AI boom sparks fears of spending built on house of cards

It would not be a stretch to describe this period of hyperactive growth in the tech industry as a historic moment.

- CADE METZ

Nvidia has said that its quarterly profit had jumped to nearly $32 billion, up 65 per cent from a year earlier and 245 per cent from the year before that. Just three weeks ago, Nvidia became the first publicly traded company to be worth $5 trillion. Microsoft, Google, Apple and Amazon are also now valued in the trillions. In their most recent quarters, the four companies reported more than $110 billion in combined profits.

“There’s been a lot of talk about an AI bubble,” said Jensen Huang, Nvidia's chief executive, after his company’s blowout quarterly report. “From our vantage point, we see something very different.”

But some industry insiders say there is something ominous lurking behind all this bubbly news. They look at the same eye-popping growth and the same stunning wealth creation as Huang and see a house of cards. And they say it is hard to know what the damage will be if it collapses.

Even Nvidia’s growth can be explained away. Demand for the company’s chips doesn’t mean people want to use AI. It merely means that companies are building giant AI systems in hopes someone will pay to use them.