The hottest AI trade on Wall Street has officially become “boring.”
“Nvidia would be a very annoying idea … because we all know the story,” serial entrepreneur Tom Sosnoff said in Yahoo Finance’s Opening Offer.
The former founder of Thinkorswim and Tastytrade argued that despite the technological dominance of Nvidia, the history of the stock is too well known and can be priced for perfection.
Sosnoff is not a technological skeptic. In fact, he is a fan of the product. He compared Nvidia’s (NVDA) AI platforms to having a “genius best friend” with 165 IQ available at all times.
The problem, he argued, is that Nvidia is now “fully priced.” When most analysts and retail traders are already on one side of the boat, that “boring” reality suggests that there are a few surprise scenarios that could drive the price significantly higher from here.
“I look at Nvidia and I’m thinking to myself, how much more upside [is] here and what kind of slowdown is there if this thing flips?” 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 at record highs. In the past year, Nvidia shares are up roughly 40%, while the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) recently closed at all-time highs this month.
Sosnoff is not predicting a total market collapse, but he is preparing for a reality check. He anticipates “disgusting sales” in the range of 10% to 15% potentially hitting between March and May.
“The odds favor the decline in the market,” Sosnoff said. He noted that while the equity market is celebrating, the bond market has remained strangely stagnant. If that volatility returns, “full price” darlings like Nvidia are often the first to feel the gravity. Moreover, the impossibility of the market may materialize when the term of the President of the Federal Reserve Jerome Powell ends in May.
Another provocative takeaway 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 of the market capitalization race. Google (GOOG, GOOGL) recently overtook Apple (AAPL) to become the second most valuable company in the world, and is within striking distance of Nvidia as it surpassed $4 trillion.