The AI boom is real, the valuations were not. Nvidia is not collapsing, the market is simply sobering up.
The AI Bubble That Never Was
There is a recurring obsession in the financial press, a kind of seasonal panic. Every time Nvidia stumbles for more than three trading sessions, every time a billionaire sells a few hundred million in stock, every time Michael Burry squints in the direction of Silicon Valley, the headline writers dust off their favourite phrase, the AI bubble.
But the notion that we are living through a gigantic speculative hallucination collapses the moment you look at what is actually happening in data centers, in semiconductor supply chains, in software companies, in universities, and in industries that now depend on machine intelligence the way they once depended on electricity. AI demand is not a fad. If anything, it is alarmingly persistent.
What was a fad, however, was the belief that Nvidia’s valuation could defy both physics and economics forever.
For two years the market behaved as if Nvidia had finally broken free of earthly constraints. As if demand would grow without limit, supply would scale effortlessly, competitors would politely disappear, margins would widen indefinitely, and hyperscalers would subsidise AI experiments until the end of time. Investors behaved as if Nvidia were not merely a company, but a law of nature.
This is, of course, nonsense. Beautiful nonsense, profitable nonsense, but nonsense nonetheless.
And now, with Peter Thiel dumping his entire Nvidia stake and Michael Burry buying puts, markets are rediscovering a concept many had forgotten, gravity.
What we are witnessing is not a collapse. It is sobriety.
The AI revolution continues, but the valuation fairy tale is being retired. Nvidia remains an extraordinary company, but extraordinary is not the same as supernatural.
The correction we are seeing is the most normal thing in the world. Markets do this when narratives grow too large for the balance sheets beneath them. The same happened to Amazon when investors realised that “bookstore of the future” was not enough to justify astronomical multiples, and again when Tesla had to prove that scaling factories is harder than scaling hype. It is not decline, but maturation. The moment when myth returns to numbers.
AI, as a technological wave, is still accelerating. But the market that finances it is learning that acceleration does not always mean infinite upward slope. Even the strongest players eventually enter the phase where the story must match the cash flow.
And this is the crucial distinction most commentators miss. Bubbles burst when reality disappears. Mature markets correct when reality returns. Nvidia is experiencing the latter.
Demand is still enormous. Semiconductor roadmaps are still years behind actual need. Research output is increasing, not shrinking. Energy grids are struggling under workloads that did not exist a decade ago. None of this signals decline. But investors are beginning to ask a long overdue question, how fast can this scale before the costs, the physics, the competition, and the simple limits of supply chains slow it down?
These are not bearish questions. These are grown up questions.
The shift we are experiencing is a rotation from euphoria to adulthood. The moment when the hyperscale AI dream is no longer priced as an infinite horizon, but as a powerful industry with actual margins, actual constraints, and actual competitors. Nvidia does not become less relevant. It simply becomes mortal again.
And this is healthy.
- It is healthy for investors.
- It is healthy for the semiconductor ecosystem.
- It is healthy for the entire AI industry.
Because a world in which Nvidia remains valued like a monopoly that will never face resistance is a world detached from industrial reality. The more realistic scenario is the one we see forming now, a dominant company that continues to grow, but no longer at escape velocity. What we are watching is not a crash but a convergence, valuations converging toward fundamentals, enthusiasm converging toward execution, expectations converging toward what technology can realistically deliver.
The paradox of technological revolutions is that they do not collapse when stock prices fall. They collapse when nothing real is happening underneath. With AI, the opposite is true, the stock prices are cooling just as the underlying industry is heating up.
That is not a bubble bursting. That is a market learning to breathe.