The Magic Words That Got the Stock Market to Stop Worrying About an AI Bubble

Nvidia CEO Jensen Huang said exactly what the markets wanted to hear. (AFP via Getty Images)

Key Points

• Nvidia’s CEO dismissed concerns of an AI bubble, projecting strong demand and a $500 billion forecast for accelerators.
• Nvidia’s shares rose after reporting strong third-quarter earnings and guiding for $65 billion in sales.
• Major customers’ capital spending plans indicate an AI investment wave of $520 billion next year, reaching $700 billion by 2027.

Nvidia CEO Jensen Huang didn’t waste any time in addressing the market’s biggest concern when he spoke to investors after last night’s blowout third-quarter earnings.

“There has been a lot of talk about an AI bubble,” he said in his opening remarks. “From our vantage point, we see something very different.”

That statement alone was likely enough to get stocks rolling in after-hours trading, given that Nvidia had already blasted Wall Street’s forecasts for both earnings and revenue over the three months ending in October, and guided investors to sales of around $65 billion for its final quarter of the year.

Nvidia shares, the world’s most-valuable, jumped more than 5% immediately following last night’s update, pulling stocks in the broader AI complex, as well as the three major benchmarks, firmly higher. Wall Street, meanwhile, breathed a massive sigh of relief.

“We are working into our $500 billion forecast, and we are on track for that,” Huang said, referring to comments last month that detailed customer demand for Nvidia’s Blackwell and Rubin accelerators. “And there is definitely an opportunity for us to have more on top of the $500 billion that we announced.”

Huang’s assurances on the size of the overall market, and the group’s stellar earnings, were just the balm that investors needed to soothe the burn of the worst November performance for stocks since 2008, and the growing global angst over the fate of the AI investment boom.

“Nvidia is the clearest read on AI infrastructure spending that public markets have,” said Ruben Dalfovo, investment strategist at Saxo Bank. “It sells into Microsoft, Amazon, Alphabet and a growing list of AI specialists, so its order book is a rough poll of how confident big buyers feel about demand through 2026.”

Pretty confident, it would seem. Capital spending plans unveiled and updated by Nvidia’s biggest customers over the past month point to an AI investment wave of around $520 billion next year, and rising to around $700 billion by 2027.

Collectively, that’s offering an early Thursday offset to the hawkish tone gleaned from minutes of the Federal Reserve’s October policy meeting, which showed officials split on the direction of interest rates into the end of the year. They also worried about a “disorderly fall in equity prices, especially in the event of an abrupt reassessment of the possibilities of AI-related technology.”

Markets had a sharper reaction to the rate outlook, however, paring bets on a December reduction to just 32% and sending the dollar to the highest levels since May against a basket of its global currency peers.

A decision from the Bureau of Labor Statistics to scrap its October payroll report, and publish its reading for the month of November after the Fed’s December sit-down, added further doubt to the chances of a end-of-year rate cut.

But Huang’s magic words, and his dismissal of an AI bubble, are proving a lot more powerful than the interest-rate market’s recalcitrance.

“In a few years we may look back at this time and point to signs that it was a bubble,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

“But for now, the largest technology companies in the world are extremely profitable, they’re reinvesting billions of dollars into data centers, servers, and chips, and the spending is real,” he added.

And that’s really all that markets wanted to hear.

Write to Martin Baccardax at martin.baccardax@barrons.com