AI Bubble Concerns Mount as Google Surges and Nvidia Faces China Challenges

Volatility grips the AI sector this week, with industry insiders sounding the alarm on a potential bubble. Meanwhile, Google surges ahead in market cap, surpassing Microsoft, while Nvidia grapples with geopolitical risks in China.

Industry Insiders Raise Bubble Warnings

Dan Niles, founder of Niles Investment Management, tells CNBC's Deirdre Bosa, "Unless you're the most optimistic person on the planet … you know you're in a bubble, right?"

Alphabet CEO Sundar Pichai also acknowledges the irrationality in the current AI investment cycle. "Given the potential of this technology, the excitement is very rational. It's also true when we go through these investment cycles, there are moments we overshoot collectively as an industry," he says in a BBC interview.

Google's AI Momentum

Google's renewed AI momentum propels it past Microsoft in market cap for the first time. The launch of Gemini 3, which quickly climbs to the top of AI model rankings, and the updated version of its AI image generator, Nano Banana, contribute to this surge.

Josh Woodward, vice president of Google Labs and Gemini, shares his enthusiasm. "I've never had more fun than right now. I think it's partly the pace, it's partly the abilities these models give to people who can imagine new use cases and products. It's unparalleled."

Nvidia's Geopolitical Risks

Nvidia's earnings report fails to restore confidence in the tech trade, despite a strong financial performance. The company's CFO, Colette Kress, cites geopolitical issues and a competitive market in China as reasons for unfulfilled purchase orders.

Aaron Ginn, co-founder and CEO of Hydra Host, warns that the West's attitude toward Chinese AI poses the biggest threat to Nvidia's dominance. "We just have to accept that we fell behind the eight ball in the fact that China is a manufacturing powerhouse. We have the ability to beat back that trade balance to where we are now leaders," he says.

References

• This week in AI: Brushing off new bubble warnings, Google’s AI comeback and Nvidia’s China threat