NVIDIA is, by far, the most valuable company in the world. It has the world’s (as of yet) unquenchable thirst for AI to thank for that. Its chips underpin much of the extremely complicated, advanced hardware that runs AI.
But Softbank, a major investment firm that trades primarily in tech companies, sold off all 32.1 million shares of NVIDIA stock it held last week, netting itself $5.83 billion. Then on Monday, November 17, Peter Thiel’s hedge fund sold off all of its 537,742 NVIDIA shares for about $85 million.
Fears of an AI bubble forming and bursting have been the anxious talk of Silicon Valley increasingly over the course of this year, as ludicrous amounts of money pour into the AI industry. The sudden overloading of NVIDIA stock, a major driver of the AI industry, has people wondering if this could be the pinprick that bursts the bubble.
what’s a bubble?
A market bubble forms when people who invest in the market get carried away by the promises of an industry’s potential, causing them to buy and buy until people realize that the money being thrown around for these assets exceeds what they’re actually worth.
It’s a speculative behavior—basically, betting on a future of massive riches—and as soon as that speculation abruptly ceases, the market undergoes a contraction known as a crash. Values drop, and a lot of money is wiped out. The clever folks at Investopedia have an excellent explainer.
The unsettling thing about a market bubble is that nobody really knows at the time whether there is one. Definitely being able to say, “Oh yeah, that industry was in a bubble,” is something that only comes later, after it deflates or bursts, and upon reflection.
Recall the Dot-Com Bubble that formed in the late 1990s and burst in 2000. About $5 trillion was wiped away as company stocks crashed in the aftermath.
Like the Dot-Com Bubble, if there is an AI bubble and it bursts, it doesn’t mean that AI will fade away or become unimportant. The internet didn’t after 2000, right? AI is here to stay, and beyond a doubt it has yet to mature.
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