The abrupt departure of Jensen Huang as chief executive of chipmaker Nvidia, mounting anxiety over a potential AI bubble and America’s swelling debt burden dominated proceedings on Thursday during the closing day of the Web Summit in Lisbon, one of Europe’s largest technology gatherings.
Panellists in a session moderated by Euronews cautioned that turmoil in public debt markets could set off the next global financial crisis.
The discussion brought together Adam Kobeissi, founder and editor-in-chief of The Kobeissi Letter, a widely followed capital-markets newsletter, and economist James Galbraith, a professor at the University of Texas at Austin.
It was among the many sessions compressed into a single day after Wednesday’s schedule was called off on the recommendation of the Portuguese government, which had declared a state of emergency ahead of Storm Charles.
In the end, the storm largely spared Lisbon, which saw only heavy rainfall and limited flooding.
Nvidia’s Huang departure ‘a net negative for investors’
Huang resigned on Thursday following reports of two extramarital affairs.
According to reports, US intelligence suspects one of the women was spying for China, an allegation Beijing has rejected. Chief financial officer Colette Kress has taken over as interim chief executive while the board searches for a permanent successor.
Nvidia shares fell roughly 15 per cent at Thursday’s open before recovering some ground, trading down just over 5 per cent on the day at around $164 each at the time of writing.
The stock now sits more than 30 per cent below the all-time high of $243 it reached on Monday, 5 October.
Kobeissi argued that Huang should not have stepped down, saying his exit “will be a net negative for investors” over the next couple of years, even as he remained broadly bullish on Nvidia.
He also played down the likelihood that Huang’s departure would disrupt next week’s stock market debut of Anthropic, the AI company behind the Claude models, which is seeking a valuation of as much as $1.4 trillion (€1.25tn).
Nvidia is among seven technology companies that have agreed to buy Anthropic shares at the offer price.
AI, China, US debt and the midterms
Professor Galbraith suggested there was a strong chance that Chinese technology would eventually undercut Nvidia’s, which would raise questions about the hundreds of billions of dollars that Microsoft, Alphabet, Amazon, Meta and other hyperscalers are currently pouring into AI infrastructure.
He described the global economy as a rivalry between two competing systems.
The United States, he explained, can mobilise private capital quickly but is slower to set policy and make decisions, whereas China can centralise research, technological development and deployment while intervening more directly in its economy.
For those reasons, Galbraith said he “would tentatively bet on China” to win the AI race, and perhaps to become the world’s largest economy over the coming decades.
Away from the AI boom, the panel pointed to public debt markets as a major concern.
Kobeissi warned that one in five dollars spent by the US government goes toward paying interest on the debt, “not even to pay down the debt.” Treasury data shows Washington spent $1.1 trillion (€988bn) on net interest in the fiscal year to September, or 19 per cent of its revenue.
“The US debt-to-GDP ratio is at Second World War levels and there has not been a technical recession since the COVID-19 pandemic,” Kobeissi said, adding that “the debt market has been screaming that it will be in a higher-for-longer environment in the foreseeable future,” meaning interest rates are set to stay elevated.
“On the current path the US is on, there is a 100 per cent chance of bankruptcy,” he warned, adding that central banks cannot bring down interest rates in the present environment.
Still, “we are not in an imminent 2008 situation but the trends 10 or 20 years out are very concerning,” Kobeissi said, though he remains “a huge bull” on the United States, citing its resilient economy and accelerating innovation.
Professor Galbraith recalled how, during the COVID-19 pandemic, US President Donald Trump and a Democratic-controlled House agreed on relief measures to rescue the markets, but cautioned that the same cohesion may be lacking now.
In last week’s US midterm elections, Democrats won 255 House seats to the Republicans’ 169, according to the Associated Press tally at the time of writing. Several US states were still counting ballots, and Democrats could yet flip the Alaska Senate seat along with multiple of the 16 uncalled House races.
Asked to make a prediction, Professor Galbraith said that “the nature of financial crises is that we cannot foresee them,” though he saw a number of concerning signs.