Dan Loeb says $5 trillion Nvidia is still undervalued

Billionaire investor Dan Loeb has stirred the investment community by asserting that Nvidia, currently valued at approximately $5 trillion, is still undervalued. In a recent appearance on the "All-In" podcast, Loeb, the CEO of Third Point, expressed skepticism regarding the notion that Nvidia has already reached its peak potential. Loeb argued that the perception of Nvidia's immense market capitalization might be causing investors to overlook its earnings potential in the coming years. He believes that many investors are struggling to grasp the scale of Nvidia's value, which could be creating a psychological barrier, particularly among hedge funds and long-short investors who may view the stock as an attractive short position due to its significant valuation. His remarks come amidst ongoing discussions about the sustainability of the AI boom, following an impressive surge in Nvidia's stock prices. The company has positioned itself as a leading player in the generative AI industry, providing essential chips for notable models developed by organizations like OpenAI, Google, and Anthropic. Since the start of 2023, Nvidia's stock has skyrocketed nearly 14-fold, establishing it as one of the top performers on Wall Street during this AI-driven era. This remarkable growth has also significantly boosted CEO Jensen Huang's wealth, placing him among the richest individuals globally. Despite this, Loeb pointed out that many long-short hedge funds are often required to hold short positions, making Nvidia a frequent target, even when its fundamentals appear strong. Drawing parallels to previous market trends, Loeb noted that other major companies, such as Google and Amazon, were once considered safe shorts before eventually breaking out of their valuations. He remains confident that Nvidia will follow a similar trajectory in the future.