Nvidia surge brings memories of Tesla rally, as investors move from chasing electric vehicles to artificial intelligence
- While Nvidia’s shares have added 66 per cent this year after more than tripling in 2023, Tesla shares are down more than half from their 2021 peak
- Nvidia has a sizeable lead in graphics chips used to train AI models, but its competitors are eager to grab a piece of that market
Nvidia’s rise is captivating the stock market and driving the S&P 500 Index to new highs. But it also raises cautionary reminders of another investor darling that soared on dreams of a technological transformation, only to tumble back to earth when those hopes turned to disappointment.
That stock belongs to Tesla, which sparked its own mania in 2017 as investors bet that electric vehicles (EVs) were going to take over the world.
Back then, Elon Musk’s company was a phenomenon as it blew past established carmakers like General Motors and Ford Motor in market capitalisation to become America’s biggest auto manufacturer. Some analysts were looking beyond the industry and calling it “the next Apple”.
Now, Tesla shares are down more than 50 per cent from their 2021 peak, and other EV stocks that raced higher with it are shadows of their former selves. All of which should be sobering for Nvidia investors who see the stock as a limitless bet on the future of artificial intelligence (AI). The company’s shares have added 66 per cent this year after more than tripling in 2023.
“We have seen time and again that when investors fall in love with the idea of the technology innovation du jour, logic takes a back seat” Adam Sarhan, founder and CEO of 50 Park Investments, said in an interview. “And when emotion takes over, sky is the limit.”
There are plenty of differences between Nvidia and Tesla, from the products they make to the personalities of the men that run the companies. But the parallels are striking.
