Nvidia, the end if AI investment falters?... "Neither semiconductor buyers nor sellers can smile"

▲ Nvidia (NVDA), Artificial Intelligence (AI)/AI Generated Image

A warning has emerged that Nvidia's (NVDA) biggest risk is not its competitors, but the moment the enthusiasm for AI investment cools down.

According to Nasdaq on August 2 (local time), Nvidia's stock price surged by 13,440% over 10 years as of July 29. Although it has fallen 19% from its peak, its growth remains steep. In the first quarter of fiscal year 2027, which ended on April 26, revenue increased by 85% year-over-year, and net profit skyrocketed by 211%.

The driving force behind this rapid growth is the astronomical AI investments by big tech companies. Colette Kress, Nvidia's Chief Financial Officer, stated, “Capital expenditures by hyperscale companies are expected to exceed $1 trillion in 2027.” She added, “AI infrastructure spending will reach $3 trillion to $4 trillion annually by 2030.”

The problem is that there's no guarantee the investment frenzy will continue. Economists on the Federal Reserve (Fed) Board estimated that over one-third of the U.S. first-quarter GDP growth came from AI investments. If the 2030 spending is calculated at the median value of $3.5 trillion, its share of the U.S. economy surpasses even the railroad construction boom of the 1880s.

Future scenarios diverge sharply. If hyperscale companies reduce capital expenditures and focus on securing cash flow, the revenues of semiconductor companies, including Nvidia, will falter. Conversely, if aggressive investments continue, Nvidia's growth could also persist. The analysis suggests that a structure where both semiconductor buyers and sellers win simultaneously is difficult to sustain long-term.

Nvidia's long-term growth depends on the performance of companies adopting AI. If these companies cannot demonstrate revenue expansion or profitability improvement beyond the experimental phase, demand for data center GPUs could also decline. A slowdown in AI investment is a key risk that will simultaneously pressure Nvidia's revenue and market capitalization.

[Article Summary]

-Nvidia's stock price surged by 13,440% over 10 years, and its net profit increased by 211% in the first quarter of fiscal year 2027.

-Capital expenditures by hyperscale companies are projected to exceed $1 trillion in 2027.

-If AI investment slowdown begins, Nvidia's revenue and market capitalization could be shaken simultaneously.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*