“We think the Vera Rubin architecture is the best architecture. We think it’s the best AI computer and we greatly value our close cooperation and partnership on many levels with Nvidia,” SpaceX CEO Elon Musk told investors in the company’s first earnings call last month, referring to Nvidia’s computing processors. “So, we’re exclusive to Nvidia.”
What’s behind Nvidia’s bombshell forecast
Nvidia attributed its extremely rosy forecast due to the insatiable appetite from players across the tech landscape for their chip equipment. They acknowledged that scarce supplies had driven up prices and they projected bottlenecks for the near-future.
“The surge in AI demand is driving a global infrastructure buildout, supported by an expanding and diverse set of growth opportunities, spanning hyperscalers, AI labs, AI natives, enterprises and sovereign customers,” Nvidia CFO Colette Kress said in an earnings call last week. “This is a supply-constrained outlook.”
She added: “We will work to close the supply-demand gap, we expect supply to remain a bottleneck, at least through the end of fiscal year [2028].”
Nvidia CEO Jensen Huang announced the creation of a $500-billion joint effort with Wall Street investment giants to finance the AI boom. Some investors like DoubleLine Capital’s Jeff Gundlach derided it as “bananas,” since it’s unclear how long many AI assets will retain their value during the rapid buildout.
Nvidia reported $96.2 billion in earnings in Q2, quelling fears among investors that the AI buildout was about to lose steam. As of Tuesday afternoon, Nvidia was trading at $217 per share, up 5.2% compared to a month ago.
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The latest AI bubble warning
A prominent central bank leader in England, though, raised alarm about a possible financial crisis in the event the AI buildout triggers a market crash.
“Markets remain vulnerable to a potentially disorderly correction that could spread across borders,” wrote Bank of England governor Andrew Bailey in a public letter to G-20 finance ministers on Monday. He listed fragilities in debt markets, private credit vulnerabilities and lofty asset valuations in the AI sector as weaknesses that governments should continue monitoring.
“The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, in particular the increasing cross-investment between artificial intelligence (AI) companies and hyperscalers, in a way that could amplify a future market correction,” Bailey wrote.
Joseph Zeballos-Roig is a policy and politics journalist based in Washington D.C with a focus on economics. He is experienced in connecting the significance of events in the capital to the lives of everyday Americans whether its taxes, tariffs, interest rates or federal programs.
