NVIDIA’s stock has experienced a significant pullback since its earnings report last month, dropping 27% from its summer peak. However, prominent investor Dan Niles, founder and portfolio manager of Niles Investment Management, remains bullish on the artificial intelligence chipmaker’s long-term prospects.
Niles draws compelling parallels between NVIDIA’s current trajectory and Cisco’s performance during the dot-com bubble. During the late 1990s internet boom, Cisco’s revenue peaked at approximately 15 times its 1994 levels, while its stock soared nearly 4,000% before the eventual crash that saw shares plummet 85%. NVIDIA has risen around 1,500% over the past six years, suggesting the company may still have substantial upside potential before any major correction.
“I firmly believe that in the next several years, Nvidia’s revenues will again be able to double from current levels, and the stock will be able to double as well,” Niles told CNBC. He emphasized that while the market may be experiencing a short-term “digestion phase,” corporate AI spending remains robust and shows no signs of slowing down.
The investment thesis is supported by Wall Street’s broader sentiment. Analysts maintain an average price target of $153.24 per share, according to Nasdaq data, implying approximately 44% upside from current levels. This optimism is largely driven by anticipation surrounding NVIDIA’s next-generation Blackwell AI chip, which is expected to further cement the company’s dominance in the AI hardware market.
However, the chipmaker faces near-term headwinds. The Blackwell chip has experienced delays, causing some investor concern. More significantly, questions are mounting about whether the billions of dollars in AI infrastructure spending by NVIDIA’s customers will generate meaningful returns in the near future. This uncertainty has contributed to the recent stock decline.
Despite these challenges, Niles’ forecast sits at the high end of analyst expectations, reflecting confidence that the AI revolution is still in its early stages. “I’ve lived through ‘01, ‘02. These things can go on longer than you’ve ever imagined possible,” he noted, suggesting that AI spending could continue to exceed expectations for years to come. The key question for investors is whether NVIDIA can maintain its market leadership and pricing power as competition intensifies and customers become more discerning about AI investment returns.
Key Quotes
I still believe you have a lot of room for spend. What I’m saying is that in the short term, I think you’ve got a digestion phase that you just have to go through. I firmly believe that in the next several years, Nvidia’s revenues will again be able to double from current levels, and the stock will be able to double as well.
Dan Niles, founder of Niles Investment Management, expressed continued confidence in NVIDIA’s growth trajectory despite recent stock weakness. This statement is significant because it comes from an experienced investor who lived through previous tech bubbles and understands both their potential and risks.
I’ve lived through ‘01, ‘02. These things can go on longer than you’ve ever imagined possible.
Niles referenced his experience during the dot-com crash to suggest that AI spending momentum could continue far longer than skeptics expect. This historical perspective matters because it acknowledges both the potential for extended growth and the eventual risk of correction.
Our Take
The NVIDIA story encapsulates the central tension in today’s AI market: unprecedented technological potential versus uncertain economic returns. Niles’ dot-com comparison is instructive but double-edged—Cisco’s stock never recovered its 2000 peak, even as the internet transformed society. The critical difference may be that AI represents genuine productivity gains rather than speculative infrastructure buildout. However, the $27 billion question is timing: will AI applications generate revenue fast enough to justify current valuations? NVIDIA’s advantage lies in being a “picks and shovels” play—profiting regardless of which AI applications succeed. Yet even this position isn’t immune if the broader AI investment thesis falters. The Blackwell delays and customer ROI concerns suggest we’re entering a more mature, scrutinized phase of AI development where execution and profitability matter more than pure potential.
Why This Matters
This analysis is significant for the AI industry because NVIDIA’s performance serves as a bellwether for the entire artificial intelligence sector. As the dominant provider of AI chips powering everything from ChatGPT to autonomous vehicles, NVIDIA’s trajectory reflects broader trends in AI adoption and investment.
The comparison to the dot-com bubble raises critical questions about market sustainability. While Niles sees continued upside, the historical parallel serves as both encouragement and warning—tech bubbles can inflate further than expected but also deflate dramatically. For businesses investing in AI infrastructure, this suggests a need to balance aggressive adoption with realistic ROI expectations.
The concerns about return on AI investment are particularly important. Major tech companies have committed hundreds of billions to AI spending, and if these investments fail to generate profits, it could trigger a broader reassessment of AI valuations across the sector. This would impact not just NVIDIA, but the entire ecosystem of AI startups, cloud providers, and enterprise software companies. The coming quarters will be crucial in determining whether AI represents a sustainable technological revolution or an overheated investment cycle.
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