Are We in the Bubble of Tech Stocks?
A stock market bubble is caused by a quickly rising price of a stock or groups of stocks, which lasts over a period of time. The prices then shoot up beyond the existing values of the stock, and then the bubble bursts. This leads the market forces to reverse the upward trend very fast, and the investors suffer major losses in a short time. Dubious financial bubbles are ready to be popped by history with tulip manias, tech stock bubbles, real estate bubbles and crypto currencies bubbles.
What are two stocks of tech industry that make the best profit?
One might also call a stock market bubble a kind of insanity when investors rush in to increase the share of a particular stock or sector for no reason. It is as if they have the stock Mindset that direction is uni-directional, but if the expectations are not met, then its house of cards will collapse. This had already met with the tech bubble in 2000, as well as the sub-prime mortgage crisis of the US and the financial crisis of 2008.
In fact, those questions are being asked mostly about some tech industries in the US. The stocks that proved to be the best performers in the S&P500 last year are Super Micro Computers and Nvidia. Both of them are making chips that can handle artificial intelligence tasks such as image, face and speech recognition) as well as generating the language for chatbots such as ChatGPT. Super Micro Computers saw an increase by 735% in the past 12 months compared to Nvidia, which rose more than 230%. The runner up in the blue chip index is once again a renewable energy provider, Constellation Energy whose price has surged almost 150%.
The semiconductor sector in the US, which Nvidia and Super Micro Computers are the main subjects, has gone up over 114% in the past year and is also up nearly 40% in the current year. The US oil and gas sector is the second best performing sector, upward by 32 as of now.
This is a big undertaking for a sector that is producing hardware that will one day be a technological revolution that has not been adopted mainstream yet. This is why many investors are worried that stock market may have an air of another bubble. But, we can also find that there are quite a few positive arguments in favor of this idea. During the period shown, the American Big 7 which is the term used to refer to the largest US tech companies have experienced relative differences in the way they have performed.
Is this performace justified?
The next question is if the worth is high enough for their success. It is at this point that I find it more fascinating. We do not feel that the A. I. stocks actually are in a bubble yet. Of course, they are valued greatly, but at the moment they still earn the revenues. For example, Nvidia had its revenues increasing more than 125% year-over-year over the past 12 months. During the last 12 months, gross profit margin was 73% while it was 73% in the previous year. Nearby in 2014, its water self-sufficiency was at 6%, whereas in 2013 it was 58. When in 2019 it was 81%, 3 years ago it was only 42. From 70% to -66%, and earlier 66%.
Nvidia during its fiscal year 2021 achieved a gross profit margin of 65%. This is in contrast to Apple, another tech giant whose market capitalization ranks the second biggest in the world at the moment. Apple‘s earnings have stopped growing recently. Last year the revenue had gone up to 5 %. In 2021 they were still 5% but then it increased to 33%, the next year they slowed to 7%. 2018 saw exports grow by 8%, but a slowdown is expected in 2023, with exports decreasing by 2. 8%. Gross profit margin of Apple holds strong, but the latter surpasses it on this measure as well. The gross profit margin for Apple was recorded as 38% in 2020, 41% in 2021, 43% in 2022 and 44% in 2023. With these tremendous numbers, NVIDIA has made investors take interest in the stock over the past few years.
