Nvidia achieves a record value in the S&P 500, becoming the largest shareholder of the index with a weight exceeding 8%. This event is accompanied by both successes and numerous risks.
Historical Success of Nvidia
Following a significant stock rise, Nvidia closed Monday with a market capitalization of around $4.5 trillion. The stock price increased by 239% in 2023 and 171% in 2024, significantly enhancing its influence on the index. Nearly 90% of Wall Street analysts currently recommend Nvidia's stocks as a buy.
Risks in China and Political Agreements
Analyst Gil Luria from D.A. Davidson pointed out that the company faces risks from sales in China. He noted that despite official reports, a significant share of shipments ends up in China via overseas firms or resellers. "It's a big part of their sales that is at risk from either further action by the U.S. or by further restrictions from China," he said. A recent agreement with the U.S. government allows Nvidia and Advanced Micro Devices to gain export licenses in exchange for 15% of revenue from sales in China.
Infrastructure Bottlenecks and Rising Competition
Despite record-high demand, Nvidia's production capabilities may be limited by infrastructure. Dealers are facing delays not due to chip shortages, but because of data center requirements. Luria mentioned that resources for power and HVAC systems are already strained. Peter Boockvar from One Point BFG Wealth Partners also pointed out rising competition from Amazon Web Services, which is developing alternatives to Nvidia's GPUs.
Despite Nvidia's significant influence on the market, the company faces various risks, including political instability and rising competition, which may impact its further development.
