Wall Street’s AI worries are getting stranger. Chip company Nvidia reported record-breaking earnings on Wednesday, but tech investors are still panicking.
AILSA CHANG, HOST:
Something very strange is happening on Wall Street when it comes to AI. Tech giant NVIDIA reported record-breaking earnings yesterday, but tech investors are still panicking. NVIDIA’s shares fell more than 5% today, dragging down the tech-heavy NASDAQ. NPR financial correspondent Maria Aspan joins us now to explain. Hi, Maria.
MARIA ASPAN, BYLINE: Hey, Ailsa.
CHANG: Hey. OK, wait. So if NVIDIA beat expectations and broke records yesterday, why would its shares fall today?
ASPAN: It’s a perpetual question. I mean, NVIDIA is the most valuable company in the world, and it’s really at the center of the AI boom.
CHANG: OK.
ASPAN: It sells the chips…
CHANG: Yeah.
ASPAN: …That other tech companies are using to build up AI, and tech is powering the overall stock market. Now, NVIDIA’s earnings, as you said, were objectively excellent. Its profit almost doubled from a year earlier to $43 billion.
CHANG: So what’s the problem?
ASPAN: However…
(LAUGHTER)
ASPAN: …We’re at this stage of the AI cycle where it almost doesn’t matter what the reality is. There are so many hopes pinned on how AI could benefit the economy, but now investors are also worrying about the damage it could do. I talked about all of this with Andy Li. He’s a tech analyst for the financial research firm CreditSights.
ANDY LI: People are just getting more and more antsy. Any one headline kind of creates a cascade of, you know, everybody trying to do the same thing at the same time.
ASPAN: So this week NVIDIA’s earnings were one of those headlines, and it almost didn’t matter what the actual results were.
CHANG: So interesting. So why exactly are investors antsy? Like, what are they worrying about specifically?
ASPAN: So they’re worrying about a lot – and some of it is grounded in reality, but a lot of it is contradictory. This is Gil Luria. He’s a tech analyst at the investment bank D.A. Davidson.
GIL LURIA: There are two very big concerns that are really the opposites of each other.
ASPAN: One of them is what we’ve talked about before – that this AI bubble will pop. Big Tech companies like Microsoft and Google are spending a ton of money on NVIDIA chips, building up data centers, other AI investments. And we don’t know how soon these investments will pay off, if at all. But the other worry is the exact opposite.
LURIA: There’s the diametrically opposed concern, which is, oh, my goodness, this AI thing is completely out of control. It’s going to run over the economy and destroy all these businesses.
ASPAN: In other words, AI is going to eat the world. And we’ve seen these worries hit software stocks like Salesforce and Workday because investors are afraid about AI making these companies obsolete. And then, Ailsa, this week, we saw a truly weird example of investors panicking over this imagined AI doomsday scenario.
CHANG: I mean, an AI doomsday scenario sounds bad, but do we know what’s actually going on here?
ASPAN: Well, so over the weekend…
CHANG: Yeah.
ASPAN: …A financial research firm published a Substack essay that went viral. It was a hypothetical thought experiment. It was written like a memo from the year 2028, and it imagined this worst-case scenario for what AI could do to the economy – massive job losses, stock market crash, etc.
CHANG: Wow. OK.
ASPAN: So – but it was completely fictional. It was almost too convincing. This fictional story had fake Bloomberg headlines about real companies. And then in the real world, the shares of those companies plummeted on Monday.
CHANG: Wow. It was like it was too real-feeling (laughter).
ASPAN: Exactly. We’re at this point of the AI boom where it almost doesn’t matter what reality is or what companies like NVIDIA report. It is literally fake news or at least speculative Wall Street fan fiction…
CHANG: (Laughter).
ASPAN: …As having this real-world impact for investors.
CHANG: Yeesh (ph). That is NPR’s Maria Aspan. Thank you so much, Maria.
ASPAN: Thank you.
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