Nvidia’s Rally Is Going to Show Traders What a Market Bubble Looks Like, Rob Arnott Says

For years now, stock traders have been getting so rich betting big companies will get even bigger that they’ve forgotten what a bubble looks like. They’re going to find out thanks to Nvidia Corp.

So says Rob Arnott, renowned for his warnings on the dangers of bloated megacaps — and the designer of passive products for muting their supposed threat. Up 232% in 2023, Nvidia may be riding a revolution in computer science, but the stock is “a textbook story of a Big Market Delusion,” wrote the founder of Research Affiliates LLC.

“Overconfident markets paradoxically transform brilliant future business prospects into even more brilliant current stock price levels,” Arnott wrote in a new research note, citing shares trading at around 110 times earnings. “Nvidia is today’s exemplar of that genre: a great company priced beyond perfection.”

Would Nvidia’s popping bring down the whole market? “It’s very possible,” Arnott said in an interview.

Shares of Nvidia Have Surged in 2023