The City had barely finished pricing in the AI revolution when Nvidia’s fairy-tale valuation hit a dose of reality. The chipmaker, which briefly touched the £2 trillion mark, saw its shares wobble as markets digested earnings that failed to justify the astronomical multiples. For a company trading at over 30 times sales, any hint of deceleration is a thunderclap.
The market’s reaction was swift and surgical. Gilt yields, which had been simmering on fiscal concerns, barely reacted. This is a US story, through and through. The real question is whether this wobble is a buying opportunity or the first crack in a speculative dam. History suggests that when the leader of a hype cycle stumbles, the follow-through can be brutal.
Meanwhile, the UK tech sector remained eerily calm. Our domestic champions are not pricing in the same moon-shot expectations. ARM Holdings aside, London-listed tech is more grounded: it makes money, pays dividends, and relies less on future promises. The FTSE 100’s tech component actually rose marginally yesterday, a classic sign of rotational resilience. Capital is not fleeing; it is simply reallocating to sanity.
The Bank of England will watch this with interest. If the AI euphoria deflates without contagion, it removes a source of financial stability risk. But let us not kid ourselves. The real threat to our markets remains fiscal: a Chancellor who treats the public purse as a bottomless well and a gilt market that is losing patience. Nvidia’s wobble is a sideshow. The main event is the looming bond vigilante attack on UK debt.
For now, the message is clear: the AI party is not over, but the hangover is starting. Investors who chase parabolic curves should remember the law of gravity. As for the UK, we may benefit from being the boring, dullard on the block. Sometimes, boring is beautiful.
