After last week\u2019s sell-off of technology stocks over concerns about whether enormous artificial intelligence spending plans are justified, bubble-watchers won\u2019t have to wait long for another big test of investor sentiment. <\/p>\n
On February 25, Nvidia, the chip-making pioneer selling the shovels for the AI gold rush, will report quarterly earnings amid growing scrutiny of the industry boom. <\/p>\n
Shares in the business rose 3.4 per cent on Monday on the very spending signals from some of its largest customers that prompted the recent dip in technology shares. <\/p>\n
Last week\u2019s flurry of earnings from Amazon, Alphabet, Meta and Microsoft showed AI capital expenditure by these giants alone is set to top $650 billion, prompting a sell-off that went beyond technology stocks and into other risk assets.<\/p>\n
The fundamental anxiety is that the industry is racing to establish the expensive infrastructure needed to underpin the AI boom before it has come close to demonstrating the returns will be there to justify it. Outside of tech, business leaders are divided on the extent of the utility and productivity gains that will be delivered. <\/p>\n
Investors are also cautious about the wisdom of technology titans that have thrived on a capital-light business model racing towards a capital-intensive one. <\/p>\n
Cumulative AI spending has been forecast to exceed $5 trillion by 2030, 60 per cent of which is expected to go on semiconductors and other hardware, a frankly incredible level of investment in a new and commercially unproven technology. <\/p>\n
Analyst Mike Zigmont at Visdom Investment Group, has said doubts over the sector\u2019s \u201cgrowth into infinity\u201d are growing.<\/p>\n
Yet even if the current spending boom ultimately proves unwise, Nvidia looks set to benefit from the largesse for some time yet, providing it with an enviable level of comfort about demand and revenue. <\/p>\n
\u201cThe massive step-up in [capital expenditure] now expected in 2026 is likely to greatly benefit \u2026 providers like Nvidia,\u201d Sebastien Naji, analyst at William Blair, said in a research note.<\/p>\n
Goldman Sachs has issued an upbeat forecast for Nvidia\u2019s quarterly earnings, predicting it will exceed revenue and earnings per share expectations.<\/p>\n
Over the past four years the company has transformed from a significant technology player worth about $360 billion to the world\u2019s largest company, with a market capitalisation of more than $4.6 trillion.<\/p>\n
\u2022 Sell-off, what sell-off? Dow shrugs off AI fears to surge past 50,000<\/a><\/p>\n This is on the back of an explosion in demand from the AI industry for its graphics processing units \u2014 formerly focused on the gaming industry \u2014 following the launch of OpenAI\u2019s ChatGPT and other \u201clarge language model\u201d products.<\/p>\n Nvidia is not immune from investors\u2019 anxiety about the sustainability of the AI boom. Since its peak in late autumn last year, its share price has fallen by about 12 per cent, although it is in marginally positive territory for the year to date. <\/p>\n The Silicon Valley chipmaker is seeing growing competition from rivals including AMD and Broadcom. The launch of Nvidia\u2019s latest chip, Vera Rubin, named for the American astronomer, and said to promise performance and energy efficiency improvements, needs to be well received to help maintain momentum. <\/p>\n There have been recent tensions between the company and OpenAI, one of its biggest customers, with doubts raised over a purported $100 billion \u201cpledge\u201d by Nvidia to invest in OpenAI amid reported concerns from Nvidia about OpenAI\u2019s business model which, to put it gently, is extremely optimistic in its revenue projections. <\/p>\n