Nvidia's enormous profits do not prevent the fall of AI giants on the stock market.

BarcelonaMajor US artificial intelligence (AI) companies closed down on Thursday as a result of the growing fears of a bubble in this industry. Paradoxically, the losses occurred on the same day as Nvidia, the world's largest AI chip manufacturer. published some extraordinary results for the third quarter of this year, which exceeded analysts' expectations and set a new record for both sales and profits.

The declines in the United States spread to the rest of the world's stock markets this Friday. The Ibex 35, the benchmark index of the Spanish stock market, opened this Friday with a 1.5% drop, which by 10 a.m. was down 0.69%. In the rest of Europe, the stock exchanges in London, Paris, Frankfurt, and Milan also opened with moderate declines, while in Asia, Tokyo closed the day down 2.4%; Shanghai, 2.45%; Seoul, 3.79%; and Hong Kong, 2.38%.

On Thursday, Nvidia presented its results for the third quarter, which exceeded investor forecasts. The company increased its net profit by 65% year-over-year to $31.91 billion, while quarterly revenue reached $57.006 billion, 62% higher than the same period in 2014. The announcement of the record results was initially met with a 5% rise in the stock price, but this gain moderated, and the stock ended the day in the red, down 3.15%.

The rest of the major US tech companies fared no better. Tesla, the electric car manufacturer led by billionaire Elon Musk, fell 2.17% on Thursday, while AI software company Palantir dropped a notable 5.85%, and the tech giant...e-commerce Amazon, up 2.49%. Alphabet (Google's parent company) lost 1.03%; Microsoft, 1.6%; and Meta (parent company of Facebook, WhatsApp, and Instagram), 0.2%.

The company most affected lately by bubble fears has been Oracle, which is also one of the companies that has invested the most in AI. The Californian software and electronic database giant fell 6.58% on Thursday—the company has lost a third of its value since mid-September—and has recently been making headlines in the US financial press due to the rising cost of so-called Credit Default Swaps (CDS, instruments that allow investors to cover losses in the event of company bankruptcy, like insurance) on their securities.

The danger of a possible bubble

It's important to keep in mind that the ten largest AI companies represent more than 40% of the value of the S&P 500, the index that groups the 500 largest companies on the US stock exchange. Therefore, a reduction in the value of these companies' shares has a direct negative effect on the US stock markets.

In fact, the overvaluation of companies in the AI industry is one of the main fears of analysts and investors, who have been openly discussing a speculative bubble for several months. In recent weeks, several investment funds have been publicly either its divestment from companies focused on artificial intelligenceor their short-term investments, that is, betting that the share price of these companies will fall in the future.

The unease in the stock market is related to the possibility of an AI bubble, but also to the uncertainty caused by the recent problems of credit companies subprime —companies that provide high-risk loans to low-income individuals— and regional banks, such as Tricolor, Zions, and Western Alliance. In fact, a portion of consumer credit, especially the higher-risk kind, in the US is being channeled through what is known as shadow banking (shadow banking), entities that can provide loans despite not being banks, and are therefore outside the regulations imposed by the Federal Reserve or other public regulators of the financial sector.

Cryptocurrencies have also been declining for several days. The leading cryptocurrency, Bitcoin, registered a new low on Thursday since last April, and if it maintains this rate of losses, November could end as its worst month since the 2022 market crash.