Nvidia (NASDAQ:NVDA) is investing billions across an AI industry that ultimately buys its chips. Prominent economist Tyler Cowen says that could make the boom more durable, not prove it is a bubble.
“You can think of Nvidia as a kind of lender or buyer of last resort for the sector,” Cowen told the Prof G Markets podcast on Friday.
Microsoft, Alphabet and Meta can play similar roles, he said. Cowen argued that new technologies often need help getting off the ground, and that the huge amount of money flowing into AI gives the sector a better chance of succeeding over time.
Cowen serves on Anthropic’s Economic Advisory Council. Nvidia committed last year to invest up to $10 billion in Anthropic as part of a broader compute partnership.
Nvidia Helps Finance Its Own Customers
Cowen was responding to concerns that Nvidia and other technology giants are helping finance an AI industry that later spends heavily on their chips and computing infrastructure.
Nvidia is now doing far more than selling GPUs. On Aug. 10, it partnered with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR on financing platforms aimed at mobilizing more than $500 billion of third-party capital for AI infrastructure.
A week later, Nvidia agreed to guarantee up to $105 billion of OpenAI-linked lease obligations at SB Energy’s Ohio data-center campus and invest $1.5 billion in SB Energy, Reuters reported. Nvidia will be the exclusive AI compute provider for the site.
In effect, Nvidia is using its financial strength and relationships with Wall Street to help customers finance data centers and computing infrastructure that run on its systems.
Cowen argues that does not necessarily make the boom artificial. New technologies often need large amounts of capital to get off the ground, he said, and “new things bootstrap themselves.”
Cowen Says Bubble Debate Misses the Point
“I think it’s the wrong discussion,” Cowen said when asked whether AI could be a bubble.
He compared the boom with automobiles in the 1920s. Many carmakers failed, just as internet companies later disappeared, without making the underlying technologies worthless.
Cowen said investors should instead ask a simpler question: “Does the product work?”
“And the answer here is a very clear yes,” he said.
Polymarket traders also see a near-term collapse as unlikely, putting the chance of the AI bubble bursting this year at 12%.
That does not mean investors cannot lose money. Cowen said debt-financed data centers could create “bad macro consequences” if the boom reverses, including capital losses and solvency problems. He said the fallout would likely fall well short of the 2008 financial crisis.
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