Billionaire investor Leon Cooperman has raised concerns about the stock of semiconductor company Nvidia and has warned that the US economy could experience a recession next year. Cooperman made these comments during an interview at The Ben Graham 10th Annual Conference on June 20.
According to Cooperman, the current valuation of Nvidia is not sustainable, and he believes the stock will eventually decline. Despite Nvidia’s shares nearly tripling in value this year, with its market capitalization reaching a record $1 trillion, Cooperman believes that a fall from such high levels will be much more significant and challenging to recover from. He highlighted past examples, such as Cisco, which failed to regain its previous highs after the dot-com bubble burst.
Cooperman, the founder of Omega Advisors and former head of Goldman Sachs’ asset-management division, expressed his concern about the speculative frenzy among investors in today’s market. He noted that there are unusual price movements based on insignificant news and attributed this volatility to quantitative traders who focus solely on price rather than value.
While the stock market has seen significant gains this year, with the S&P 500 rising by 15% and the Nasdaq 100 surging by 38%, Cooperman believes that the rally is driven by positive sentiment rather than fundamental factors like company profits. He cautioned that this enthusiasm is unlikely to last and predicted that the S&P 500 will not surpass its January 2022 high for several years.
As for the US economy, Cooperman suggested that a recession could occur in 2024. He believes that if a recession were to hit, it could be triggered by a combination of depleted funds among individuals and the Federal Reserve continuing to raise interest rates.
In light of his concerns about overpriced assets, inflation, rising interest rates, and a looming economic downturn, Cooperman is adopting a cautious approach. He emphasized that he is not fully invested and has cash on hand. However, he also noted that there are still plenty of undervalued stocks in the market, providing opportunities for bargain hunters to achieve significant returns.
Cooperman’s warnings serve as a reminder to investors to carefully assess their investment choices and consider the potential risks and uncertainties in the current market environment. While the market outlook may be positive for now, it is essential to remain vigilant and consider the potential consequences of unsustainable valuations and economic challenges in the future.
