Market Guru Warns: NVIDIA is in a Bubble, Shares Will Disappoint in a Decade, Recession Coming This Year

• Jesse Felder says Nvidia is in a bubble, the stock market is going to stumble, and there will be a recession this year.

• This market guru says that the microchip boom will subside and stock market returns will fall.

• He said to be prepared for slower economic growth, rising unemployment, inflation and persistently high interest rates.

Jesse Felder says the Invicta hype is a bubble that's about to burst, and that the stock market will disappoint over the next decade or more, with a recession on the horizon this year.

The senior analysts behind the Feld Report made their case in the latest episode of the Thoughtful Money podcast.

He warned that the microchip-buying frenzy would not last, that the excess returns in the market would dry up, and that the economy might fall into stagflation.

Living in a fantasy

Stock prices have soared to record highs so far this year as investors hope that artificial intelligence, interest rate cuts and steady economic growth will boost corporate profits.

Fielder, who managed money for about 20 years before starting his own market research firm, warned that stocks had become so expensive that their future returns were bound to be less than satisfactory.

"The price performance of financial assets will be much worse than that of the past 10 or 15 years," he said.

Hoping for further excess returns is 'extrapolating an unsustainable phenomenon - the definition of a bubble'," he said.

"That's exactly what happened with Nvidia and Micron shares," he continued, warning that buying soaring stocks could be "extraordinarily painful" because they could suffer a big drop.

He said the semiconductor industry is cyclical, meaning it will go from boom to bust over time. He went on to say that over-excited AI companies are rushing to get double or triple the number of chips they need from suppliers such as Nvidia, which means the market will be flooded.

"It's all going to fall apart, and that's the history of these companies," Fielder said.

Chipmakers such as Nvidia could even see their revenues and profits turn from explosive growth to declining, Felder said, which could mean "real pain for many stock prices that have already discounted their fantasies about the future."

The market guru also cited Amazon.com's Jeff Bezos, Meta's Mark Zuckerberg and JPMorgan's Jamie Dimon as examples of the recent surge in insider selling of company stock as a warning.

"It's a very, very dangerous environment for stocks," he said.

Economic Issues

Many on Wall Street expect the U.S. economy to emerge from recession, inflation and interest rates to fall this year, and unemployment to remain near historic lows.

However, Feld expects "more of a stagflationary scenario than a soft landing or even a non-landing scenario."

The former trader and ex-hedge fund boss said the economy might not "fall apart" like it did during a pandemic or the Great Recession.

He said economic growth may be more of a "slow burn" than a "really painful downturn." He noted that unemployment could move higher and the economy may only contract in real terms as inflation resists nominal growth.

Feld points to aging populations in many Western countries, as well as de-globalization trends such as repositioning, as two combining forces that may prevent inflation from declining too quickly.

He also pointed out that the large amount of government spending, the rising cost of national debt service and the Fed may relax the 2% inflation target are also other inflationary factors.

"There is plenty of evidence that inflation will continue to move higher relative to recent history," Felder said.

If he's right, it will likely mean that interest rates will stay higher for longer, the economy will grow slower and possibly even shrink, and assets like stocks will perform worse than many experts predict.

Read the original