The price of Nvidia shares could react positively or negatively, and these movements could also have a cascading effect on many other assets, including Bitcoin and stocks related to mining.
Today, Wednesday, August 28, 2024, is an important day for the financial markets: the economic and financial reports for the second quarter of the year from Nvidia will be released.
The bull of AI
The fact is that according to many analysts, a real financial bubble has inflated on AI stocks (those related to artificial intelligence).
Nvidia, specifically, is a company whose present and future are now closely tied to artificial intelligence, given that it produces many of the processors that are used in this field, which in turn is experiencing strong growth.
The performance of Nvidia on the stock market, moreover, are even superior to those of Bitcoin.
For example, since the beginning of the year, the price of Bitcoin has risen by 41%, while that of Nvidia shares by 166%.
During 2023, while Bitcoin recorded a +160%, Nvidia shares recorded a remarkable +220%, and during the bear-market of 2022 this stock lost less compared to BTC.
Taking February 2020 as a reference, that is just before the crash due to the start of the pandemic, to date Bitcoin is at +500%, while Nvidia is at +1,500%.
Furthermore, while on one hand this incredible growth in Nvidia’s stock price might also be justified, there are however dozens or hundreds of other stocks connected in some way to AI that have grown just as much but perhaps not as justifiably.
In light of all this, there are many who believe that in the last three years a true and proper bubble has inflated on AI stocks. It is not yet clear, however, if this is the case, whether it is a colossal financial bubble destined to burst and that’s it, or just a temporary speculative bubble that could also start a new subsequent phase of growth after bursting.
Nvidia’s shares and their effect on Bitcoin and mining-related stocks
The reason why the markets are betting heavily on AI stocks, and particularly on Nvidia, is that it is a market in wide and rapid growth.
The economic-financial performance of Nvidia confirms it.
The annual revenue of the company has increased from 3 billion dollars in 2010 to the current 80 billion, with an increase since 2020 of over 600%.
The problem, however, is that the price of its shares in the same period has increased by 1,500%, or more than double. This means that the financial markets are already pricing in at least a further doubling of revenue in the coming years.
Today, the data for the second quarter of 2024 will be released.
The first one closed with a turnover of 26 billion, up 18% compared to the last quarter of 2023.
Even compared to the first quarter of 2023, the growth was 270%.
In the event that the data released today paints a less positive picture than this, the AI bubble could burst.
The impact on Bitcoin
A possible burst of the AI bubble, if it were to happen, would have repercussions on the entire financial market.
For example, the main index of the US stock markets, the S&P500, has grown by 20% since the beginning of the year, and by 67% since February 2020. Although these may not seem like exaggerated numbers, when compared to previous ones, they are still very positive numbers for an index like this.
Certainly the AI bubble has played a part in this growth, so if it bursts it could have the opposite impact, and bring down other stocks as well, especially American ones.
Furthermore, it could also significantly raise the Dollar Index.
The price of Bitcoin tends to be inversely correlated to the Dollar Index, so a potential burst of the AI bubble could simultaneously generate a strong and rapid rise in the Dollar Index, and a strong and rapid fall in the price of Bitcoin.
However, it is not at all certain that the AI bubble will burst today, because if Nvidia’s data were in line with expectations, everything could continue to move forward as it has in recent months.
Mining
The stocks listed on the exchange of Bitcoin mining companies, such as MARA of Marathon Holding or RIOT, obviously tend to follow the trend of the price of BTC.
However, due to the halving in April during this 2024, they have lost a bit.
MARA for example is currently at -34% since the beginning of the year, after doing well until early March, and RIOT is at -54%.
Taking as a reference the February 2020 quotation, against a +500% of Bitcoin and +1,500% of Nvidia, MARA is marking a +1,100%, while RIOT stops at +380%.
So not all mining companies on the stock exchange perform in the same way, but they essentially follow the trend of Bitcoin. So if the price of Bitcoin were to fall, further declines are expected for stocks like MARA and RIOT as well.