Leon Cooperman has called out the speculative mania around Nvidia and other popular stocks, and warned the US economy could slump into recession next year.
“We know that Nvidia’s not going to end well,” the billionaire investor said during an interview at The Ben Graham 10th Annual Conference on June 20.
Nvidia’s shares have nearly tripled in price this year, boosting its market capitalization to a record $1 trillion, as investors wager the microchip maker will be a big winner from the artificial-intelligence boom.
“I’ve learned over the years that everything ultimately turns to shit, and the fall from 200 times earnings is a lot harder than the fall from eight or nine times earnings,” Cooperman said, referring to Nvidia’s current valuation. He noted that former stock-market darlings like Cisco have never reclaimed the breathless highs they reached during the dot-com bubble.
The Omega Advisors founder, and former head of Goldman Sachs’ asset-management division, bemoaned the general state of madness that investors are in today.
“There’s a lot of crazy things going on in the market,” he said. “I’ve never seen moves on such insignificant news as we’re seeing in the market today,” he continued, partly blaming the volatility on quantitative traders who “know everything about price, know nothing about value.”
Cooperman attributed the rally in stocks this year — the S&P 500 has climbed 15%, while the Nasdaq 100 has surged 38% — to a major upswing in positive sentiment, not fundamentals such as larger corporate profits.
He cautioned the enthusiasm wouldn’t last, and predicted the S&P 500 wouldn’t surpass its January 2022 high of about 4,800 points for several years. However, he noted there are still plenty of undervalued stocks on the market today, paving the way for bargain hunters to score outsized returns.
Cooperman also touched on the US economic outlook, suggesting a recession could strike in 2024.
“If we have one it may come next year, when people run out of money and the Fed keeps raising rates,” he said.
The veteran investor added that he’s behaving cautiously against a backdrop of overpriced assets, lingering inflation, rising interest rates, and a looming economic downturn.
“I’m sufficiently nervous about the big picture that I’m not fully invested, I have cash,” he said. “But I would say that there’s no shortage of good values around.”
