NVDA is a stock we have followed with intense interest for some time. After some initial trepidation, based on valuation concerns, we added it to our American Resilience Model Portfolio on March 12, 2025 (NVIDIA (NVDA): The Time Has Come).
The stock had sold off sharply amidst concerns about the (now almost totally forgotten) competitive threat posed by China’s DeepSeek.
This was a few weeks before Liberation Day tariffs sent stocks plunging, but I’m glad we acted. NVDA shares have advanced approximately 75% since then.
NVDA has now surpassed a $5 trillion market capitalization. Earlier this week, the company made several disclosures to the public that sent the shares up sharply.
NVDA held its annual GPU Technology Conference (GTC) in Washington, D.C. on October 28. Originally focused on graphics and gaming, GTC has become the world’s premier AI developer conference. It attracts more than 20,000 attendees, while millions watch online.
NVDA’s founder and CEO Jensen Huang made waves when he announced unprecedented visibility into future revenue, projecting $500 billion in cumulative sales from the Blackwell platform and early Rubin ramps through 2026.
Over the longer term, NVDA now sees $3 to $4 trillion of annual AI spend by 2030. These projections are significantly higher than consensus forecasts.
NVDA also announced a number of exciting strategic moves, including a major collaboration with the Department of Energy to build what will become its largest AI supercomputer.
The company unveiled a strategic partnership with Nokia, including a $1 billion investment into Nokia to deliver next-generation 6G wireless networks. On the industrial front, NVDA announced it is teaming with a number of leading global manufacturers to build AI-powered robotic-factory ecosystems.
Chuck’s big “problem”
Chuck bought NVDA way back when, years before AI was a “thing.” At the time, it was known for its dominant position in the video gaming market. I don’t quite know why he bought it, but he probably had an intuitive sense that it was an extremely dynamic company with a bright future.
He can talk to you for three hours about the latest advances in sailcloth, but I suspect Chuck would struggle to explain what a P/E ratio is. I think he just sensed NVDA was a winner playing in a high growth area of technology.
Sometimes these intuitions end up being far more valuable than any information that can be gleaned from a spreadsheet.
As a trained, professional investor, I have to admit, it’s a bit humbling when an individual with zero relevant experience is able to identify one of the greatest stock market investments of all time just by going on the internet.
Chuck never sold a share. The “problem” Chuck has now is that NVDA is half his net worth.
This problem is compounded by the fact that NVDA is now also the largest stock out there. NVDA accounts for approximately 8% of the S&P 500. So if he has diversified exposure to the S&P 500 with the rest of his portfolio, this means he has a lot of additional NVDA exposure there as well.
But it’s not just about direct or indirect NVDA ownership. The S&P 500 is dominated by mega-cap technology platform stocks which, like NVDA, are all highly connected to the AI theme. The top ten holdings within the S&P 500 represent nearly 40% of the index.
Only the tenth-ranked position, Berkshire Hathaway (BRK), which has a 1.6% weighting within the S&P 500 as of the end of September, sits outside the tech sector. And even with BRK, its stake in Apple (AAPL) represents a large chunk of its value.
Chuck is not alone
Chuck’s portfolio, via his large NVDA stake, may be especially levered to AI, but he is not alone. Investors who simply have S&P 500 exposure are relying heavily on the future success of AI plays.
I will even take it a step further. AI is now the driving force of the economy.
Take this with a grain of salt, since he is a Harvard faculty member, but one economist estimated that tech-related investment represented more than 90% of all U.S. economic growth in the first half of the year.
Many other sources confirm the idea that, in the absence of the current AI buildout boom, we would potentially be in a recession.
So while the S&P 500 may now have as much as a 40% or even 50% allocation to direct AI plays, depending on how you want to define them, the profitability of the rest of the stocks in the index is in many ways also connected to AI.
The vast majority of U.S. stocks benefit from AI spending indirectly (think of a construction business benefiting from the creation of new data centers). Alternatively, they are simply reliant on the overall impact of AI growth on the broader economy.
Lots of good questions
Talk of an “AI bubble” is therefore understandably frightening because it does not just pertain to a few tech stocks. The entire stock market is, in some sense, an AI play—if not the entire economy.
There are a few layers to this perception of bubble risk.
First, there is valuation risk. AI stocks now have multi-trillion dollar market caps.
Are stocks overvalued?
Then there is the question of the sustainability of AI-related growth.
Will there be an economic return from all this investment in data centers and related infrastructure?
In recent weeks, investors have grown concerned about the “circularity” of the AI economy, with market leaders like NVDA making direct investments in customers like privately-held OpenAI (see Implications of NVDA/OpenAI Mega Deal).
Is all this AI growth just an illusion?
To some extent, the vast success of the stock market just feels too good to be true. After all, what goes up must come down.
How can the stock market perform so well, year after year?
Meanwhile, we see one headline after another about corporate layoffs, including this week’s announcement by Amazon (AMZN) that it is carrying out “an overall reduction in our corporate workforce of approximately 14,000 roles” as it implements AI.
