Are we in an AI bubble that’s about to burst? Here’s what Nvidia’s Jensen Huang thinks
Nvidia Corp. Chief Executive Jensen Huang dismissed concerns about an AI bubble, saying the company’s newest chips are expected to generate half a trillion dollars in revenue.
“I don’t believe we’re in an AI bubble,” Huang said during a Bloomberg Television interview. “We use a lot of services across all these different AI models that we use, and we happily pay for it,” he said.
Huang’s latest words eased fears of an AI investment bubble and sent Nvidia’s shares up 5% to a record close of $201.03 on Tuesday.
What is the AI bubble?
An AI bubble generally refers to a situation where investor interest or expectations push the valuation of AI-related companies. This occurs when expectations of future AI profits inflate stock prices. If these high expectations are not met, the bubble may burst.
In particular, spending on artificial intelligence is increasing globally. According to US research firm Gartner, this figure is expected to reach approximately $1.5 trillion by 2025 and exceed $2 trillion in 2026; This corresponds to almost 2% of world GDP.
Why is the AI bubble causing concerns?
Since the AI boom, concerns have emerged about a speculative bubble similar to the dot-com craze of the late 1990s, which resulted in a dramatic crash and many bankruptcies.
Tech companies are investing heavily in advanced chips and data centers not only to keep up with the growing popularity of chatbots like ChatGPT, Gemini, and Claude, but also to prepare for a larger, more disruptive shift in economic activity from humans to machines. The total cost could even reach trillions. The funding comes from venture capital, debt and some unusual arrangements that have attracted attention on Wall Street.
AI supporters recognize that the market is volatile, but they are confident in the technology’s long-term promise. They claim that artificial intelligence is poised to transform various industries, find cures for diseases, and vastly advance human progress, Bloomberg reports.
Despite this rapid spending on AI, AI has still not proven to be a profitable business model. Tech industry executives who are privately skeptical of the most enthusiastic claims about AI’s revolutionary potential, or at least struggle to see how to make money from it, may feel they have little choice but to continue investing to keep up with competitors or risk being overshadowed and sidelined in the future AI market, the report notes.
“The numbers that are being thrown around are so extreme that it’s really hard to understand them,” David Einhorn, a leading hedge fund manager and founder of Greenlight Capital, told Bloomberg. “I’m sure it’s not zero, but there’s a reasonable possibility that a tremendous amount of capital losses will come out of this cycle,” he said.
