Elliott Investment Management, the prominent activist investor, reckons chipmaking titan Nvidia Corp (NASDAQ:NVDA) is in “bubble land”.
The thesis of the active Florida-based hedge fund, according to internal communications shared by The Financial Times, is that the artificial intelligence (AI) technology supercharging Nvidia’s valuation is overhyped with “few real uses” other than “summarising notes of meetings, generating reports and helping with computer coding”.
At their recent all-time peak, shares in Nvidia had rocketed over 700% higher since the start of last year as it emerged as Wall Street’s number one AI play after the Santa Clara-based graphics processing unit (GPU) designer was a key beneficiary of potential spending in this area.
Nvidia’s GPUs quickly became the bedrock of the massive data centres driving AI technology such as OpenAI’s ChatGPT large-language model.
This has led to unprecedented demand for Nvidia products as tech giants including Microsoft, Meta and Elon Musk’s web of tech firms seek to build out their AI capabilities.
Nvidia briefly became the world’s most valuable company with a $3.3 trillion valuation in June, but according to Elliott there is little to justify this hype.
AI applications are “never going to be cost-efficient, are never going to actually work right, will take up too much energy, or will prove to be untrustworthy”, said the firm.
The technology has not delivered “value commensurate with the hype”, it added.
Given the recent correction among tech stocks (not least the 1,000-point pre-market fall on the Nasdaq 100 on Monday), Elliott may find some sympathetic voices in the market.