Global Stock Markets Rally
Global stock markets rallied as the world’s most valuable company reassured investors of the demand for artificial intelligence (AI) and the returns companies can generate. Nvidia’s announcement of another round of record-breaking sales is “a hugely important moment in the AI revolution thesis.”
Nvidia’s Role in AI Surge
Nvidia’s computer chips are driving much of the AI surge and are a key component in generative AI chatbots like ChatGPT. The company’s results and forecast for strong sales are seen as a clear signal that AI and technology stocks are not overvalued and that there is no bubble waiting to burst.
Market Reaction
The stock price and valuations of technology companies have skyrocketed as investors hope to profit from investments in AI. Nvidia itself became the first company to reach a valuation of $5 trillion in October this year. "The pure Nvidia numbers/guidance and strategic vision show that the AI revolution is NOT a bubble… Instead, in our view, it is the third year of a 10-year buildup to this fourth industrial revolution,"
Investor Enthusiasm
While investors hailed Nvidia’s "flawless" results, there was clear enthusiasm for technology and AI-related companies. Across Asia and Europe, technology companies and Nvidia competitors saw their share prices rise. Doubts about the ratings have been dispelled for the time being and bubble concerns have been calmed.
Financial Performance
The chipmaker reported revenue of $57 billion for the three months ended October and expects revenue of $65 billion in its next results. It’s "as calming as a warm cup of tea on a cold day, giving investors the energy to increase their risk appetite and putting a nice glow back on the market,"
Risks and Concerns
The feeling of calm is unlikely to last. AI trust has been weakened in recent years by the success of the Chinese AI model and trade wars; There is still much that could weaken trust. And not everyone is reassured by Nvidia’s latest numbers. US trader Michael Burry has effectively bet that Nvidia’s share price will fall.
Market Skepticism
After the results were published, Mr Burry posted a picture of large AI companies and said: "The actual end demand is ridiculously low. Almost all customers are financed by their dealers." The statement underscores concerns about deals between big tech companies as they are self-fulfilling, circular and funded by borrowed money.
