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The hedge fund Elliot Management’s warning about Nvidia came as chip stocks nosedived with Intel falling by up to 27% and Nvidia by 6% read more
 "Hedge fund Elliot warns against investing in Nvidia, calls AI 'overhyped'")
Following the release of ChatGPT late last year, demand for NVIDIA's chips surged. With a combination of its chips, other hardware, and powerful software, NVIDIA has achieved approximately 80 per cent market share. Image Credit: Reuters
The hedge fund Elliot Management has warned investors against putting their money in Nvidia.
Elliot has said that Nvidia investors were in the “bubble land” and that the artificial intelligence (AI) remained “overhyped”.
In a letter to investors seen by Financial Times, Elliot said the AI was overhyped as it is not cost-effective and its applications are also not likely to work.
The Elliot’s warning against Nvidia came as chip stocks plunged on Friday with Intel witnessing as much as 27 per cent decline and Nvidia falling by up to 6 per cent in the United States.
Elliot’s case against Nvidia & AI
The Elliot said its stock is in a “bubble” driven by “overhyped” AI technology, according to a letter seen by FT.
The Elliot said that many of the promised AI applications are “never going to be cost-efficient, are never going to actually work right, will take up too much energy, or will prove to be untrustworthy”.
The Elliot said the AI has not yet delivered significant productivity that its applications had promised. It further said that that there were “few real uses” for AI at this stage beyond “summarising notes of meetings, generating reports and helping with computer coding”.
The Elliot’s letter, as reported by the FT, concluded that the AI had not yet provided “value commensurate with the hype”. It further said it was sceptical if companies would continue to buy Nvidia’s graphic processing units (GPUs).
Even though it was sceptical of Nvidia and AI, Elliot advised against shorting Nvidia stocks and said it could be “suicidal”.
Nvidia has risen over 600% since 2023
Over the past year, Nvidia has ridden the AI boom bandwagon to grow more than 600 per cent since January 2023. So far, Nvidia company has grown by 120 per cent this year.
In June, it briefly overtook Apple and Microsoft to become the most valuable in the world with the market valuation of $.3.34 trillion at the time, according to Yahoo Finance.
Nvidia makes chips that are highly sought-after in the operations of the data centres. These data centres help run powerful computers and are also used for running AI applications. The company also makes graphic processing units (GPUs) for computers.
In the chips for data centres and AI applications, Nvidia has a market share of 80 per cent, according to CNBC.
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English (US) ·