AI Bubble Fears Rise as Thiel Exits Nvidia, Analysts Remain Bullish

Nvidia (NVDA) shares faced renewed scrutiny as billionaire Peter Thiel's hedge fund, Thiel Macro LLC, disclosed in a 13F filing that it had sold its entire $100 million stake in the AI chipmaker during the third quarter. The move, coming just days before Nvidia's upcoming earnings report on November 19, adds to growing concerns about valuation risks in the AI sector, particularly after SoftBank Group sold its $5.8 billion Nvidia position in October. Despite these exits, Wall Street analysts remain bullish, with firms like BofA Securities and D.A. Davidson maintaining Buy ratings and high price targets as per the latest reports.

The sell-offs by high-profile investors contrast with robust demand for Nvidia's data center chips, which analysts argue is being driven by hyperscalers like Microsoft, Amazon, and Alphabet. Wedbush analysts highlighted that these cloud giants are "nearly ubiquitously" increasing AI spending, funneling capital into Nvidia's products. Bank of America noted that while skepticism about AI monetization persists, the company's ability to meet surging demand could reassure investors according to market analysis. Earnings expectations are lofty: analysts project revenue of $54.89 billion and adjusted earnings per share of $1.26 for the quarter, with data center revenue expected to account for roughly 90% of total sales as reported in financial data.

The mixed investor sentiment reflects broader debates about whether AI stocks are in a bubble. Thiel, a prominent tech investor, has backed rivals like Substrate and AI startups Mercor and Cognition AI, suggesting a strategic shift away from pure-play chipmakers. Meanwhile, SoftBank's $5.8 billion Nvidia divestment is being funneled into OpenAI and its Stargate project, a $500 billion AI and robotics hub in Arizona. These moves underscore a reallocation of capital toward AI infrastructure and applications, even as questions linger about the sustainability of current spending levels.

Nvidia's stock price has been volatile, up 42% year-to-date but down 1.2% in premarket trading after Thiel's exit was disclosed. The stock trades at a forward P/E of 31.88x, above the semiconductor sector average, reflecting both optimism about AI's growth potential and concerns about stretched valuations. Analysts like Oppenheimer's Rich Schneider argue Nvidia is "best positioned to win" in the AI race, while others caution that market corrections could follow if earnings fall short of expectations as market experts suggest.

With the AI sector at a crossroads, investors are closely watching Nvidia's earnings report for clues about the trajectory of the broader market. The company's ability to balance explosive demand with sustainable profit growth will likely determine whether the current AI boom continues or faces a reckoning as analysts project.