Last Friday, August 2, 2024, was a black day for global financial markets. European and US stock markets closed sharply lower, dragged down by the stock market crash of major technology companies. Shares of several technology companies have in fact suffered significant losses: Intel lost 29.61%, Amazon 11.77%, while Tesla and Nvidia they lost more than 7%.
This climate of skepticism surrounding the ability of tech companies to be profitable, particularly in the field ofartificial intelligencehas negatively affected the performance of global markets. And so all the main European stock exchanges closed the day in the red, as did the US ones. The Italian FTSE Mib recorded a loss of 2.58%, the London FTSE 100 of 1.42%, the German Dax 40 of 2.44% and the French Cac 40 of 1.44%. In the United States, the Nasdaq lost 2.43%, while the S&P 500 fell by 1.84% and the Dow Jones by 1.51%.
Friday’s declines ended a long period of growth for financial markets, especially in the U.S. After a boom in 2020 and 2021, markets had some troubles in 2022 and early 2023, but then recovered thanks to the enthusiasm for artificial intelligence. AI has been met with great enthusiasm, pushing up the valuations of companies investing in this sector. However, the reality of worsening accounts and layoffs, such as those recently at Intel, has caused investors to reconsider their expectations.
At Google’s recent quarterly conference call, for example, analysts grilled CEO Sundar Pichai about when the $12 billion invested in AI each quarter will start to generate profits. Big banks and investment firms have also expressed concern about the sustainability of AI, suggesting that the technology may not be able to generate enough money to justify the investment.
Some experts are even starting to talk about a new speculative bubble, similar to that of dot com of the 90s (the financial bubble that arose around technology companies in the late 1990s, which revealed the inconsistency of many companies that had obtained investments on the wave of enthusiasm around the spread of the Internet, ed.). The fear is that tech stocks have been inflated by AI hype, without a solid business model behind them. Things are still very different from then, but Nvidia’s price-to-earnings ratio of 70 is much higher than average (though still a long way from the incredible 200 that Cisco, the symbol of the dot-com bubble, had).
What do you think? Do you think that AI is a speculative bubble or do you share the general enthusiasm? Let us know in the comments below.
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