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For the past 18 months, speculation about a potential AI bubble has been growing. However, Nvidia’s recent impressive earnings report aimed to dispel these concerns, though some remain skeptical.
On Wednesday, Nvidia revealed a remarkable increase in sales and profits, soaring over 60% compared to last year, surpassing Wall Street’s expectations. CEO Jensen Huang described the surge as “sales are off the charts,” and the company is forecasting fourth-quarter revenue to reach approximately $US65 billion ($100 billion), again exceeding analysts’ predictions.
Nvidia’s leadership believes these outcomes, bolstered by growth from other significant players in the AI industry and substantial investments in AI infrastructure, suggest that worries about an AI bubble may be unfounded.
“There’s been a lot of talk about an AI bubble,” Huang remarked during a Wednesday call with analysts. “From our vantage point, we see something very different.”
While some Wall Street analysts share this optimism, the broader market remains cautious. Nvidia shares (NVDA) experienced a brief rise on Thursday morning following the earnings report but subsequently fell, closing 1% lower on Friday. Despite this, the stock has gained 29% since the year’s start.
In other words, Nvidia answered a lot of questions about where the industry stands right now, but it may take more to shift the overall AI narrative.
Nvidia CFO Colette Kress said the company anticipates $US3 trillion ($4.65 trillion) to $US4 trillion ($6.2 trillion) in annual AI infrastructure spending by the end of the decade, adding that demand “continues to exceed our expectations”. Already, tech giants are expected to pour $US400 billion into AI-related capital expenditures this year, to meet what they say is growing demand for AI and cloud services but also to avoid falling behind industry rivals.
Nvidia has every reason to try to reassure investors — expectations for the company are sky-high after nearly two years of astronomical growth. And many look to the chipmaker as a bellwether for the overall tech industry.
Even as Silicon Valley tries to figure out the business model for generative AI, Nvidia has a big role to fill in the existing tech services people use every day, Huang said. That could help insulate Nvidia even if returns from new AI applications are smaller than expected or take longer to arrive than planned.
“The world has a massive investment in non-AI software, from data processing to science and engineering simulations, representing hundreds of billions of dollars in cloud computing spend each year.” Much of the infrastructure powering that software has transitioned from running on older CPU chips to Nvidia’s GPUs, the chips known for running AI tools, Huang said.
Kress also took the unusual step of ticking through highlights from the chipmaker’s partners’ recent financial reports. At Meta, for example, AI recommendation systems are leading to “more time spent on apps such as Facebook and Threads”. Anthropic recently noted it expects to earn $US7 billion in annual revenue this year. And Salesforce’s engineering team is 30 per cent more efficient now that it’s using AI for coding, she said, among a long list of corporate customers she rattled off.
Nvidia isn’t the only one arguing that AI bubble concerns may be exaggerated.
“The pure Nvidia numbers/guidance and strategic vision shows the AI Revolution is NOT a Bubble…instead its Year 3 of a 10-year build out of this 4th Industrial Revolution in our view,” Wedbush tech analyst Dan Ives said in emailed commentary.
Brian Colello, senior equity analyst at investment research company Morningstar, said he doesn’t “see many signs to suggest that 2026 will be a weak year for Nvidia in any way” and sees the bubble fears weighing on the company’s stock as a “buying opportunity”.
But despite those strong results, it appears the stock market may not be ready to relax just yet.
Questions remain about whether tech firms will maintain their massive spending on AI infrastructure, especially as Nvidia has invested in key, unprofitable customers such as OpenAI and Anthropic. OpenAI CFO Sarah Friar also raised alarms earlier this month when she suggested that the government should backstop the debt tech companies are incurring to build AI infrastructure. Some took her comments as a sign OpenAI may struggle to afford its commitments, although the company later tried to walk back the statement.
And while Nvidia likely has enough customers even if a bubble burst causes some casualties among AI firms, investors may still be worried about what a downturn or even a slowdown could mean for the larger market.
Daniel Morgan, senior portfolio manager at Synovus Trust Company, said questions about the sustainability of Big Tech’s infrastructure spending spree and Nvidia’s circular funding deals were not “put to rest” with its latest report. Instead, they may just be “punted” to the next quarter.
That means Nvidia almost certainly has more work ahead to convince the world that we’re in for an AI boom and not bust.