Blockbuster Earnings, Falling Stock: Why Nvidia’s Results Fuel the AI Bubble Debate

NEW YORK — Chipmaker Nvidia, the undisputed epicenter of the artificial intelligence boom, delivered yet another set of blockbuster earnings this month, shattering analyst estimates with massive revenue growth in its data center division. But in a sign of intense market anxiety, the stock promptly fell, reflecting a deep divide on Wall Street: is the AI surge a genuine, multi-year “Super Cycle” or an over-inflated “Bubble” waiting to burst?

The post-earnings stock dip underscores that for many investors, Nvidia’s numbers are no longer just a measure of its success, but a barometer for the entire AI economy—and that barometer is showing signs of heat exhaustion.

The Core Worry: Overspending and Concentration

The central paradox—a stock falling on spectacular news—is driven by two intertwined fears that analysts worry are replicating the conditions of the 2000 dot-com crash: overspending and market concentration.

About forty percent of the S&P 500 is now made up of just 10 tech giants, including Nvidia, Amazon, Meta, Oracle, Alphabet, and Microsoft. All are locked in an intense, costly arms race to dominate AI infrastructure.

“Fears of an AI Bubble are way overstated in our view,” argued Wedbush analyst Dan Ives, who maintains that the Nvidia earnings report is “another validation point for the AI Revolution and (in) our view we are in the Top of the 3rd inning of this AI game.”

However, skeptics argue that this massive, almost unquestioning capital expenditure (capex) by these hyperscalers could leave them with a glut of expensive data center capacity if actual enterprise AI adoption or consumer demand fails to match the promised world-changing potential.

The Spectre of Circular Deals

Adding to the bubble concerns are increasingly intricate financial arrangements. Nvidia, for example, has made investments in its own customers, such as AI model developers like OpenAI and cloud providers like CoreWeave. Critics warn that this web of investments and subsequent sales blurs the lines between customer and supplier, creating “circular deals” that resemble the unsustainable vendor financing practices that helped inflate the dot-com bubble.

“The lesson of the dot com era is there was a bubble, it burst,” said Bob Michele, JP Morgan’s chief investment officer. “We don’t think we’re in one now for AI,” he asserted, but acknowledged the historical gravity of the situation, noting the dot-com crash led the Nasdaq to lose over 75% of its value by late 2002.

🚀 The Super Cycle Case: Real Revenue and Tangible Value

For the industry’s biggest believers, the comparison to the dot-com era is deeply flawed, arguing that the AI boom is supported by superior financial and technological fundamentals.

The Profitability Buffer

Unlike the 1990s, when countless early internet companies lacked lucrative or steady business models, the leaders of the AI revolution—Microsoft, Alphabet, and Amazon—are established profit-generators with massive cash reserves that act as a safety buffer.

“The scale of revenue growth happening in this cycle is exponentially greater than prior cycles,” said Ravi Mhatre, co-founder of Lightspeed Venture Partners, a backer of AI company Anthropic. He suggests that the sheer volume and speed with which genuine value is being created are radically different from previous technology waves.

AI’s Real-World Applications

Proponents point to tangible, immediate productivity gains already being realized, particularly in coding and cloud services. New consumer markets are also rapidly emerging, such as advanced shopping research tools recently integrated into platforms like ChatGPT.

This dual-pronged growth—productivity gains in business and new services for consumers—suggests a structural, decades-long shift, or “super cycle,” rather than a short-term frenzy.

“I tend to believe that the AI super cycle is real, that it is going to have a pretty profound impact on the economy,” said Marta Norton, Empower’s chief investment strategist.

Ultimately, the market is grappling with an investment philosophy known as “hype cycle vs. super cycle.” Investors agree a lot of money is chasing momentum, but whether the massive investments being sunk into compute power today will be justified by the profits of tomorrow remains the trillion-dollar question hanging over Wall Street.