Barclays: Nvidia's turmoil and financing risks will not derail the long-term AI rally, investors should maintain exposure.

Julien Lafargue, chief market strategist at Barclays Private Bank, said that while the turmoil surrounding NVIDIA CEO Jensen Huang’s tenure, uncertainty over AI investment returns, and rising financing costs are testing market confidence, investors should still stay engaged in the AI rally. Lafargue argued that AI is not a bubble, but a technological revolution that will impact all industries, though its commercialization and infrastructure development cannot be achieved overnight. Lafargue noted that NVIDIA is dubbed the "central bank of AI trading," but even if the company changes its CEO, it does not mean all transactions in the broader AI ecosystem need to be re-evaluated or renegotiated. He compared the potential leadership transition at NVIDIA to past management handovers at Microsoft, Alphabet, and Amazon, noting that a successor taking over does not necessarily erode a company’s value. However, Barclays cited interest rates and financing conditions as key risks that could upend the market. As AI infrastructure investment scales up, the market’s focus has shifted from whether computing power demand is genuine to whether massive capital expenditures can generate sufficient returns. Data center construction also faces bottlenecks such as power access, equipment installation, and commercial operation cycles, while expectations of tighter Federal Reserve policy could raise corporate financing costs and depress long-term cash flow valuations. Lafargue emphasized that trillions of dollars in AI investment pledges cannot be quickly converted into actual computing power delivery, and returns on investment will vary significantly across companies. Tighter financing conditions may alter the industry’s investment pace and competitive landscape, but they do not mean the long-term demand for AI infrastructure will disappear. Barclays remains inclined to maintain exposure to AI investments until clear signs of a significant slowdown in industry growth emerge.