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AI Bubble Watch After Nvidia Splits Stock

Last week, option trades correctly predicted that Nvidia (NVDA) shares would move sharply in either direction.
Bulls gained the most not only when Nvidia posted strong results but also said it would split its stock ten-for-one.

Nvidia closed at $1,064.69 last week. CUDA is the AI chip supplier’s moat. Most of its competitors fail to recognize that Nvidia understands the AI system stack. Nvidia worked with AI software developers and has a strong understanding of networks. AMD, for example, could optimize its chip performance. However, it faces limitations in using multi-GPU architecture in the networking environment.

Nvidia delivers systems that perform at scale. This discourages customers from buying inferior AI hardware that AMD and Intel (INTC) offer. For example, Nvidia’s Hopper AI hardware is slower and uses more electricity. The refreshed Blackwell solution is more attractive and customers are willing to pay more.

In the AI software sector, Microsoft (MSFT) closed near its 52-week high. Markets did not want to push the stock price higher, since its price-to-earnings ratio is at 37.3 times. Investors want to wait for evidence that the ChatGPT update to 4.o will drive CoPilot subscription sales. Should revenue growth lag expectations, MSFT stock is a less attractive buy at current valuations.