Why Nvidia's Record Results Couldn't Save the Market or Public Perception of AI

AI's problem is larger than the technology itself. And it goes back to the public experience with technology over the past 20 years. 

The fundamental issue is that, while people appreciate the way the internet and their mobile phones have, in may ways, made life easier and more interesting, the vast majority of financial benefits have been grabbed by a very few, leaving the rest feeling poorer and more threatened about the future. People were excited about the potential of the dotcom era. They liked Google's 'dont be evil' (even if many didnt believe it - and were right to be skeptical). It felt like tech was empowering everyone. But that was most emphatically then. The constant constriction of life and choices, the arrogance and disdain for everyone else shown by Musk, Bezos, Zuckerberg, Thiel and the rest of the tech glitterati - as well as their unseemly embrace of a president who clearly despises everything they once claimed to stand for - has soured the public on AI whose creators loudly and openly bray about its ability to make the rest of humanity irrelevant. So Nvidia's record results couldnt save the market because it underscored how concentrated power already is and how limited the benefits will be for most. A revolution is coming, but probably not the one Silicon Valley has been hyping. JL

Greg Ip and Matt Wirz report in the Wall Street Journal:

The AI trade is still in trouble. Blockbuster results from Nvidia sparkeda rally Thursday before indexes reversed in the largest blown gain since April. Today, optimism is largely confined to AI engineers and executives calculating how much AI can reduce head count while workers wonder whether they will be replaced by AI. Since ChatGPT was released, the market value of 7 megacap tech stocks is up 169%. (But) consumer sentiment is near a record low. “AI has gone from being a useful, timesaving tool for research to a threat to entry level jobs, higher utility bills, concern about water and farmland turned to data farms." Nuclear power once offered the potential that AI promises today. But the public never got comfortable with a technology that could wipe out humanity. AI evangelists believe it's unstoppable. They better hope so, because it isn’t going to succeed on popularity.

The artificial-intelligence trade is still in trouble.

Blockbuster results from AI bellwether Nvidia sparked a furious rally from Tokyo to New York early Thursday before indexes reversed and tumbled in the largest blown gain since April’s tariff-fueled market turmoil.decrease; red down pointingsparked a furious rally from Tokyo to New York early Thursday before indexes reversed course and tumbled in the largest blown gain since April’s tariff-fueled market turmoil.

For a while, investors cheered, with the Nasdaq composite surging 2.6%. Then tech shares slumped, driving the index to a 2.2% decline. Nvidia climbed 5%, before finishing down 3%. Bitcoin slumped to its lowest 4 p.m. level since April. The Cboe Volatility Index, known as Wall Street’s “fear gauge,” rose around 12%.

“What stands out to me is the lack of any substantial shift in narrative to cause such a big shift. There’s just not a lot of confidence in the market right now.” Artificial intelligence might be the most transformative technology in generations. It is also the most joyless.

While Wall Street greets AI with open arms, ordinary Americans respond with ambivalence, anxiety, even dread.

This isn’t like the dot-com era. A survey in 1995 found 72% of respondents comfortable with new technology such as computers and the internet. Just 24% were not.

Fast forward to AI now, and those proportions have flipped: just 31% are comfortable with AI while 68% are uncomfortable, a summer survey for CNBC found.

Why the difference? The dot-com bubble, like the AI boom, had its excesses and absurdity. But it also shimmered with optimism and adventure. From Fortune 500 CEOs to college dropouts, everyone had a web-based business idea. Demand for digitally savvy workers was off the charts.

The dot-com era bubble, like the AI boom, had its excesses. Chris Hondros/Newsmakers/Getty Images

Today, the optimism is largely confined to AI architects and gimlet-eyed executives calculating how much AI can reduce head count while workers wonder whether they will be replaced by AI, or someone who knows AI. Meta Platforms, Microsoft and Amazon, three of the leading purveyors of AI, have all announced layoffs this year.

A piece of the ‘disconnect’

Since November 2022, when ChatGPT was released, the market value of the “Magnificent Seven”—megacapitalization tech stocks closely tied to AI such as Nvidia and Microsoft—is up 169%. The spending spurred by that wealth, and the massive sums those companies are plowing into data centers, are why the hard data on economic growth and household finances looks pretty healthy.

And yet consumer sentiment is near a record low, according to the University of Michigan.

 

There are a lot of reasons for this disconnect, most prominently the cost of living. 

AI could be one, as well: The very thing powering the stock market to records might be gnawing away at Americans’ sense of well being.

AI can be unsettling even if you face no direct threat from it, just as an out-of-control border bothered people unaffected by illegal immigration. Both undermine your sense of control. “The AI fear is one hunk of meat in a stew of distrust and grievance that has been marinating for a long time,” said Micah Roberts, a partner at pollster Public Opinion Strategies, which conducted the CNBC survey.  

Americans have always had mixed feelings about technology. They appreciate the convenience and features while worrying about the costs: to privacy, to mental health, to social cohesion. In that sense, AI is no different from personal computers, the internet or social media.

Most people also get that tech inevitably makes some jobs obsolete. But what about a technology that could make humans obsolete? In a recent report, economists at Goldman Sachs, mapping out downside and upside scenarios to AI, say the latter means an acceleration in productivity that “eventually makes human input in knowledge-based work tasks redundant.”

And here is Yale University economist Pascual Restrepo imagining the consequences of “artificial general intelligence,” where machines can think and reason just like humans. With enough computing power, even jobs that seem intrinsically human, such as a therapist, could be done better by machines, he concludes. At that point, workers’ share of gross domestic product, currently 52%, “converges to zero, and most income eventually accrues to compute.”

These, keep in mind, are the optimistic scenarios. 

John Finger works as a personal banker in Lady Lake, Fla., and at age 27 and with a 4-month-old son, doubts he will ever afford a house without his parents’ help. AI, he worries, forecloses potential careers in banking: “There are back office jobs that pay a lot more money, but if AI is as powerful as they say it is, and I have my doubts, those jobs are going to be gone.”

 

It isn’t just the job-destroying potential that is disturbing. The technology defies comprehension. Even the modelers aren’t sure why models do what they do. Finger considers himself tech-savvy: “I like my iPhone. I like playing videogames. I love the internet. I love that any question I have I can go on Google, all I have to do is punch it in.” But AI is different. “Can bad actors train AI to give the answer it wants? Who knows.”

Peter Atwater, an economist who lectures at the College of William and Mary and studies consumer confidence, said the more his students learn about AI, the less comfortable they are. “AI has gone from being a useful, timesaving tool for papers and research to a threat to entry level jobs, higher utility bills, environmental concern about water and farmland turned to data farms,” Atwater said. “I suspect the reasons not to like AI will likely grow.”

Don’t panic

Feelings are just that: feelings. Just because AI could replace humans doesn’t mean it will. Few of the companies announcing layoffs actually cite AI as the reason. Relative to the investments of AI companies, actual corporate adoption has been modest, feeding suspicions of a bubble.

So does it matter that people don’t love AI? It might. Nuclear power once offered the sort of potential that AI promises today. But the public never got comfortable with a technology that could also wipe out humanity, especially after the 1979 Three Mile Island accident. From 1978 to 1990, polls showed overwhelming opposition to new reactors, and deployment ground to halt. Only now is it coming back to life—ironically, to power AI.

 

Today, AI has the political wind at its back. One of President Trump’s first acts was to rescind former President Joe Biden’s AI safety guidelines. He now gives priority to dismantling regulatory barriers to AI and competing with China.

But those winds can shift. A poll of roughly 2,000 people by Narrative Strategies, a communications and public relations firm, found just 40% said the AI industry could be “trusted to do the right thing,” well below the 62% to 63% who said that about finance, energy or healthcare. Asked about government regulation, 57% said tech and AI needed more, well above other industries.

AI evangelists believe its sheer economic and computational force make it unstoppable. They better hope so, because it certainly isn’t going to succeed on its popularity.