Investors chasing the artificial intelligence (AI) trade must look past trillion-dollar valuations and ask much harder questions, warns Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory organisations. His comments follow a deepening global sell-off in semiconductor stocks, raising concerns about the AI boom’s sustainability. On Tuesday, South Korea’s Kospi index plunged 8.1%, its lowest since April, with memory giants Samsung Electronics and SK Hynix each shedding over 9%. Japan’s chip-heavy Nikkei 225 also fell 4%.
Mr Green asserts this market rout is not random, signalling the market is finally pricing in a ‘circularity risk’ it has ignored. He explained new mapping shows chipmakers, cloud giants, and AI labs increasingly invest in and buy from one another in a closed loop. He cited Nvidia funding OpenAI, which pays Oracle and Microsoft for cloud capacity, who then buy Nvidia chips, calling this a circular ‘accounting trick wearing a growth story as a costume’. Beyond this, Mr Green warned of an external danger: Chinese rivals are closing the technology gap at a fraction of the cost, increasingly setting the global pace for open-source models.
Highlighting the sector’s fragile confidence, Mr Green advises investors not to abandon AI but to focus on robust balance sheets over mere narratives. He urges targeting companies with real customers paying real money, strong margins independent of supplier funding, and technology viable even if financing tightens. He concluded by outlining three critical checks for any AI holding: where revenue originates, if customers would remain without supplier funding, and how its edge survives a Chinese competitor delivering 80% performance at a fraction of the cost.
