Nvidia is “in a bubble,” and the AI technology driving the company’s stock price is “overvalued,” according to hedge fund Elliott Management in a letter to clients, reports FT.
The firm, which manages assets worth approximately $70 billion, expressed “skepticism” about large tech companies continuing to purchase Nvidia’s graphics processors in significant volumes.
“Artificial intelligence is overvalued, and many of its applications are not yet ready for use,” the company asserts in the letter reviewed by FT.
The letter also states that most of the proposed AI use cases “will never be economically viable, will not function correctly, will consume too much energy, and will prove unreliable.”
Elliott Management noted that AI has failed to deliver the “promised massive productivity boost.”
“It is practically impossible to use for real-world purposes, except for summarizing meetings, generating reports, and programming,” the company claims.
According to the firm, artificial intelligence is software that has yet to deliver “value commensurate with the hype.”
The bubble could “burst” when Nvidia reports poor performance, the fund believes.
Nvidia’s shares have shown significant growth over the past couple of years amid the AI boom. In June, the company reached a market capitalization of $3.34 trillion, becoming the most valuable in the world for the first time.
Earlier, the firm introduced a new chip architecture for training artificial intelligence models called Rubin.
In April, Nvidia acquired the Israeli startup Run:ai, which assists developers and operations teams in managing and optimizing AI infrastructure.