AI boom inflates fears of a bust

Investors worry about returns as tech giants’ big spending draws comparisons to the dot-com era

- By QUEENIE WoNG AND NILESH CHRISTOPHER

THE HIGH valuations of Nvidia and other giants have investors asking whether the AI bets will pay off.

(JEFF CHIU Associated Press)

The artificial intelligence boom seems unstoppable, but a growing number of investors and other observers worry it could be a bubble about to burst.

After skyrocketing more than 50% from April lows, the tech-heavy Nasdaq composite experienced a decline of close to 5% this month. Investors are concerned it could take longer than expected to see big profits from the trillions of dollars they've poured into technology's next wave.

Those who have been around long enough say some of the enthusiasm feels like the dotcom boom and bust of the turn of the century. Optimists say this time is different.

AI chipmaker Nvidia has led the stock market rally, becoming the world’s most valuable company on the back of the AI enthusiasm. The Santa Clara-based company makes specialized computer chips that tech companies use for AI model training, data centers, robotics and more.

AI bulls and bears waited to hear what Nvidia had to say about the state of the business in its quarterly earnings report on Wednesday. The company helped keep the hope alive by announcing that its profit as well as its outlook on the future were better than analysts had expected. But its shares fell about 3% on Thursday.

“There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different,” Nvidia Chief Executive Jensen Huang said in a call after the results were announced. “As a reminder, Nvidia is unlike any other accelerator, We excel at every phase of AI.”