Are we in an AI bubble?

America’s Nvidia just became the world’s first firm to break the $5T valuation barrier, three months after it became the first to pass $4T. So the AI chipmaker is now worth…

• More than every GDP besides the US and China
• More than two Canadas, and
• Believe it or not, roughly $5T more than Intrigue.

Why? Markets were responding to some spicy remarks, first from Nvidia’s Jensen Huang, who told a pack of nerds at Nvidia’s DC conference that he’s now sitting on…

• $500B in AI chip orders (including for seven US government supercomputers), and
• New partnerships with Finland’s Nokia, plus US defence tech player Palantir, while
• Nvidia’s newest Blackwell chip is now in full production and “shipping like crazy”.

Second, President Trump told Air Force One reporters en route to meet China’s Xi in South Korea that his high-stakes Xi chat would cover Nvidia’s “super duper” Blackwell chips above, again hinting he might approve (downgraded?) Blackwell sales to China!

Anyway, while this fuels an epic AI boom, there’s another b-word quietly circulating, and we’re almost too scared to whisper it out-loud: it’s Ben Affleck’s Batman reboot bubble.

So… are we in an AI bubble? Some quick reasons why you might conclude no…

• i) Maybe this boom is different given it rests on real, foundational AI advances (though dot com, housing, and even tulip investors variously said the same thing)
• ii) Nvidia is actually profitable, posting Q3 revenue of $35B (though that rests on hyperscalers continuing their reported $600B p/year capex), and so…
• iii) Maybe we’re just seeing a smart, accelerating, capitalist flywheel.

But now some quick reasons you might conclude there’s a bubble:

• There’s sobering research from places like MIT, finding 95% of big corporate AI initiatives still show zero return
• There’s maybe circular financing rather than a flywheel at play (Nvidia invests in OpenAI, which buys cloud from Oracle, which buys chips from… Nvidia), and so…
• There are smart people, whether Ray Dalio or the Bank of England, now sounding the alarm (though smart people can be wrong — see Affleck above).

So stir in some hype, some sky-high valuations, and FOMO-fuelled capital chasing uncertain returns, and maybe you’ve got yourself a nice little bubble there, pal.

But then… would a bubble even matter to your favourite ex-diplomats? Well, yes.

First, there’s the concentration risk: US stocks now make up ~56% of the world’s public market cap; America’s Mag7 AI stocks in turn make up a third of the US market cap alone; and their AI infrastructure build-out alone is driving a ~third of all US economic growth.

So any ‘pop’ might rattle not just the US economy, but the world’s economy. It’d also hit a key pillar (US tech dominance) now balancing the world’s concerns about US political risk.

Second, an AI pop would have downstream impacts on other sectors like energy, where there are already countless billions in AI-related energy projects in the US alone.

And third, a pop would also shape US-China competition, which is already in turn shaping this century: Nvidia’s chips are now arguably America’s biggest source of leverage.

But the result of that leverage is the two rivals are now bifurcating into two parallel, algorithmic blocs built on parallel stacks and supply chains. So any AI pop — inevitably slowing US investments and therefore advances — could end up less like the global 2008 meltdown, and more specifically shifting our world’s centre of gravity even further east.

Intrigue’s Take

The fact Nvidia is even hosting a conference in DC is pretty darn revealing about the extent to which the world’s most valuable company also depends massively on the whims of one man, which you could argue only adds to the above concentration risk, even if Trump and Huang do seem to be increasingly aligned lately.

But that gets us to the biggest lingering question right now: if Nvidia’s chips are now US leverage over a China throwing its weight around everywhere from Taiwan and the South China Sea to rare earths and automotive supply chains, then why would Trump consider surrendering that kind of technological superiority?

We’ve previously explored this debate, but by way of quick recap:

• Backers like Huang argue a) China smuggles chips in anyway, b) keeping China hooked on US tech slows its urgency to develop alternatives, and c) it’s better to flood the world with US tech than watch China do so (like with 5G). Yet…
• Critics argue a) more chips for China means less for the US, b) this Blackwell chip is 12 times more powerful than the H20 chips the US already restricts for China, and so if we accept AI’s various national security implications, then… c) you could argue selling top chips to China is like selling highly-enriched uranium to Iran!

Oh, and empowering China with top chips also helps China develop — and flood the world with — its own AI advances, undercutting one of the ‘pro’ camp’s reasons above.

Anyway, it’s unclear what exactly the White House has in mind here — moments ago, Trump told reporters on Air Force One, “we’re not talking about the Blackwell… but a lot of chips, you know, a lot of the chips. And that’s good for us”.

But even if he’s talking about a downgraded Blackwell or something else, what’s the US getting in return? Will Xi rebalance his lopsided economy that’s rattling global industry? Will he tone things down on Taiwan? Will he stop water-cannoning Philippine marines in Philippine waters? Will he quit sustaining Putin’s dystopian invasion?

Rather, based on President Trump’s initial read-out (see above), it seems Xi is pledging some transactional concessions, including resumed purchases of US soybeans.

So we’re possibly seeing the US swap this God-tier tech for… beans. And not even magic beans (though the political power of US soybean farmers can seem pretty magical).

Now, maybe there’s something we don’t know here (DC already snuck trackers into Nvidia shipments to trace China’s smuggling networks, for example). Or maybe this deal just reflects the reality of current US leverage, particularly amid China’s rare earths dominance.