P 500 index.
How much of the S&P 500's market cap gains this year can be attributed to Nvidia according to Apollo Chief Economist Torsten Sløk?
According to Apollo Chief Economist Torsten Sløk, 34.5% of the S&P 500's market cap gains so far this year can be attributed to Nvidia alone4.