Nvidia Corp.‘s (NASDAQ:NVDA) market capitalization has surged to a staggering $4.8 trillion, creating a concentration in the S&P 500 not seen in modern history.
Yet, despite the AI chipmaker’s unprecedented scale, Fundstrat’s Tom Lee insists the AI trade is “still in really good shape fundamentally” and that its flagship stock is “hardly a bubble valuation.”
Check out NVDA’s stock price here.
NVDA Now Larger Than 6 US Sectors
The stunning statistics, highlighted in a post by The Kobeissi Letter, show Nvidia now comprises 8.5% of the entire S&P 500. Its market cap is larger than the combined market caps of the Materials, Real Estate, and Utilities sectors.
The company’s valuation also exceeds the combined value of more than 240 of the S&P 500’s smallest companies.
Tom Lee Defends Nvidia’s Valuations
While such figures have stoked fears of a bubble, Lee, in a conversation with CNBC, pushed back directly, arguing that the stock’s price is justified by its earnings.
“Nvidia still only trades at 29 times forward earnings,” Lee said in a recent interview. “I mean, it’s still cheaper than Costco Wholesale Corp. (NASDAQ:COST).”
Lee’s bullishness on the AI sector heading into the end of the year is rooted in strong fundamentals. “We know there’s a lot of visibility for AI spending and we know there’s still innovation and gain of function taking place with the models,” he said. “So it to me it makes sense that there’s still a payoff coming.”
Lee Blames ‘Underperforming Fund Managers’ For Market Nervousness
The comments follow a recent market “wobble” where, according to other analysts, concerns over high-flying names like Palantir Technologies Inc. (NASDAQ:PLTR) and massive AI spending commitments spooked investors. Lee, however, attributes the market’s nervousness to a different factor: underperforming fund managers.
With the S&P up 80% over the past three years, Lee noted that only 21% of fund managers are beating that benchmark.
“They’d rather see the market fall so that it falls to their performance level,” he said. Instead, Lee believes the market will follow seasonal patterns, leading to “a lot of chasing into year end” as managers are forced to buy into the rally.
Nvidia Soars Over 43% In 2025
NVDA closed 5.79% higher at $199.05 apiece on Monday. It rose 0.47% after-hours. The stock has advanced 43.92% year-to-date, and it has fallen 37.03% over the year.
It maintains a stronger price trend over the short, medium, and long terms, with a poor value ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings, are available here.
The futures of the S&P 500, Nasdaq 100, and Dow Jones indices were mixed on Tuesday after settling higher on Monday.
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