The 'Wizard of Wharton' says a tech bubble may be forming - and AI stocks like Nvidia could crash

• A speculative bubble in tech stocks may be starting to form, Jeremy Siegel said.
• The "Wizard of Wharton" said Nvidia could rise further, but the tech rally would eventually stall.

The breathless hype around technology stocks like Nvidia is nearing dangerous levels, Jeremy Siegel warned.

"The beginnings of a speculative bubble may be forming but it is impossible to tell when it will end," the retired finance professor known as the "Wizard of Wharton" said in his weekly WisdomTree commentary on Monday.

Nvidia stock has soared more than five-fold since the start of last year, vaulting the semiconductor company past Amazon and Alphabet to a $2 trillion market value.

Insatiable demand for its graphics chips from AI companies fueled a 265% year-on-year increase in its revenue to more than $22 billion last quarter, and an almost 1,000% rise in its operating income to about $14 billion.

Siegel said it's unclear whether the frenzy is more like the halcyon days of the internet revolution, or the peak euphoria that preceded the dot-com crash.

"I do not think we are in a bubble now," he said. Heady tech valuations are underpinned by strong earnings growth, and Nvidia is a "special company" that doesn't strike him as "dramatically over- or undervalued" and could keep rising, he added.

Still, the tech-stock rally will ultimately stall and the correction could be brutal, Siegel said. "In a run such as this, the saying is 'stairs up, elevator down.' And that elevator ride can be quite swift!"

WisdomTree's senior investment strategy advisor shrugged off mounting concerns about the US economy.

Historically low unemployment, solid job gains, and stubborn inflation in recent months have fueled fears that the Federal Reserve might not cut interest rates for a long while. That would mean continued pressure on cash-strapped households as well as businesses in industries such as banking and commercial real estate, and an increased risk of recession.

Siegel, the author of "Stocks for the Long Run," said he wasn't worried as a healthy economy and robust earnings backdrop are good for companies and their investors. There's also little sign of resurgent inflation in his view. "Sensitive commodities are the early warning signals of inflation, and they are quiet," he said.

The finance guru was one of the few commentators to anticipate last year's stock-market rally, and in December he issued another bright outlook for this year.

He predicted stocks would jump, a recession wouldn't materialize, and rates would tumble. Given his perennial optimism, it's striking that even he sees the risk of a tech bubble now.