What happens when the AI stock market bubble bursts?
The hottest stocks in the market – Apple, Nvidia, and Meta – reflect the hype from past crashes. Will AI optimism crumble soon?
The company that epitomizes the artificial intelligence boom announced its third-quarter earnings after the closing bell, and it did not disappoint.
Shares rose in after-hours trading as Nvidia beat expectations, earning $1.30 per share on revenue of $57 billion.
Wall Street had expected four more quarters of growth from Nvidia’s AI chip business. Analysts had expected earnings of $1.25 per share on sales of $54.9 billion. Wall Street was also looking for $61.4 billion for the fourth quarter. Nvidia topped this, with sales projected to be more or less $65 billion.
The better-than-expected report sent the stock up 4% at the time of the announcement. NVIDIA is being closely monitored as stock price fluctuations can have a significant impact on the market. Semiconductor giants account for 8% of the S&P 500 index.
Why Nvidia has so much influence in the market
Nvidia makes chips essential to training and running AI models, and the red-hot market for AI has made Nvidia the most valuable company in the world.
“The old Wall Street adage, ‘One stock doesn’t make a market,’ is inaccurate here,” Neil Azous, portfolio manager of the actively managed Monopoly ETF, which owns Nvidia stock, told Reuters. “NVIDIA has the ability to create a market.”
Why is the market worried about an AI bubble?
However, market turmoil over the possibility of an AI bubble remains lurking.
Generative AI, which investors hope will revolutionize business and the world, has driven record gains in technology stocks this year.
What’s unsettling in the market is that no one knows how long that transformation will take, and the skyrocketing spending on AI and the growing mountain of debt to finance it are shaking market confidence.
Rising concerns about an AI bubble have caused a sharp decline in recent weeks, leaving the index at a standstill. The S&P 500 suffered its longest losing streak since August.
What will happen if the AI bubble bursts?
In an interview with the BBC, Sundar Pichai, CEO of Google’s parent company Alphabet, pointed to the “irrational element” in the current wave of AI investment and soaring valuations.
Pichai said that while Google may weather the storm of the AI bubble bursting, “I don’t think any company, including us, will be immune.”
Bubbles are hard to pinpoint, but for the first time in 20 years, more than half of global fund managers surveyed by Bank of America said they were concerned about companies spending too much on investments.
Looking ahead to 2026, almost half say an AI bubble is the biggest “tail risk” in investing, a low-probability but extremely high-impact risk.
“A fundamental part of this AI revolution.”
Nvidia was adversely affected by recent moves by a few large investors, including tech billionaire Peter Thiel’s hedge fund and SoftBank CEO Masayoshi Son, to sell their shares.
Nvidia shares fell more than 4% this week as cautious investors braced for third-quarter results. The stock rose ahead of Nvidia’s earnings release on Wednesday, November 19th.
But Wedbush Securities analyst Dan Ives calls Nvidia “a fundamental part of this AI revolution.”
“It all comes down to identifying the demand story for the AI revolution that starts and ends with Nvidia,” he said in a research note.
