Bitcoin and Nvidia Share Strong Correlation Amid AI Bubble Concerns

According to CoinDesk, the 90-day and 52-week correlation coefficient between bitcoin and Nasdaq-listed chip maker Nvidia has risen above 0.80, indicating a strong positive correlation. This relationship is significant as some analysts, including investment management firm GMO, believe the surge in Nvidia's valuations represents an artificial intelligence (AI) bubble that could soon burst. Bitcoin has pulled back over 8% from its record high, while Nvidia has pulled back 9% from its lifetime peak, but both still show substantial year-to-date gains. The growing demand for Nvidia processors from ChatGPT and other generative AI projects has been primarily responsible for the surge in the chip maker's valuations. The 90-day correlation coefficient between the two has risen to 0.86, the highest since May 2023, while the 52-week correlation has risen to 0.88, the highest since January 2023. GMO's Chief Investment Strategist Jeremy Grantham explained in a paper published on Monday that the launch of ChatGPT in December 2022 helped raise general awareness about AI, and the subsequent love affair with AI stocks represents a "bubble within a bubble." Grantham compared the AI frenzy to the dot-com bubble burst in 2000, noting that every technological revolution has been accompanied by early massive hype and a stock market bubble. Meanwhile, strategists at Citi said the AI bubble could last into 2025, according to Investing.com.

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