Nvidia’s recent investment moves, spearheaded by CEO Jensen Huang, have ignited discussions about market fundamentals and the sustainability of the AI boom. Nvidia, a leading technology company specialising in graphics processing units (GPUs) and AI hardware, has been making waves with strategic investments in Intel and OpenAI.
Just days ago, Nvidia announced a US$5 billion investment in Intel, causing Intel’s shares to surge by 23 per cent. Simultaneously, Nvidia invested US$100 billion in OpenAI to bolster AI model development. These moves, while boosting Nvidia’s market capitalisation by billions, have raised concerns about circular financial flows. The dynamic involves Nvidia investing in companies that then use the funds to purchase Nvidia’s own products, creating a closed-loop system.
Jody Jonsson, vice chair of Capital Group, draws parallels to the late 1990s dotcom era, where vendor financing was prevalent. She questions the real value behind substantial spending commitments, like OpenAI’s US$300 billion cloud computing capacity purchase from Oracle, and how these promises are reflected on balance sheets. These investments also propelled Oracle shares upwards, further highlighting the interconnectedness and potential risks within the AI sector.
Jonsson cautions that a market downturn, concerns over AI investment returns, or practical bottlenecks could disrupt this cycle. While Capital Group holds significant positions in tech giants like Meta and Microsoft, Jonsson has strategically reduced tech exposure in her New Perspectives fund, prioritising long-term stability over short-term gains, comfortable with being on the sidelines during what she views as potentially overheated market conditions.
