AI and Nvidia's suspicions in an uncertain economy: NPR

The Artificial Intelligence Bubble has been supporting the stock market and the wider economy for some time. What happens if it bursts?

It's been a recent issue circling Wall Street as both the big tech companies face both unprecedented political pressure from the White House and new questions about all the money poured into AI investment.

Over the past week, AI Darling Nvidia reported a hugely successful financial results that beat analysts' expectations. However, investors were not impressed. The chip company's shares fell 4% in two days since its report.

Nvidia remains the most valuable company in the world, and by itself accounts for around 8% of the S&P 500. And other so-called “magnificent seven” tech companies contribute by investing billions and billions of dollars in the development of artificial intelligence, and the stock markets that Americans rely on for retirement investments.

The S&P 500 has risen nearly 10%, with the high-tech Nasdaq rising by more than 11% since the beginning of the year. That surge comes despite increasing uncertainty about the wider US economy's performance, the long-term impact of President Trump's sweeping tariffs, and price hikes that are widely expected to be caused by consumers.

The AI ​​Gold Rush hasn't been rewarded yet

For businesses and investors, the promise of artificial intelligence was a big, economically bright place in all the other darkness. In this modern gold rush, Nvidia and its competitors sell picks and shovels. It is a semiconductor used by many high-tech companies to develop AI systems and functions.

These companies sell AI products to all non-technology companies that are looking for money for AI products. That is, they are looking for ways to make their business cheaper or more efficient.

However, few have seen the results yet. According to a new study from MIT, the majority of companies experimenting with AI (95%) do not look at the revenue of companies experimenting with AI. The publication of last week's findings has caused the Nasdaq to run for several days.

“Most companies don't make any profits [of investing in artificial intelligence]But they feel they have to continue to challenge because of the magnitude of the chaos that their path is coming,” says Gil Luria, managing director at Da Davidson, targeting technology companies.

What's happening in Nvidia symbolizes a broader story

Despite beating analyst expectations and earning $26.4 billion in profits in the second quarter, Nvidia's latest quarter results disappoint Wall Street.

Even outside of the AI ​​bubble, Nvidia has become a link to major issues facing US companies, including raising concerns about the future of free market capitalism and how much control Trump is taking place on private companies.

Nvidia headlined this month for an extraordinary deal that Trump announced with the company. He says that in exchange for Nvidia leaving the company with the business, he agreed to pay the US government to cut the sales of certain chips in China. (Nvidia said this week that it has not sold its chips in China in the past quarter.)

Trump announced that he is considering seeking a deal just before his administration told Inter to take a 10% stake, and similar deals in other industries. These extraordinary arrangements have warned in the US, that the US government is taking more control over the free market. Meanwhile, investors are also still waiting to see the full impact of Trump's sweeping tariffs on the wider economy.

But Pam Hegarty, who invests in tech companies as the lead portfolio manager at BNP Paribas, says Wall Street appears to be used to political turmoil, centering around parts of the artificial intelligence industry.

“Tax and export restrictions have certainly added a lot of uncertainty, especially in the semiconductor sector. But investors are beginning to absorb that uncertainty,” she says, adding that she is still optimistic about the wider AI boom.