AI Bubble Could Take Down Market

seekingalpha11-22 19:22

NVIDIA's earnings show signs of exhaustion, raising concerns about future gains for the Nasdaq, especially given its heavy reliance on tech stocks.The AI bubble may deflate soon, with slowing growth ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAI Bubble Could Take Down Market\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-22 19:22 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739544-ai-bubble-could-take-down-market><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>NVIDIA's earnings show signs of exhaustion, raising concerns about future gains for the Nasdaq, especially given its heavy reliance on tech stocks.The AI bubble may deflate soon, with slowing growth ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739544-ai-bubble-could-take-down-market\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NDX","symbol_name":"纳斯达克100指数","start_time":0,"source_url":"https://seekingalpha.com/article/4739544-ai-bubble-could-take-down-market","article_id":"2485259700","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/97970592/image_97970592.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485259700","pubTimestamp":1732274527,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"NVIDIA's earnings show signs of exhaustion, raising concerns about future gains for the Nasdaq, especially given its heavy reliance on tech stocks.The AI bubble may deflate soon, with slowing growth and profitability for NVIDIA, and unsustainable valuations for many AI startups.AI's high costs and lack of immediate productivity results make it a more significant bubble risk compared to the internet boom.The market's heavy concentration in AI-related stocks could lead to a broader market downturn if the AI bubble bursts.Robert Daly  Thesis Summary NVIDIA's  earnings have been received with a muted reaction by investors. Even the world's AI darling is running out of steam, and this in my opinion spells trouble for the Nasdaq. NVIDIA has been responsible for most of the Nasdaq's gains, but it is showing signs of exhaustion, so where are gains going to come from now?The waning excitement in response to NVIDIA's earnings could be symptomatic of something much worse. Could The AI Bubble Be R","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NDX":"纳斯达克100指数"},"translate_title":"人工智能泡沫可能会拖垮市场","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NDX":0.9},"content_text":"NVIDIA's earnings show signs of exhaustion, raising concerns about future gains for the Nasdaq, especially given its heavy reliance on tech stocks.The AI bubble may deflate soon, with slowing growth and profitability for NVIDIA, and unsustainable valuations for many AI startups.AI's high costs and lack of immediate productivity results make it a more significant bubble risk compared to the internet boom.The market's heavy concentration in AI-related stocks could lead to a broader market downturn if the AI bubble bursts.Robert Daly  Thesis Summary NVIDIA's (NVDA) earnings have been received with a muted reaction by investors. Even the world's AI darling is running out of steam, and this in my opinion spells trouble for the Nasdaq. NVIDIA has been responsible for most of the Nasdaq's gains, but it is showing signs of exhaustion, so where are gains going to come from now? I see some big headwinds for US stocks ahead, especially tech stocks. The risk-on trade is overcrowded, and the AI bubble could begin deflating sooner than we think. We can also see clear signs of exhaustion from technical charts. NVIDIA; Slowing Down And Topping Out NVIDIA delivered another earnings beat, but investors were far from impressed. The stock opened in the red, though it is now marginally up. Despite some strong numbers, it's hard to get over the fact that growth and profitability have likely topped out. NVDA in charts (SA) QoQ growth keeps decelerating and is projected to keep slowing down next quarter, and the margins for the company are also expected to come in lower than in Q3. Over the past year, NVIDIA has accounted for over 20% of the market's returns, but are we running out of steam? The waning excitement in response to NVIDIA's earnings could be symptomatic of something much worse. Could The AI Bubble Be Ready To Pop? It's hard to argue the fact that the US economy is firing on all cylinders. Employment is strong and inflation is still coming down. Even housing doesn't seem to be a threat, with effective mortgage rates still quite low. It seems like nothing could derail stocks right now, but then that's exactly the general sentiment before a big market sell-off. While AI continues to be a hot topic, 2025 will have to deliver some results, or we could see an unwinding of the current euphoria, which would no doubt drag markets down with it. Today's AI euphoria has often been compared to the development of the internet, so let's use this as a base case to explain exactly why this could be even more of a bubble. Internet vs AI Users It's been argued that AI users are growing at a faster rate than internet users. AI vs Internet (Federal Reserve) However, this may be overlooking a very important difference. Back in the 90s, becoming an internet user required a sizable investment. meaning, they had to buy a PC and invest time in learning about a very noble technology. But today, there are really no barriers to entry when it comes to using AI. Everyone is already online, and there are plenty of free services available. Productivity vs Cost This takes me to my next point. While there's plenty of use and engagement with AI, we have yet to see any results. To this extent, we can argue that both in terms of cost and immediate productivity, AI is way more of a bubble than the Internet. AI models are incredibly costly to deploy, requiring specialized hardware and energy output that is already getting beyond current capacity. The internet, on the other hand, was a much cheaper invention to deploy, while it yielded much quicker results. By 2000, over 134 million PCs had been sold, which at an average price of $5,101 amounted to $684 billion in revenue. E-Commerce around the year 2000 was generating $286 billion annually and also, every single person using the internet by this point was paying for it. By some estimates, the internet was already generating $1.5 trillion in today's dollars by 2000, which was right ahead of the .com crash. Meanwhile, Generative AI is expected to generate $10 billion in 2026. According to David Cahn $600 billion in annual AI revenue would be needed to justify the current investment in AI. We're nowhere near these levels. Unsustainable Valuations While yes, NVIDIA's valuation is backed to a great extent by growing revenues, the same can't be said of plenty of other AI startups. OpenAI, is valued at $157 billion per its latest funding round. This is a company that is expected to have $5 billion in losses on $3.7 billion in revenue. The problem isn't NVIDIA, it's all the AI startups which it relies on to buy its chips, which in turn rely on VC and PE funding to keep going. Once one domino falls, the funding dries up and the whole thing could topple fast. If AI Goes, Everything Goes We've seen it happen many times before. People see new technology and get excited. It happened more recently with EVs and Crypto, and now it's AI. But this time, the AI bubble could take down the whole market. Valuations and Market concentration (ECB) The top five companies in the S&P 500 represent over 25% of the market capitalization, and they are all involved in AI. The ECB recently issued a report highlighting the risk of this high level of concentration. The AI bubble doesn't just take down NVIDIA, but all of the Mag 7. The Nasdaq May Have Topped NDX (TrendSpider) Tech could be in for a rude awakening. We are beginning to reverse at the key 1,618 ext of the 2022 bear market. On top of that, we have a very clear bearish divergence in the RSI, and the weekly MACD is rolling over. Final Thoughts  The AI mania can only continue for so long without tangible results. Yes, we have seen some cool applications, but maybe not enough to justify the high costs and investments. While the technology is no doubt great, just like the internet, this doesn't mean we are not in a bubble.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485259700"}