Indeed, even the venerable Nvidia isn't invulnerable to the shake in confidence. Nvidia's recent earnings reports were strong, but its stock price has slid several percent in recent days and has lost over 10 percent since the start of the month.
Bloomberg highlights that this reaction from investors comes as they start to hunt for profit in the AI equation. Although capital investment was expected earlier in the AI hype phase, investors are now looking for a return on those investments. That may be where some of the borrowing is coming in: companies look to accelerate their developments to increase revenue over a shorter time scale.
“When companies that don’t need to borrow are borrowing to make investments, that sets a bar for the returns on those investments,” explained Bob Savage, head of markets macro strategy at BNY. “We’re in a ‘show me the money’ phase.”
Still, he doesn't see the AI bubble bursting any time soon. Most expenditure is still being funded by cash flow, so investors shouldn't be too concerned for now. As we head into the new year, though, if some of these major investments don't lead to big returns, it's clear investors will put increasing pressure on these AI-first companies to find the profit somewhere.
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Jon Martindale Freelance Writer Jon Martindale is a contributing writer for Tom's Hardware. For the past 20 years, he's been writing about PC components, emerging technologies, and the latest software advances. His deep and broad journalistic experience gives him unique insights into the most exciting technology trends of today and tomorrow.
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/wall-street-warns-of-rising-ai-debt-risk-as-stocks-slide-on-wobbly-investor-confidence-analysts-warn-of-systemic-risk-as-nvidia-share-price-creaks#main
- https://www.tomshardware.com
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