Will Nvidia’s boom bust?

On Tuesday, chipmaker Nvidia (NVDA) became the world’s most valuable publicly traded enterprise, surpassing Microsoft (MSFT) with a market value of $3.32 trillion. Nvidia’s chips are the backbone of AI computing, and as a result its share price has tripled in the past year. CEO Jensen Huang says AI is the foundation of a new industrial revolution, which makes Nvidia its U.S. Steel (whose ticker symbol is, interestingly enough, X).

Analysts at Wedbush said in a note this week that Nvidia’s chips are “the new gold or oil in the tech sector,” and they see its market cap possibly rising to $4 trillion as the need for AI expands. And CFRA analyst Angelo Zino said this month that Nvidia will be “the most important company to our civilization over the next decade,” as AI drives the economy. But we’ve seen massive tech bubbles before, from the browser wars to the dotcom bust and the Great Crypto Collapse. As the Wall Street Journal reports, around $50 billion has been invested in Nvidia’s chips since the boom began, but generative-AI startups have brought in only $3 billion in sales.

“Enthusiasm around AI has all the hallmarks of an inflating bubble. Once it bursts — as it inevitably will — the U.S. stock market will be destined for a period of significant underperformance relative to its peers,” Neil Shearing, group chief economist at Capital Economics, a consulting firm, wrote in a note this week.

But don’t expect a crash like 2001 (or even 1929), wrote Shearing: “The drivers of U.S. dominance are too fundamental to be challenged by the occasional bout of irrational exuberance.” It doesn’t take any artificial intelligence to hear Shearing’s message: Ride that bull, but jump off before it bucks you.

It’s Still the Economy, Stupid!

The Congressional Budget Office said on Tuesday that the U.S. national debt is poised to top $56 trillion by 2034, as rising spending and interest expenses outpace tax revenues, largely due to the mounting costs of Social Security and Medicare. That sets the stage for a massive battle next year when the 2017 Trump tax cuts expire, and could see a vast reduction in government spending, higher taxes, or just an even bigger national debt. Spending cuts and rising debt will only make life harder for average Americans, particularly if tax hikes don’t hit the wealthiest and corporations. But high interest rates are also hitting those of us with incomes in the less-than-stratospheric tranche.

There may be hope on the interest rate front. On Tuesday, Fed Governor Adriana Kugler said inflation appears headed toward the Fed’s 2 percent goal after stalling earlier this year, and said monetary policy is “sufficiently restrictive” to ease price pressures without causing a significant deterioration in the job market. “If the economy evolves as I am expecting, it will likely become appropriate to begin easing policy sometime later this year,” she told a conference in Washington. The latest data, including a government report showing consumer prices did not rise at all from April to May, is “encouraging,” she said.

Meanwhile, things are beginning to change with the biggest single asset of most Americans, a home. U.S. home prices are rising at the slowest pace in nearly a year and a half, and a lot of people can’t afford to sell their homes because they are locked into low mortgage rates that they would never get on new homes. That may change, as mortgage rates trend downward (they are still near 7 percent), but higher mortgages raise the total cost of home ownership, meaning buyers have less to spend.

A housing shortage is partly to blame. According to the National Association of Realtors, while 17.2 million households were formed between 2012 and 2023, only 13.4 million homes were built.

The usual suspects:

  • Disney’s World: Riley has a jumble of new emotions in her head, and one of them is surely Joy, as Disney Pixar’s Inside Out 2 opened to a U.S. box office of more than $200 million this week, and another $300 million overseas. The hit film is a huge boost for the studio and the beleaguered movie business. Yet Anxiety is the Disney (DIS) shareholder’s current emotion, as they watch to see who will succeed 73-year-old CEO Bob Iger, who has promised to retire, this time for good, at the end of 2026. Iger is showing up at the Sun Valley media mogul conference next week with three potential successors in tow: Disney Entertainment co-chairmen Dana Walden and Alan Bergman, as well as Disney Experiences leader Josh D’Amaro. Relief is probably the emotion some visitors to Disney World are feeling, after winning a $67 refund in a class-action suit charged Disney misled some buyers of its $1,400 Dream Key annual pass into believing that the program had no blackout dates.
  • Elon’s World: Back in November, Elon Musk told advertisers who pulled their ads from X over anti-semitic posts that they could “Go f*** yourself.” Shockingly, that hasn’t worked out so well, with many major advertisers avoiding the platform, and revenue down 40 percent in 2023 from before Musk bought the platform. This week, in a conversation with Mark Read, chairman of advertising giant WPP (WPP), at the Cannes Lions ad festival, he begged advertisers to come back and try Twitter (I mean X). Musk is also trying to build X out into a payments platform (Xenmo? PayPaX?), regulatory filing showed. What’s more, Tesla has sued a firm that supplies batteries for its cars, claiming the contractor, Matthews International (MATW), divulged Tesla’s trade secrets when it filed a patent application. A lawsuit was filed in Delaware this past week accusing Musk and the Tesla board of utilizing its scarce resources from Tesla to create xAI, which the suit alleges diverts billions of dollars in value from Tesla to xAI.
  • Golden Goose Egg: Italian fashion footwear firm Golden Goose, maker of those pre-scuffed Superstar sneakers worn by Taylor Swift and Selena Gomez, is feeling its own distress, canceling what was supposed to be an IPO worth nearly $2 billion, blaming the far-right victories in this month’s European Parliament elections.
  • AI is going to shake up jobs in finance: A new report from Citigroup says 54 percent of banking jobs could be partly or fully automated as AI charges into the business world, but just how many jobs would be lost it couldn’t say. Still, Citi expects banking to remain a big employer, and an even bigger profit center, estimating that the global banking sector 2028 profit pool could increase 9 percent or $170 billion from the adoption of AI, rising to about $2 trillion.
  • Boeing Blues: Not for love and not for money. The troubled Seattle- and Chicago-based planemaker (BA) still can’t find a new CEO to replace outgoing chief exec David Calhoun. Calhoun oversaw the company’s response to the 2018 and 2019 737 Max disasters, and was running Boeing in January when a door panel blew out of an Alaska Airlines 737 in midair. Calhoun was in Washington this week to get roasted by a Senate committee over his handling of the company. Sen. Josh Hawley, a Missouri Republican, accused Calhoun of “strip mining” Boeing. None of that has helped Boeing find a successor, with GE Aerospace CEO Larry Culp and former aviation executive David Gitlin both passing on the job, the Wall Street Journal reported.

Corporations battle “shareholder democracy”

Climate activist shareholders got a boost this week, when a Texas judge barred Exxon (XOM) from muzzling an eco-friendly investment fund that wants the oil giant to put climate-related motions on its annual meeting agenda. The ruling was made on narrow grounds — that the fund, Arjuna, had agreed not to introduce the resolution, so there was no dispute to argue about.

Large corporations have become increasingly uncomfortable with Biden-era SEC rules that make it easier for small shareholders to bring forward proposals on politically sensitive issues including climate, diversity, religion and guns. It all comes down to what the SEC allows on so-called proxy statements, those booklets of thin paper with tiny print that shareholders receive before every annual meeting. The idea is to increase shareholder democracy, the SEC says, but some companies accuse activist shareholders of inserting “Trojan Horse” resolutions that would fundamentally undermine their businesses, according to a second suit still pending by the National Association of Manufacturers.

TiKTok has to follow the rules?

The Federal Trade Commission, which among other things regulates false advertising claims, is trying to tackle the truth- and reality-stretching properties of artificial intelligence. But some big-name A.I. producers like TikTok don’t seem to be listening.

In a post on its site Monday, TikTok told advertisers and content creators that they can “use Symphony Creative Studio to generate fit-for-TikTok video assets for your brand, using generative AI to make custom advertising and content without using real actors.” It told content creators to “Select from a diverse cast of pre-built digital avatars.”

Just a week earlier, FTC attorney Michael Atleson issued a warning about A.I. misrepresentation on the agency’s business guidance page.”

Don’t misrepresent what these services are or can do,” Atleson wrote. “Your therapy bots aren’t licensed psychologists, your A.I. girlfriends are neither girls nor friends, your griefbots have no soul, and your A.I. copilots are not gods.”

He warned that the agency will take action against A.I. misrepresentation, and cited a number of actions already taken. TikTok didn’t immediately respond to BBTW’s request for comment (We’ll update you next week if they do).

But there is hope. After an investigation by the tech news site 404 Media, YouTube took down more than a thousand A.I. videos that violated the FTC rules last week.

Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.

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