As the dawn of 2024 approaches, the American stock market finds itself in a thriving state, primarily buoyed by the fervor surrounding artificial intelligence (AI). The exuberance over AI has catalyzed a rapid rise in the valuations of stocks associated with this sector, culminating in record highs for major stock indicesWhile investors are stirred by this momentum, there emerges a wave of excitement, trepidation, and speculation about the sustainability of these gains.

Throughout 2023, only a handful of large-cap companies have led the charge, significantly energizing the AI marketThe most notable players, often referred to as the "Magnificent Seven," include Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and MetaThese tech giants have not just made headlines; their soaring stock prices have captured the collective imagination of both institutional and individual investors.

This fervor has seeped into every corner of the financial landscape

It seems that overnight, the discourse among media, communities, and platforms has shifted entirely to these stocksInvestors have been engrossed in discussions, seeking the next potential winner, and assessing the implications of their strategies.

The AI wave continues to crash over into 2024, with Nvidia rapidly establishing itself as a favorite among investorsBoasting a market capitalization exceeding $2 trillion, it proudly secures the third position in the ranking of U.Smarket capitalizations; its value has surged more than sevenfold since October 2022. The PHLX Semiconductor Index has consistently reached new heights, while other chip stocks and AI-related equities have also shown remarkable robustnessFor instance, as of the close on March 7, AMD shares had risen by 52%, with Lam Research gaining 32% and Broadcom increasing by 29%.

Moreover, Nvidia's supplier, Supermicro, experienced a staggering rise of more than 300% within just three months, even crossing the $1100 mark

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The announcement by S&P Dow Jones on March 4 to include Supermicro in the S&P 500 propelled its shares to surge 19% on that very day.

Amidst this rapid growth, commentators have raised alarms regarding a potential AI bubble that might evoke memories of the dot-com eraEconomic analysts are divided—while Apollo's Chief Economist Torsten Slok warns that the AI bubble could eclipse that of the early 2000s, some Goldman Sachs strategists argue that the current market leaders exhibit robust fundamentals and lack the extreme valuations that characterized their predecessor stocksRay Dalio, the founder of Bridgewater Associates, maintains that the broader U.Smarket lacks significant bubble-like qualities, though he cautions that AI stocks could face corrective risks.

The momentum behind companies like Nvidia seems unstoppable

Investors are faced with a dilemma: should they take profit and exit, or should they continue riding the wave to capitalize on further gains?

Some investors are indeed cashing in on this influx of capital; however, others are left grappling with missed opportunities, while a select few remain apprehensive about the future.

“The Mistake of Choosing Poorly”

In this environment, countless individuals aim to secure a slice of the AI frenzy but find themselves regretting the long-term opportunities they let slip through their fingers.

Li Sheng, born in the mid-90s, reflects on his regret regarding his campus recruitment—it was his first job opportunity, and he acknowledges that he did not make the right choice.

Six years ago, he turned down offers from prominent companies like Meituan, Nvidia, Texas Instruments, and a state-owned enterprise in his hometown, ultimately joining a technology giant in Beijing, which he now feels has led him down the wrong path.

“Looking for a job back then, Nvidia was rather obscure and unremarkable in the eyes of fresh graduates,” Li said

Classmates were more likely to aspire toward giants like Google, while only those with a passion for gaming recognized Nvidia's significance as a producer of gaming graphics cards.

“Tech-savvy students, particularly gamers, might look to companies like AMD and Nvidia, but relative to the generous salaries and prestige of top Chinese firms at the time, there were scant advantages to considering foreign enterprises,” he addedHe reminisced that while he was receiving offers from Nvidia and Texas Instruments, people back home thought Nvidia was a private company while Texas Instruments was a state-owned enterprise based in Shandong.

At that time, Nvidia’s lack of recognition could be inferred from its stock prices, which hovered around the $50-$60 range in 2018. Further examining earlier years, in 2017 and 2016, shares fluctuated between $10 and $20. Meanwhile, tech giants like Intel, Nvidia, and Amazon demonstrated little interest in promoting their brands in mainland China, often resorting to outsourcing their public relations and HR functions.

Nvidia’s popularity surged alongside its skyrocketing stock price and the simultaneous excitement around AI

Li estimates that since the stock's low point in 2016, it has increased in value over 100-fold.

Back in 2018, when Nvidia was still relatively “under the radar,” Li's alma mater had already established an AI academy, leading to an influx of fresh graduates, unaware of the future that awaited themAt that time, most of the computer science graduates chose to further their studies abroad, while Li focused on building his career in BeijingIn August of that same year, he joined an internet company as an operations and maintenance employee.

However, by the end of 2020, he faced layoffs and now holds a position at a former classmate's firm.

Li reflects, “Choice is more significant than effort.” He confesses that he established various investment accounts early on and bought Nvidia stocks early on

However, when the stock price fell from over $300 to below $100 in 2022, he became anxious and eventually sold at just over $200.

Looking back at these events, Li expresses regret, recognizing that the previous plunge in U.Stech stocks stemmed from initial pandemic stimulus measures that inflated stock prices and later corrections triggered by economic sluggishness and interest rate hikes by the Federal ReserveThis downturn impacted not only Nvidia but also the much-talked-about “Fabulous Seven,” the overall stock market, and the IPO landscape, all witnessing substantial contraction.

“In the end, I watched countless opportunities slip through my fingers,” he laments.

Making Big Money is Hard

Navigating the volatile market calls for resilience, yet many potential investors find themselves deterred by the daunting hurdles of participating in the U.S

stock market, compounded by various hidden risks.

One such individual is MsLi from a southern cityAfter researching, she discovered that several foreign banks require advanced accounts for overseas investments, which entail significant costs, whether through prohibitive minimum balances or by purchasing related wealth management products.

MsLi feels disillusioned by this method of investing in U.Sstocks and has opted instead to focus on a QDII fund (Qualified Domestic Institutional Investor) that she has held for a yearGiven her positive outlook on AI, that particular fund comprises several U.Stech stocks alongside a smattering of Chinese companies, offering her satisfactory returns over the past half-year.

Shen, a young financial analyst from Shanghai, recounts that he only began investing after relocating abroad for work

He initially sought to broaden his knowledge horizon.

In October 2023, a task offered by moomoo, a platform under Futu, caught his attention: by executing a certain volume of trades, users would receive rewardsThis incentive marked the moment he ventured into investing.

Shen’s investment portfolio is largely composed of tech stocks, where he often mimics the strategies of investment magnatesTypically, he invests in the lower-priced stocks of the “Magnificent Seven.” Currently, he holds some lagging stocks from this group, such as Apple, Google, and MicrosoftPreviously, he invested in Netflix, AMD, and Amazon but sold them once they reached his target price; while he experienced a few successful exits, many times shares he sold subsequently soared—like AMD, which he purchased at $166 only to sell at $173, missing its subsequent rise above $200.

His conclusion? “Retail investors should probably invest in ETFs (Exchange-Traded Funds) since individual stocks can be too unpredictable.” Shen confides that last October, when Nvidia's stock hovered above $400, he refrained from buying, believing it was already too expensive compared to Apple, which was below $200 at the time.

Many investors face similar occurrences, especially now that Nvidia trades around the $900 mark, making entry challenging for casual investors who recall its past stock split

Many hopefuls speculate if the company will undertake another split.

Unlike Shen, Ai has consistently held onto her Nvidia stock.

She began investing in Nvidia in 2019, and throughout five years, she witnessed wild fluctuations in its share priceDuring this volatile period, many people exited prematurely, and Ai didn't always withstand the pressures either.

In the summer of 2022, faced with the impact of interest rate hikes, Nvidia and numerous other stocks plummeted from their 2021 highs of over $300 to approximately $150, hitting a lows of below $120 in autumn of that yearAi managed to endure through that slump but became frantic in the spring of 2023 when the collapse of Silicon Valley Bank sent shockwaves through her brokerage, Charles Schwab, leading to the greatest intraday decline in history.

After careful consideration on March 15, 2023, Ai decided she could no longer afford to hesitate and sold one-third of her Nvidia shares at $257. Subsequently, Nvidia's stock soared while the banking crisis rapidly resolved.

In hindsight, Ai muses, “I guess I’m just too young and inexperienced to have weathered many economic cycles.”

Facing the Unknown

To summarize, investors grapple with several pressing issues: high investment thresholds and identity restrictions, insufficient knowledge about market conditions, limited access to information, a flood of youthful investors who lack experience with economic cycles, and the financial constraints that hinder many from entering the market.

All investors inevitably encounter the dual allure and trepidation of the unknown

The market’s hallmark is its uncertainty—despite holding a decisive position in the GPU domain, even a company as robust as Nvidia cannot guarantee an uninterrupted stock climbIn a bull market, prices tend to rise, creating positive investor sentiment; however, it remains vital to recognize that economic booms and busts occur in a consistent cycle.

According to data from Dow Jones, Nvidia shares have experienced significant downturns throughout its history, plummeting more than 50% on 14 occasions since its public debut in 1999. Notably, in 2018, the stock fell 56% within two months and essentially halved during the peak of 2022.

“It seems like everyone is watching Nvidia intently,” Ai remarked.

Her sentiments resonate with many; in today’s landscape, Nvidia's graphics processing units (GPUs) play a pivotal role in the AI sphere, capturing a remarkable 80% of the market share

In its most recent earnings report for Q4 of 2024, Nvidia revealed staggering year-on-year growth of 265%, achieving revenues of $22.1 billion, far exceeding expectations, with net profits soaring 769% compared to the prior yearThis sales explosion has, in turn, invigorated global tech stocks.

Nonetheless, many investors question whether the seemingly inexorable rise of firms like Nvidia can endureThis skepticism arises for a multitude of reasons.

Firstly, demand for chips among major tech corporations may not sustain over the next few yearsNvidia risks encountering new competitors eyeing its market shareAdditionally, the U.Schip companies' policy initiatives could backfire, impacting companies like Nvidia adverselyHistorically, China constituted a vital market for Nvidia; however, the tightening grip of chip bans has led to a rise in prices for the few "stripped-down" chips that can still be exported.

On the other hand, anxieties over a potential bubble crackdown are increasingly prevalent

Investors cannot ignore the prospect that AI might prove less revolutionary than anticipated in enhancing human productivity, rendering the current surge speculativeThis concern has already begun surfacing within media inquiries that question the legitimacy of tech stock valuations, with the very term “bubble” entering popular discourse around Nvidia.

Despite these hesitations, fresh investors continue to pour into the marketMichael Sansoterra, Chief Investment Officer at Silvant Capital Management based in Atlanta, holds substantial Nvidia stock, and previously had stakes in now-defunct tech firms like Webvan and Pets.com, both infamous for their spectacular crashes during the dot-com era.

Webvan, once an online grocery service with an $8 billion valuation at IPO, declared bankruptcy in 2001 when its share price plunged to just 6 cents; Pets.com, a pet supply retailer, saw its stocks skyrocket shortly after an IPO before filing for bankruptcy a mere nine months later.

“Today, that kind of failure won't recur,” Sansoterra maintains, reflecting the optimistic perspective of many AI proponents.

While the majority of investors may hesitate to make definitive statements, Ai succinctly articulates her cautious yet conscious approach to investing, recognizing her own ignorance and acknowledging the associated risks of both market declines and surges.

The unknown offers a blend of fear, excitement, and temptation, and amidst this transitional era, individuals exhibit differing behaviors—some remain contemplative, some courageously advance, while others strike unique paths, yet all navigate their journey through this financial landscape.