NVIDIA is a bubble and AI is overhyped, says investment fund Elliott

The investment fund Elliott has adopted a skeptical and more down-to-earth stance in relation to two terms that are in vogue and that are largely correlated: NVIDIA e Artificial intelligence. With the significant global growth of everything that revolves around AI, NVIDIA, which provides hardware and technology solutions for this market, has been growing in popularity and market value.

irrational valuation

However, in a letter sent to investors, the Elliott Management took a critical tone regarding all this hype. The company founded in 1977, and with US$ 70 billion under its management, stated that NVIDIA is a bubble, and artificial intelligence is something overrated, overhyped. A technology with a level of expectation above what it should have, considering the numerous open questions surrounding its development.

This overexposure around AI has led several manufacturers to acquire large quantities of GPUs supplied by NVIDIA, a move that Elliott considers to be above a certain rationality, since, according to the letter sent to investors, and that the Financial Times had access tomany of the supposed uses of AI “they will never be economically viable, they will never work properly, they will consume too much energy or they will look suspicious”.

In addition to the appreciation of the hardware provided by NVIDIA, the current panorama around AI is also leading to a race for other companies that want a slice of that pietrying to bother the company run by Jensen Huang. Another investment giant, SoftBank, recently announced that it is looking to raise $100 billion to create a rival to NVIDIA. NVIDIA currently accounts for more than 80% of the AI ​​market.

There are differing opinions on whether NVIDIA is a bubble or not. But there is a consensus that a healthy dose of caution is needed regarding all this enthusiasm. In a statement to VejaJoão Vitor Valladares, partner at Arbor Capital, classified the company as an unknown quantity. “It’s hard to say with confidence what the company’s profit will be in five or ten years, but the company’s momentum today is that it’s a monopoly in GPUs.”

Investigation in progress

In addition to the bubble issue, NVIDIA’s dominant position in this segment is also raising alarm bells among antitrust authorities. The US Department of Justice is conducting an investigation for allegedly abusing its dominance in the market for specialized AI chips. The investigation aims to verify whether NVIDIA has been charging its customers more for equipment when they choose to purchase chips supplied by rivals, such as AMD and Intel.

NVIDIA’s official stance on this is that “we compete on the basis of decades of investment and innovation, complying with all laws, making NVIDIA broadly available across all clouds for all businesses, and ensuring that customers can choose the best solution for them.”

NVIDIA did not comment on the content of Elliott’s letter to investors.