Global stock markets experienced a significant rebound of £200 billion on Thursday after the CEO of the world’s largest company dismissed concerns about an artificial intelligence (AI) bubble.
Nvidia, a prominent US tech giant heavily involved in AI technology development, reported a remarkable 62% increase in sales to £43.6 billion for the three months ending in October. CEO Jensen Huang expressed confidence, stating, “There has been a lot of talk about an AI bubble. From our vantage point, we see something very different.”
The positive results from Nvidia triggered a global stock market rally, with the FTSE All World Index, representing major stock markets worldwide, climbing by 0.3%. In the UK, the FTSE 100 surged nearly 70 points in mid-morning trading, although it remains below the recent peak of almost 10,000 points.
Recent weeks saw a substantial decline in the valuations of tech companies, raising concerns about potentially inflated market values. This led to fears of a bubble that could burst, impacting a wide range of investors, including small investors and pension funds crucial for many UK workers.
Nvidia’s strong performance also benefitted its competitors like Google parent company Alphabet and Microsoft, boosting their shares in the market. Analysts from asset manager Quilter Cheviot, such as Ben Barringer, highlighted the positive impact of Nvidia’s results, alleviating market concerns and fostering a favorable response.
Despite the reassuring results from Nvidia, some experts, including analyst Ruben Roy from investment bank Stifel, believe that fears of an AI bubble may persist due to concerns about the sustainability of AI infrastructure spending growth. However, market analysts like Chris Beauchamp from IG acknowledged the signs of robust demand, offering investors optimism for future gains.
Investment director Russ Mould from broker AJ Bell noted that Nvidia’s results brought stability to the markets following a period of uncertainty. The market had been apprehensive before Nvidia’s earnings announcement, but the positive figures provided a boost to investor confidence and market sentiment.
Victoria Scholar, head of investment at Interactive Investor, emphasized the significance of Nvidia’s exceptional earnings in dispelling bearish sentiments and reinstating confidence in AI-related stocks. Despite challenges in November and fears of overvaluations in the sector, Nvidia’s earnings justified high valuations and hinted at potential future growth for AI stocks.