Tech giant Nvidia reported record earnings on Wednesday, prompting both cheers and concerns about a surge in Wall Street investment in artificial intelligence.
LEILA FADEL, HOST:
Technology company Nvidia continues to post stunning earnings results.
AND MARTINEZ, GUEST:
Yeah. Listen to these numbers. The company announced late yesterday that it earned $32 billion over the past three months. In recent weeks, its valuation has reached $5 trillion. Nvidia is the company fueling much of Wall Street's optimism about artificial intelligence.
FADEL: NPR finance correspondent Maria Aspan is here to talk about investor enthusiasm and caution about the artificial intelligence boom. Good morning, Maria.
MARIA ASPAN, AUTHOR: Good morning.
FADEL: Nvidia is valued at $5 trillion. That's a lot. How and why is there so much enthusiasm for this?
ASPAN: It's actually the most valuable company in the world, and also one of the most closely watched. For example, financial news site Bloomberg yesterday live-streamed Nvidia's entire conference call with investors as if it were the Oscars or Super Bowl. And Nvidia is being closely watched because it sells computer chips that are fueling the artificial intelligence boom. And, as she told investors again yesterday, she's making a ton of money doing it. Yesterday's earnings report showed revenue and earnings beat analysts' expectations, and the market is ecstatic. Nvidia shares are now up about 5%, and stock futures overall are higher. Nvidia CEO Jensen Huang said on a call with investors yesterday that he is confident in Nvidia's future.
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JENSEN HUANG: There's been a lot of talk about the AI bubble. From our point of view we see something completely different.
ASPAN: Essentially, he's saying that the world is just at the beginning of the transition to generative AI and that there's a lot more to come.
FADEL: Nvidia's CEO has dismissed the idea of an AI bubble, but there appears to be a very real fear among investors. This is true?
ASPAN: Yes. This has been a recurring fear and we have seen it arise again in recent days. In particular, the benchmark S&P 500 index is ending its worst losing streak since August. And that's because technology, and artificial intelligence in particular, is a huge part of the stock market. By one estimate, AI-related stocks account for nearly half the value of the S&P 500. But while Wall Street is pinning all its hopes on the AI boom, it's a long-term bet, and companies that invest in AI just aren't seeing huge, tangible results just yet.
Well, this latest Nvidia earnings report comes at a time when we're seeing a growing number of warnings that tech stocks are too hot and the market is headed for a correction. We hear this from leading investment banks such as Goldman Sachs and Morgan Stanley, and even from Silicon Valley leaders involved in the artificial intelligence boom, such as Sundar Pichai. He is the CEO of Google's parent company Alphabet, which, it should be noted, provides financial support to NPR. And in an interview with the BBC this week, Pichai was surprisingly candid about whether this is a bubble.
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SUNDAR PICHAI: I think it's both rational and at that point there are elements of irrationality.
ASPAN: “Elements of irrationality” is a pretty serious admission from Google. And Pichai also acknowledged that the tech industry sometimes goes beyond investment cycles.
FADEL: Okay, Maria. So what does this mean for all of us non-tech titans?
ASPAN: It's important to remember that the stock market is not the economy, but it is often viewed as an indicator of the health of the economy. The problem is that the artificial intelligence boom that has driven the market to record highs is allowing investors to gloss over questions about what's happening in the economy. Tariffs are cutting into company profits, consumer prices are rising and the labor market is weakening. So while AI has become a big bright spot, it's unclear how long it can last.
FADEL: That was NPR's Maria Aspan. Thank you, Maria.
ASPAN: Thank you.
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