The AI bubble isn’t bursting just yet, but one insightful investor is suspicious it’s overhyped.
During an appearance on CNBC‘s Squawk Box, billionaire Stanely Druckenmiller — the founder of the Duquesne Family Office hedge fund — revealed that his firm had cut its investment in the AI chipmaker Nvidia earlier this year.
As the financier explained, he’d decided to invest in Nvidia after one of his firm’s young partners told him about Nvidia in 2022 and predicted that AI was going to be even bigger than the blockchain.
“I didn’t even know how to spell it, [but] I bought it,” Druckenmiller said. “Then a month later, ChatGPT happened. Even an old guy like me could figure out okay, what that meant, so I increased the position substantially.”
The rest is history. Last May, Business Insider reported that the Duquesne Family Office had spent a combined $430 million on Nvidia and Microsoft in its big AI bet — but by November, the firm had already begun trimming the fat.
While he didn’t go into specifics about this latest Nvidia load-lightening, the investor seemed to suggest that he saw the writing on the wall when the AI chip company’s stock jumped up to $900 earlier in the year.
“We did cut that and a lot of other positions in late March,” Druckenmiller said. “We’ve had a hell of a run. A lot of what we recognized has become recognized by the marketplace now.”
Break It Down
Overall, the billionaire investor said that he simply needed a “break” from AI as it started to look a bit “overhyped” — even while saying that he remains “bullish” on the industry and that it might be “underhyped” in the long-term.
“As we go through all this capital spending, we need to do the payoff while it’s incrementally coming in by the day,” Druckenmiller said. “The big payoff might be four to five years from now.”
He went on to suggest that while other investors may have held onto their Nvidia shares to watch what happens — but Druckenmiller is not, as he said, the type to “own things for 10 or 20 years.”
“I’m not Warren Buffet,” he joked. “I wish I was Warren Buffet.”
And speaking of the Oracle of Omaha: the Berkshire Hathaway founder suggested over the weekend that AI is an incredible growth market, but a scary one at that.
Buffett described during a shareholder call seeing a deepfake video of himself that was so convincing, it could have gotten him to “send money to myself over and over in some crazy country.”
At the end of the day, though? The money men can make all the pronouncements they want, but what actually happens is anyone’s guess.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
