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Nvidia Corp (NASDAQ:NVDA) stock has been scrutinized by hedge fund Elliott Management, which labeled the company a “bubble” due to overhyped artificial intelligence (AI) technology driving its share price.
Elliott Management, which oversees about $70 billion in assets, expressed skepticism about Big Tech companies’ continued high-volume purchases of Nvidia’s graphics processing units.
In a letter to clients seen by the Financial Times, Elliott Management stated that AI is “overhyped,” with many applications not ready for prime time and unlikely to become cost-efficient or reliable. The stock is trading lower on Friday.
Also Read: Amazon Tests AI Chips in Texas Lab, Aims to Cut Nvidia Costs
Elliott Management’s warning coincided with the chip sector facing a downturn amid concerns about the sustainability of AI investment and geopolitical tensions.
Nvidia lost 12.4% in the last 30 days as the U.S. intensified its advanced semiconductor embargo on China and braced for the Presidential elections.
Meanwhile, Elliott highlighted that many proposed AI uses might not work efficiently, consume excessive energy, or prove untrustworthy.
Intel Corp’s (NASDAQ:INTC) shares, for example, fell 20% after announcing weak Q2 results and plans to cut about 15,000 jobs, reflecting broader market anxiety.
Separately, the U.S. Department of Justice commenced an antitrust review against Nvidia over alleged monopolistic practices in the AI chip market.
Price Actions: NVDA shares are down 3.07% at $105.86 at the last check on Friday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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