South Africa’s central bank governor, Lesetja Kganyago, warned on Thursday that the recent surge in artificial intelligence stocks could be inflating a bubble, with potential spillover effects for emerging markets. The comments came shortly after Nvidia Corp. issued a stronger-than-expected revenue forecast, dismissing concerns of a bubble, while Wall Street executives—including JPMorgan Chase & Co. Vice Chairman Daniel Pinto—have also voiced growing apprehension about AI valuations.
“Despite the promise of AI, there are signs of a bubble inflating,” Kganyago said following the central bank’s decision to cut its policy rate by 25 basis points. He noted that low interest rates and cheap credit, even for riskier borrowers, leave financial markets exposed to potential corrections, which could disproportionately affect emerging economies. In South Africa, the biggest risk is to the rand, one of the most liquid emerging market currencies, which has historically experienced sharp declines during market shocks, including the dotcom bust, according to Deputy Finance Minister Ashor Sarupen.
Nvidia, the world’s most valuable company, anticipates roughly $65 billion in revenue for the January quarter, about $3 billion above analysts’ predictions, and suggested that the half-trillion-dollar revenue bonanza expected in coming quarters may exceed expectations. Meanwhile, the five largest tech companies are projected to invest approximately $371 billion this year in data centers to train and run complex AI models. McKinsey & Co. estimates that this infrastructure could require $5.2 trillion by the end of the decade to meet demand.
Kganyago used a vivid metaphor to describe the difficulty of predicting bubbles: “There was a governor who visited South Africa, and he wanted to go to the game reserve, and he said, ‘can you please describe an elephant to me?’ And we told him, ‘when an elephant approaches, you will know it is an elephant.’ And a bubble is almost like that.” His remarks, reported by Bloomberg, underscore growing concern that AI-driven market exuberance could trigger turbulence in emerging economies if valuations correct sharply.
