Nvidia Leads the AI Race, but the AI Market Is Far from Bubble Territory, Says Analyst
Chris Danely, a semiconductor analyst and the Head of US Semiconductor Research at Citi, believes that Nvidia is the clear leader of the artificial intelligence market. The market enthusiasm for AI has been driving the market action, with Nvidia shares up about 75% so far this year. However, Danely doesn’t think the rapid growth in the AI market will lead to a bubble, as it continues to expand the semiconductor market.
Is AI Creating a Bubble?
When asked if the AI market is creating a bubble, Danely replied that it is a good question, but he doesn’t think the current AI boom will result in a bubble. He noted that the last time he saw a single application drive an expansion in the semiconductor market was about 25 years ago with the advent of the internet. The internet eventually led to a market bubble, but it took two or three years to reach that point. While the AI market may not be able to escape a cyclical downturn, Danely doesn’t see any end to the current boom.
Who Will Be the First Departure from the AI Party if There Is a Bubble Burst?
Danely acknowledges that what goes up must come down and that any downturn in the semiconductor market will impact everyone. However, he doesn’t see any indication of an imminent bust. He believes that the AI craze still has a long way to go before any alarm bells start ringing. When the party eventually ends, no stock will get through it unscathed, he warns.
Danely’s Top Pick Within the Semiconductor Sector
Danely names Micron as his top pick within the semiconductor sector. While Nvidia is the current AI leader, Danely thinks that memory and specifically DRAM will be the next vital component in the AI market. Memory is starting to become a significant issue for the industry. As a result, Micron, a company that produces DRAM, is the top pick on the DRAM space for Danely.
Hot Take: Nvidia’s Leadership and the Current State of the AI Market
While Nvidia might be in the lead in the current AI market, the sector is far from creating a bubble. Despite the risk of a cyclical downturn that could impact all semiconductor stocks, there is no indication of an imminent bust. Danely advises investors to hold on to their investment in semiconductor stocks and to watch memory, particularly DRAM, as the next vital component in the AI market.
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