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Concerns about the AI bubble have been simmering for at least a year and a half. Nvidia’s incredibly strong financial results last week sought to dispel those concerns. Maybe it wasn’t enough.
Nvidia said Wednesday that its revenue and profits rose more than 60% from a year earlier, beating Wall Street expectations. “Sales are off the charts,” CEO Jensen Huang said. And the company expects fourth-quarter revenue to be about $65 billion, also beating Wall Street expectations.
Nvidia executives said these results, along with the growth of other major AI players and the billions of dollars being poured into AI infrastructure, show that fears of an AI bubble are overblown.
“There’s a lot of talk about an AI bubble,” Huang said on a conference call with analysts Wednesday. “From our perspective, we see something completely different.”
Some Wall Street analysts agree. However, the market as a whole is still not convinced. After briefly rising on Thursday morning following the Nvidia report, the chipmaker’s stock (NVDA) is back in the red. Despite Friday’s close down 1%, the stock is up 29% since the beginning of the year.
In other words, NVIDIA has answered many questions about the current state of the industry, but it may take more time to change the entire AI narrative.
Nvidia CFO Colette Kress said the company expects annual AI infrastructure spending to be $3 trillion to $4 trillion by the end of the decade, adding that demand “continues to exceed our expectations.” Already, big tech companies are expected to spend $400 billion in AI-related capital spending this year to meet growing demand for AI and cloud services and to avoid falling behind industry rivals.
There’s good reason Nvidia is trying to reassure investors. After almost two years of astronomical growth, expectations for the company are sky high. And many look to the chipmaker to lead the way for the entire technology industry.
Even as Silicon Valley tries to find a business model for generative AI, Huang said Nvidia has a big role to play in complementing existing technology services that people use every day. This could help isolate Nvidia even if revenue from new AI applications is smaller than expected or takes longer to arrive than expected.
“The world is making huge investments in non-AI software, from data processing to science and engineering simulations, with hundreds of billions of dollars spent on cloud computing every year.” Much of the infrastructure powering that software has moved from running on older CPU chips to Nvidia’s GPUs, chips known for running AI tools, Huang said.
Kress also took the unusual step of reviewing highlights from the chipmaker’s partners’ recent financial reports. At Meta, for example, its AI recommendation system is “increasing the amount of time spent on apps like Facebook and Threads.” Anthropic recently said it expects annual revenue to be $7 billion this year. And Salesforce’s engineering team has improved efficiency by 30% by using AI for coding, she said. She has amassed a long list of corporate clients.
NVIDIA is not alone in arguing that concerns about an AI bubble may be overblown.
“Pure Nvidia’s numbers/guidance and strategic vision show that the AI revolution is not a bubble…rather, in our view, it is year three of this decade of building out of the Fourth Industrial Revolution,” Wedbush technology analyst Dan Ives said in an emailed commentary.
“There’s not much indication that 2026 is going to be a bad year for Nvidia in any way,” said Brian Colello, senior equity analyst at investment research firm Morningstar, who sees bubble concerns weighing on the company’s stock as a “buying opportunity.”
fear remains
But despite these strong results, the stock market doesn’t seem ready to relax just yet.
Questions remain about whether tech companies will sustain their huge spending on AI infrastructure, especially as Nvidia invests in major unprofitable customers such as OpenAI and Anthropic. OpenAI CFO Sarah Friar also sounded the alarm earlier this month, suggesting that governments should backstop the debt tech companies take on to build AI infrastructure. Some took her comments as a sign that OpenAI might have trouble paying its commitments, but the company later tried to retract its statement.
And while NVIDIA likely has enough customers even if the bubble burst takes its toll on AI companies, investors may still be concerned about what a recession or slowdown could mean for the broader market.
Daniel Morgan, senior portfolio manager at Synovus Trust Company, said the latest report did not “resolve” questions about the sustainability of Big Tech’s surging infrastructure spending and Nvidia’s circular financing deals. Instead, it could simply be “punted” into the next quarter.
This means that Nvidia will almost certainly have to do more going forward to convince the world that the AI boom is here and not a bust.
