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Elliott Management, a top Wall Street hedge fund, told its investor clients that big tech giants, especially Nvidia, are in a bubble and that the artificial intelligence technology that has driven their stock prices up violently is overhyped, media reported on Friday.

Elliott's negative views on artificial intelligence are as follows:

Many applications are not ready for prime time. Many of the so-called uses of AI will never be cost-effective, will never actually work properly, will consume too much energy, or will prove to be untrustworthy.
So far, AI has failed to deliver the big productivity gains it promised, with few practical uses beyond summarizing meeting minutes, generating reports and helping with computer coding.
Artificial intelligence is actually software and has so far not delivered value commensurate with the hype.

In recent months, companies including Microsoft, Meta and Amazon have been spending tens of billions of dollars to build artificial intelligence infrastructure, with much of the money going to Nvidia. At the same time, many of Nvidia's largest customers are also developing their own chips. In response, Elliott questioned,It doubts whether big tech companies will continue to buy Nvidia's GPUs in large quantities.

Elliott told clients in the letter that it has largely avoided bubble stocks, such as the Seven Sisters. Regulatory filings show that as of the end of March, Elliott held only a small position in Nvidia, worth about $4.5 million. As for when the market bubble will burst, Elliott said that if Nvidia reports poor results and breaks the curse, the bubble is likely to burst.

While pointing out that large-cap technology stocks are in a deep bubble, Elliott has also been cautious about shorting high-flying large-cap technology stocks, saying that shorting these stocks could be "suicidal."

Elliott Management, which manages about $70 billion in assets and was founded by billionaire Paul Singer in 1977, posted a profit of about 4.5 percent in the first half of this year and has only lost money in two years since its launch.

Previously, U.S. chip stocks soared as investors were enthusiastic about the potential of generative artificial intelligence, and Nvidia dominated the market for powerful processors needed to build and deploy large artificial intelligence systems, making the rise even more amazing. But the current rally in these stocks has stalled, and the market is worried about whether large companies will continue to invest heavily in artificial intelligence.

Concerns about the sustainability of investments in artificial intelligence are sweeping Wall Street, with Nvidia shares down more than 20% from their all-time high in late June, when the company briefly became the world's most valuable company with a market value of $3.3 trillion.

Despite the sharp pullback, Nvidia is still up nearly 120% this year as of Friday's close and more than 600% since the beginning of last year.

An article on the Wall Street Journal website pointed out that in this earnings season, Google, Microsoft, and Amazon have reported consecutive “failures” in their earnings reports. Since the release of their earnings reports, Google and Microsoft’s stock prices have fallen by more than 8%, and Amazon’s stock price has fallen by nearly 9% in one day, indicating that Wall Street does not believe that spending heavily on AI will bring returns. As the business that has benefited most from generative AI, the cloud computing divisions of the three giants grew steadily in the second quarter, but this was not enough to appease investors, who are increasingly eager to see the returns from their huge investments in data centers and other AI infrastructure.

Barclays also recently pointed out that the "FOMO" (fear of missing out) sentiment was fully demonstrated in the Internet bubble in 2000, and in today's AI field, history may be repeating itself. "Spending money on AI" is the "FOMO" of large companies, but it is expected that some people will retreat next year, but in the long run, it is still early.