(VOR News) – Elliott Management, a hedge fund, has notified investors that the chipmaking giant Nvidia is now suffering a “bubble” and that the artificial intelligence technology that is driving the share price of the firm is “overhyped.” Both of these statements were revealed to investors by Elliott Management.
The Florida-based corporation that manages around $70 billion in assets recently wrote a letter to its clients, which was accessed by the Financial Times.
The letter was sent to clients. According to the letter, the corporation warned that the megacap technology stocks, and NVIDIA in particular, were currently in a state of “bubble land.”
The report also noted that NVIDIA artificial intelligence is “overhyped with many applications not ready for prime time” and that it was “sceptical” that huge technology companies would continue to purchase graphics processing units made by the chipmaker in such large quantities.
NVIDIA included both of these statements in its report.
According to the author, many of the applications that are intended to be achievable with artificial intelligence “will never be cost-effective, will never actually work, will consume too much energy, or will prove unreliable.”
A number of industries will be revolutionised by artificial intelligence as it becomes an emerging field.
Chip stocks, which have experienced a NVIDIA significant upswing due to investor excitement around the promise of generative artificial intelligence, have experienced a decline as a result of doubts regarding whether or not large corporations will continue to spend a significant amount of money on artificial intelligence.
This is because investors are uncertain about whether or not large corporations will continue to invest in artificial intelligence projects.
Intel shares experienced a twenty percent decline when the chipmaker declared its intention to lay off about fifteen thousand employees. This news came after the market in the United States closed on Thursday.
Nvidia is the leading company in powerful processors.
Which are necessary for the construction and implementation of enormous artificial intelligence systems. One example of such a system is the technology that forms the foundation of OpenAI’s ChatGPT.
Tens of billions of NVIDIA dollars have been invested in the creation of artificial intelligence infrastructure by a number of corporations over the course of the previous few months.
These companies include Microsoft, Meta, and Amazon, among others. The amount of financing that has been allotted to Nvidia is quite substantial. While this is going on, a sizeable number of its most important clients are simultaneously working on the development of their very own chips that are in direct competition with those of the company.
Since the end of June, the stock of the firm has experienced a decline of more than twenty percent, despite the fact that it momentarily held the position of being the largest corporation in the world with a market value valued at more than $3.3 trillion.
This is due to the fact that Wall Street has become increasingly apprehensive about the feasibility of investments in artificial intelligence over the long run.
In spite of this, the chipmaker has still managed to accomplish a gain of more than 600 percent since the beginning of the previous year and a gain of about 120 percent so far this year.
The letter that Elliott sent to its investors informed them that the company had, for the most part, refrained from investing in bubble securities, such as those that were included in the Magnificent Seven.
At the end of March, Elliott was reported to have possessed a tiny investment in Nvidia, which was estimated to be worth around $4.5 million, according to regulatory filings. With that being said, it is not known for how long Elliott maintained this position.
The hedge fund has also been wary of betting against high-flying, major technology stocks, which is another situation in which they have been cautious. According to what they have said, shorting these companies might be termed “suicidal.”
In the letter that Elliott, a firm that was founded in 1977 by billionaire Paul Singer, sent to its customers, the corporation asserted that artificial intelligence has not yet failed to produce the tremendous gain in productivity that was promised.
In a statement, it was noted that “there are few real uses,” with the exception of “summarising notes of meetings, NVIDIA generating reports, and assisting with computer coding.”
The report went on to state that artificial intelligence was, in essence, software that had not yet generated “value commensurate with the hype.” The report went on to discuss this further.
The company has only had a loss of money in two calendar years since it was founded, and it has enjoyed a gain of around 4.5 percent in the first half of current year. Since its creation, the company has only never experienced a loss of money.
Elliott believes that the market bubble might burst at any moment if Nvidia reveals data that is negative and “breaks the spell.” According to Elliott, this is the worst-case scenario that may take place.
SOURCE: FTN
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