NVIDIA's Bull Markets and Panics: A Journey Through Growth and Fear
Technology is the dopamine hit, electricity is the opportunity, and a solid cash reserve is your safety net.
Financial markets, like life, move in cycles. Peaks of exuberance are followed by valleys of fear, and NVIDIA’s journey over the last decade is a perfect illustration.
The First Bull Market (Nov 2013 - Jul 2018)
In November 2013, NVIDIA’s stock traded at a modest $0.43. By July 2018, it had soared to $6.07—a return of 1,311.63% over 56 months. This era was marked by NVIDIA’s dominance in gaming GPUs and AI, cementing its position as a tech powerhouse. But the market humbles even the strongest players. From July to December 2018, NVIDIA's stock plunged 55%, driven by trade war fears and recession anxieties. Panic gripped the market, forcing investors to reevaluate their positions.
The Second Bull Market (Sep 2019 - Oct 2021)
NVIDIA’s next ascent saw its stock climb from $5.48 in September 2019 to $33.2 by October 2021—a 505.11% return in just 25 months. This period was characterized by explosive growth in AI, data centers, and the cryptocurrency mining boom, all reliant on NVIDIA’s GPUs. But as before, the euphoria was short-lived. Between October 2021 and October 2022, NVIDIA’s stock plummeted by 66%, falling from $33.2 to $11.2. The panic was driven by a perfect storm: supply chain disruptions, surging inflation, and geopolitical instability following Russia’s invasion of Ukraine. Once again, the market reminded us of its inherent volatility.
The Third Bull Market (Oct 2022 - Jan 2025 ?)
NVIDIA proved resilient, rebounding from $11.2 in October 2022 to $127 by September 2024—a staggering 1,035.71% return over 23 months. The driving forces? Continued innovation in AI and electric cars. As these technologies move from concept to reality, NVIDIA is again at the forefront, powering the next frontier.
The Road Ahead
Markets are a rollercoaster, and those who endure the ride often reap the rewards. But now, we find ourselves at a bifurcation point. Are we heading for an imminent economic slowdown over the next four months, or are we in the final leg of the cycle that could last another year? NVIDIA is the thermometer of the market's animal spirits, those invisible forces driven by emotion—fear, greed, and hope—that shape economic outcomes.
With recent employment data and the potential for interest rate cuts, the market’s thirst for liquidity in an environment of low growth expectations could trigger a massive rotation. Investors might move from NVIDIA to other semiconductor companies like TSM, AVGO, and ASML, or even to Bitcoin, signaling the beginning of a bubble's crescendo. Panic isn’t unpredictable; it follows periods of massive euphoria.
So what should we do if we enter bubble territory? Rather than spreading investments too thinly, consider holding a substantial cash reserve and concentrating on semiconductor companies with momentum but without the explosive price movements—companies like TSM, AVGO, and ASML. Bitcoin could also be a protagonist in this rotation of euphoria.
Source: Tradingeconomics.
While the tech sector still drives the market’s dopamine rush, the long-term opportunity could lie elsewhere—in energy, particularly electricity, natural gas, and uranium. After all, the world of bits can’t exist without the power that drives it.
This is a trade deeply tied to geopolitical risks and potential disruptions in global supply chains. If there's another escalation in the conflict in Ukraine, the Middle East, or the South China Sea, which in my view is the most significant risk factor to monitor, it could reshape the landscape once again.
Disclaimer: This is not financial advice. It is for educational purposes only.
Thanks for reading,
Guillermo Valencia A
Cofounder of Macrowise.
September 2, 2024.