Nvidia stock surge could signal the start of AI bubble

Yahoo Finance markets reporter Jared Blikre breaks down Nvidia stock as shares surge the most in over six years amid the company's earnings report beating estimates driven by AI, as well as historical bubbles compared to the AI bubble.

Video transcript

- Nvidia stocks surging after the chip maker beat on earnings and issued a strong guidance, getting a big boost from AI. Here with a closer look at the move higher much, much, higher that we're seeing in Nvidia. Jared Blikre has a closer look. Jared gains of 25% today alone.

JARED BLIKRE: Yes, you'd have to go back over 6 years-- 6 and 1/2 years to be exact to find another day that had better returns. And this is just phenomenal. This is a stock that's already one of the largest in the NASDAQ, already one of the largest in the S&P 500, now sitting at a market cap of $950 billion. And I just want to chart the price action real quick.

This is a two-day view. So yes, up 25%. But just want to show you a 20-year as well. And you can see Nvidia really took off-- this peak right here was during the blockchain Bitcoin bubble of late 2017. Fell off from there, but you can see it's been off to the races ever since.

21,964% over the last 20 years. And you take a look at what's been happening with the short sellers. Not surprisingly, Nvidia short sellers getting clobbered. This has had-- Nvidia has one of the highest short interests in the NASDAQ in the S&P 500. And those Sellers are looking at a loss today of about $2.3 billion. That's according to S3 Partners loss year to date about $8 billion.

And let me go back here. Just want to show you what's happening in relation to all the other mega caps. I pointed out that $950 billion closing on $1 trillion. And this is all by market cap right now. That is only behind Alphabet, Microsoft, and Alphabet, and Amazon in the NASDAQ 100 here.

So I want to go back, and I just want to kind of compare what's been happening this year. And let me show you some of the year-to-date returns not only Nvidia but some of its partners here, and then we can talk about why this is happening. Nvidia, up 162%, kind of dwarfs the next best competitor here, META, at 110. But all of this is related to AI.

It's no secret that we had a terrible year last year. We're in the midst of an aggressive Fed. And what has this been doing? Well, in comparison to some of the other bubbles we've had throughout the years, and I guess we don't know that this is a true bubble just yet, but it looks that way, still relatively small. So here's AI over here.

Here's one of the first ones in modern history. This is gold, followed by Japan in the late 80s, early 90s. Then we have the .com bubble here. We have the housing bubble. That was actually small-- one of the smaller ones here, but it affected a large number of people. We got China here. But it gets really interesting over here because we have ARK Invest, and we have Bitcoin.

Now Bitcoin is the biggest bubble of all time. About 16,500%. We knew what-- we know what happened with that. But if history is any guide, guess what AI could be a larger one. Well, think about that. I think it all comes back to what happens to the debt ceiling, but let's not get ahead of ourselves. We know that-- we know that bubbles tend to discount fundamentals. Akiko and Seana.

- Yeah. Certainly. Again a 25% today, closing in 400 bucks a share.

much Yes.

- Jared Blikre, thanks so much for breaking that down.