The hottest AI trade on Wall Street has officially become “boring.”
“Nvidia would be a very boring idea … because we all know the story,” serial entrepreneur Tom Sosnoff told Yahoo Finance’s Opening Bid.
The former founder of Thinkorswim and Tastytrade argues that despite Nvidia’s technological dominance, the stock’s story is too well-known and it may be priced for perfection.
Sosnoff isn’t a tech skeptic. In fact, he’s a fan of the product. He likened Nvidia’s (NVDA) AI platforms to having a “genius best friend” with a 165 IQ available at all times.
The problem, he argues, is that Nvidia is now “totally fully priced.” When most analysts and retail traders are already on one side of the boat, that “boring” reality suggests there are very few surprise scenarios that can drive the price significantly higher from here.
“I look at Nvidia and I’m thinking to myself, how much more upside [is] in here and what kind of downside is there if this thing rolls over?” Sosnoff said. “It’s not a function of … Nvidia itself. It’s just a function of price.”
The warning comes at a time when market volatility is hovering at multi-year lows and stocks are sitting at record levels. In the past year, Nvidia’s shares have risen roughly 40%, while the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) recently closed at all-time highs this month.
Still, Sosnoff isn’t predicting a total market collapse, but he’s bracing for a reality check. He anticipates a “nasty sell-off” in the range of 10% to 15% potentially hitting between March and May.
“The odds favor the downside in the market,” said Sosnoff. He noted that while the equity market is partying, the bond market has remained eerily stagnant. If that volatility returns, the “fully priced” darlings like Nvidia are often the first to feel the gravity. Moreover, market fickleness could materialize when Federal Reserve Chair Jerome Powell’s term ends in May.
Another provocative take is that Nvidia’s reign as the world’s most valuable company is under threat. When asked if the AI giant would still have its crown at the end of the year, Sosnoff was skeptical.
“I don’t think it’s going to be Nvidia,” he said regarding the market cap race. Google (GOOG, GOOGL) has recently edged out Apple (AAPL) to become the second-most-valuable company in the world, and it’s within striking distance of Nvidia as it surges past $4 trillion.
