A Mizuho analyst has raised concerns about the strong momentum observed in chip stocks despite the absence of fresh developments. The continued surge in Nvidia Corp. shares, now on a sixth consecutive day of gains and poised to hit a sixth consecutive record high, is particularly unsettling for the analyst.
Jordan Klein, a desk-based analyst at Mizuho Securities, expressed unease in a note to clients, describing the rapid ascent of Nvidia shares as potentially “unhealthy.” He also highlighted the upward movement of other AI-focused companies like Broadcom Inc., Marvell Technology Inc., and Taiwan Semiconductor Manufacturing Co., which have seen substantial gains without apparent fundamental news.
Klein noted that while he acknowledges the growth potential of chip companies in the AI hardware sector, he is growing concerned about the increasingly frenzied investor sentiment. He observed a pattern where investors are either chasing after high-flying stocks or abandoning previous winners to join the AI-chip bandwagon.
The analyst highlighted the self-reinforcing nature of the current rally in chip stocks, where rising prices prompt investors to rotate out of underperforming stocks into those showing strong momentum.
He drew parallels between the current market behavior and the speculative frenzy seen in the technology sector during the late 1990s and early 2000s, cautioning that such exuberance often precedes market downturns.
Klein pointed out Nvidia’s upcoming GTC event as a potential turning point for the market, suggesting that while some investors may take profits following the event, others may become nervous if the event fails to meet heightened expectations.
He expressed uncertainty about which stock could fill the void if Nvidia’s rally were to falter, noting that other tech giants like Apple, Tesla, Alphabet, and Meta may not possess the same market-moving power.
Looking ahead, Klein anticipates Broadcom and Marvell’s quarterly results to further fuel market excitement, particularly if they provide bullish outlooks or financial guidance on their AI products.
Despite his overall positive outlook on the semiconductor sector, he remains wary of potential profit-taking following Nvidia’s event and ahead of the next chip earnings season.
