It wasn’t too long ago that the name “Nvidia” was only recognized by computer enthusiasts and crypto miners. Now the American chip-designing behemoth is the world’s most valuable company, having attained a market valuation of well over 4 trillion dollars. This incredible feat can be attributed to the rise of artificial intelligence. A great deal of investment into AI has gone into buying Nvidia’s premier “Graphic processing units” otherwise known as GPUs. These are necessary for training and running most advanced AI models like OpenAI’s ChatGPT or Google Gemini and Nvidia is far ahead of the competition when it comes to designing GPUs for AI. This has led to Nvidia attaining its current size. Nvidia, still looking to grow and increase its revenue, has struck up some interesting deals with other companies.

The Intel deal was unexpected. Earlier this year, the struggling company struck a deal to give 10% of its stake to the federal government. This deal was met with heavy criticism from both sides of the political aisle. Many people fear that the government, having a large stake in a private company will encourage the government to treat it preferably in comparison to other companies. Conservative talk show host Erick Erickson said “You can’t just be against socialism when the left does it,“. Then on September 18th, Nvidia invested 5 billion dollars into Intel common stock. This deal raised many eyebrows. After all, Intel was forced to pay 1.5 billion dollars to Nvidia for a legal dispute in 2011 and both companies remain direct competitors in the gaming niche. Some people interpreted this deal as Nvidia’s attempt to please the White House by making its recent investment more valuable. Some people pointed out that this investment follows a similar pattern of large tech companies (such as X, Alphabet, and Meta [5] ) trying to please the White House. 

A couple of days later, OpenAI announced that Nvidia would invest 100 Billion USD  into OpenAI to help it construct 10 Gigawatts of AI datacenters. The details were vague, but we do know that the massive influx of cash from this negotiation is equivalent to around ⅕ of OpenAI’s total valuation [11]. Afterwards, the money will most likely be paid out to Oracle (Oracle is a US tech multinational that focuses on software and cloud computing) to build a datacenter with Nvidia chips. This is one of many of the so-called “Circular deals”. Some could allude that Nvidia is trying to prop up the books by using its profit to create artificial demand and labeling it as “Investments” to please investors. The deal and other similar deals are raising the question, “Wait, if much of this investment into AI is based on artificially increased demand, does that mean that AI is overvalued and will be most likely revalued in the near future?” or in simpler terms “Are we in an AI bubble?” Many high-level experts are wary. The IMF and the Bank of England have warned that if many of these large AI investments don’t provide sufficient returns in the near future, it would trigger a large-scale revaluation into AI companies. This would also have consequences on the larger US economy because decreased stock valuations would lead to a rapid decrease in wealth; this causes consumers to spend less, which would slow down America’s otherwise grim economy. Likewise, big tech CEOs are also aware of this possibility. But in contrast to some “experts”, they remain optimistic. Sam Altman and Jeff Bezos have raised the possibility of overexcitement in AI but also ensure that it’s a “Good bubble”.

When the dot-com bubble popped in the early 2000s, the over investment telecom infrastructure led to cheap and widespread access to high-speed internet. This allowed the surviving companies to grow and revolutionize the world. As an unknown AI community product builder said “the internet was built on the ashes of the over-investment into the telecom infrastructure of yesterday”. The large investment and excitement of AI echoes the frenzy to invest in any company with dot com in its name. Even if the AI bubble pops, the short term economic pain could be worth the unprecedented amount of technological advancement which would significantly increase long term productivity gains. On the other hand, it could have no long term benefits and cause America’s economy, which is over reliant on the stock market and AI, to contract. Nobody is certain about the future of AI, but it can go in many different directions. Who knows what’s next!