TJ Walker analyzes Nvidia’s recent blockbuster results and the broader question of whether an AI-driven market bubble exists. He cites specific financials (valuation, profits, revenue, guidance), references commentary calling it a "potentially rational bubble," reviews historical parallels (automobiles, radio, railroads), and offers personal finance guidance (index investing, living within means, building income skills).
Questions this video answers
Above $5 trillion.
$31.9 billion.
65%.
$57 billion.
$65 billion.
Chapters
Nvidia's record haul and an AI bubble question Nvidia, now valued above $5 trillion, just reported results that would make any CEO dizzy. According to the New York Times, profits last quarter hit $31.9 billion. That's up 65%, a whopping 65% from a year ago on 57 billion in revenue driven by its AI data center chips. The company still controls about 90% of the market and is telling Wall street to expect $65 billion in sales next quarter. At the same time, Nvidia is plowing tens of billions into so called circular deals with OpenAI and anthropic investing in them as they agree buy more of its chips. That's causing a lot of people to say, is this completely kosher? So is there an AI bubble in comparison or In a companion Times column, the economist Mohamed El Arian, very respected economist, calls it a potentially rational bubble. Many investors will get wiped out, he predicts, and many others well. But the race could still leave society better off the way railroads and the Internet did. So what's the real message here? Are we in an AI bubble? Yeah, we are. But it doesn't mean necessarily that Nvidia is going to crash. They could be the big winner. Microsoft, OpenAI could be the big winners. Other companies could lose, but society could be much richer just as it was after electricity and railroads and automobiles. Let's dig a little bit deeper now. There's no doubt people are nervous. I'm nervous because Nvidia is now so incredibly big that what would have happened if their sales were down a little yesterday? Many fear that would have caused such a panic in the market because there's such a huge percentage of not just the US Stock market, but the entire worldwide market. Nvidia India, its market cap is bigger than the entire market cap of Germany's publicly traded companies. So they are huge, huge, huge. And you can sigh, you can have a sigh of relief after yesterday. But it does seem as though at some point everybody has a down quarter. You have a down quarter, I have a down quarter. But we're not big publicly traded companies. So what is going to happen? There's no doubt there's going to be some retrenchment. There's no doubt we going to get to a point where simply saying you're an AI company, you're going to get showered with this, this positive warm blanket of good feelings and investor cash. Those days will have to end at some point. Let's look at this in some historical context. In the United States, Alone, There were roughly 3,000 automobile companies that existed in the 20th century. Almost all of them went out of business. I mean, you had the big three after a few decades and pretty much the rest of them, poof. So if you were an investor in an automobile company and you invested in 10 companies thinking, well, one out of 10 will hit, well, no, there's a good chance you lost your money in all 10 investment. Let's look at another industry. Radio manufacturer. By 1930, there were 640 US radio manufacturers, radio networks, players. Almost all of those brands disappeared. 90% of them vanished. So this has happened time to time again. Railroads, electricity, new technology comes in. It genuinely is breathtaking technology. Investors rush in, entrepreneurs rush in. That's what you want in a free market capitalistic society. But it is inevitable that at some point there's retrenchment. At some point the bubble bursts. It doesn't mean people were irrational to invest in that new technology. It just means most people picked the wrong horse to back and that's that. If you bet, if you bet on pets.com in 1998, you lost everything. If you bet on Amazon.com, you became wildly wealthy, but you only know that after the fact. So is this the real deal? Is AI the real deal? I happen to be in the camp that yes, it is, it is going to change society. And in the short term and the media term, I do think it's going to make society as a whole a whole lot better off. Yes. I'm not Pollyannish about this. There are many, many things it could do to make things worse. Not to mention the fact that we have an entire generation of young people who are happy to sit on the couch and have relationships with digital clones and character AI which may cause the extinction of our species. But putting that aside for a minute, I think in general there's going to be a lot of advances in medical breakthroughs and new cures for diseases. Things that can eliminate backbreaking, painful, dangerous work that will be a huge, huge boon to society. Long term, could it bring out extinction? It absolutely could. I'm very optimistic. Short term, immediate. I'm not optimistic that all of the companies publicly traded in America today have seen their valuation skyrocket and that are seeing price to earnings ratio that are absurd by historical standards that they're all going to do well. No, I am not. So what are we to do if we have a lot of our stock, not necessarily in Nvidia, but if you own stock in technology companies and you're sitting back and thinking, wow, my 401k is really growing. My net worth is growing. But it seems too good to be true. It seems too easy. Well, it might be the only guidance I can give you. And this is not a financial investment investment advice. I am not your financial advisor, but I'm here to analyze major stories of the day and to try to fit it in through the filter of communication, personal development. Beware of hubris. Your net worth today might be higher than it's ever been. It is for a lot of people. That doesn't define your worth. It doesn't mean you're going to have that for tomorrow. The only hedge that I can see that I try to practice every day when it comes to my own personal finances is yes, invest. I invest in the market. I try to add holdings every single month. I only do low cost index funds. You can do what you do, but the only real hedge is to continue learning new hard skills, continue trying to be in the marketplace giving value to others so you have income at any age. Ted Danson, as we talked about yesterday, age 77, he's still making a gazillion TV shows and making tons of money. That's one hedge. If you always have income, then if your stocks go down, it's not going to matter. The other thing is live within your means. Use debt in as limited a way as possible. Use debt in very strategic purposes, for very strategic purposes, and in ways where if all of a sudden your stocks went to zero, you wouldn't have to change your lifestyle. I think that's really the only solution for how to deal with sort of the mental angst of worrying about is the market going to crash? Is the crash Live within your means. Continue to have income. Continue to build real skills where you can make money in the current economy and live off that. So if your investments go belly up, you'll be okay.
