Google and the “bubble” of artificial intelligence – 2024-08-17 03:44:04

Over the last month, the stock market value of the American technology giants has received a fairly strong – and certainly not negligible – blow. Google’s share price, in fact, is down about 17%, Microsoft’s is down 14%, Apple’s is down 11%, and NVIDIA’s – which has had the most impressive returns in a while – is down 22%.

It is worth noting that in last Monday’s session alone, the stock prices of NVIDIA, Google and Apple fell by 14%, 6.5% and 9% respectively.

Despite the fact that the “crash” did not continue and a recovery was recorded in the following meetings, the question that has been lingering for a long time seems to have become more urgent: Is a broad – and absolutely necessary, according to several analysts, who believe that has a dangerous “bubble” – correction been created in the new technology industry, which is running with… broken brakes on the stock market tracks?

“doomed”

The truth, in fact, is that after the verdict issued by an American court against Google – coincidentally (?) also on Monday –, condemning it for monopolistic practice on the Internet (as had also happened with Microsoft for its software in 2000), the “correction” scenario looks more visible.

Not only because it is likely that there will be an impact on its revenue and profitability, but because most predict that this case will be a “judgment” for similar appeals against other powerful players in the industry. Starting, thus, a domino that will call into question the extremely ambitious investment plans they have drawn up and have already begun to implement.

For example, as the “Economist” notes, Alphabet (parent of Google) and Microsoft together with Amazon and Meta will spend this year an amount greater than 100 billion dollars just for the construction of gigantic (and extremely energy-intensive) databases that will power the AI ​​tools.

Overall, if the corresponding investments of similar small and medium-sized companies and several other sectors that have turned to AI are taken into account, the total amount to be spent within the next four years (2024-27) is estimated to exceed 1.4 trillion. dollars.

“Death Valley”

As one can easily understand, any disruption in the “chain” that starts from suppliers and ends with consumers can prove fatal, turning the new “Eldorado” of profitability into a “Valley of Death”. Leading, in other words, to what the British magazine attempted to describe by posing the following question: “What, if anything, could kill the explosive growth of a trillion. of artificial intelligence?’

According to the “Economist” analysis, “the biggest threat to the AI ​​supply chain comes from declining demand.” He explains that in the event that “If profitability targets are not met, then the giants could cut back on investment, leaving the chain exposed” – and together, as is obvious, the tens of thousands of companies that make it up.

What is certain is that the balances remain extremely delicate. The “gap” that exists between the stock market returns of the companies in the sector from the beginning of 2023 to today (103% on average) proves why both with the course of the S&P 500 index (42% in the same period) and between average projected increase in their sales for 2025 (14%).