The Most Vulnerable AI Stock if the Bubble Pops

There are growing concerns about a potential bubble in the AI sector of the stock market. Several companies could fall victim to an AI bubble bursting, but few are as vulnerable as Nvidia (NASDAQ: NVDA) if AI spending were to cease.

This would be bad news for the stock market overall, as Nvidia is the largest company in the world by market cap. But is there really an AI bubble forming that investors need to be concerned about?

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Nvidia gets most of its business from AI

Nvidia makes graphics processing units (GPUs), which are accelerated computing units that excel in calculating arduous workloads. Originally, they were used for processing gaming graphics. Eventually, alternative use cases were found for them, such as engineering simulations, drug discovery, and mining cryptocurrency. Those are still legitimate use cases for GPUs, but the biggest demand by far is for AI.

Nvidia splits its business into five parts: data center, gaming, professional visualization, automotive and robotics, and OEM. In Q3 FY 2026 (ending October 2025), Nvidia generated $57 billion in revenue. Of that, $51.2 billion came from data centers. This means that 90% of Nvidia's revenue came from the sector that would be most heavily affected by an artificial intelligence bubble.

That's worrisome, but not all of that spending is AI-related. Data centers are being put up to power non-AI cloud workloads as well as other tasks like engineering simulation and drug discovery. While these use cases aren't as large as AI is, they're still relevant and would prevent Nvidia's data center division from going to $0. Still, the lion's share of data spending is going to AI-related activities. While this sounds like a disaster waiting to happen, I think investors need to seriously think about whether an AI bubble is truly forming.

Is there an AI bubble?

Two items come up concerning a potential AI bubble: A repeat of the 2000s dot-com crash and a lack of impact.

The first is the most concerning, as some tech stocks didn't recover for over a decade after crashing from a high set in the early 2000s. There are a lot of eerie similarities to the dot-com crash, such as deals being funded using circular financing. These deals are fueled by high business valuations, such as those with OpenAI. While that's a legitimate concern, OpenAI isn't the only name in town. There are other AI hyperscalers that have real cash flows to fund their AI infrastructure buildout plans, and those companies aren't at risk of collapsing.

Furthermore, Nvidia stated that it's currently "sold out" of cloud GPUs, indicating that these companies can't buy enough of them. It's also nearly impossible to get your hands on AI training capacity right now, so there is still plenty of demand to keep this segment going and growing.

The second item in the AI bubble discussion is far more concerning. With all of the billions of dollars being invested into AI, there needs to be a payoff sometime down the road. At the start of the AI arms race, many of these companies were upfront with investors, stating that the true impact of AI may not be known for a few years, and the risk of underbuilding AI capacity is far greater than overbuilding. This could limit the potential impact of AI if everyone overbuilds, but so far, the results haven't been great. Many companies offering AI services are struggling to convert free users to paid users, as the free options from many companies are quite powerful.

There have been relatively few developments that are must-haves that users must pay for, and this could be an issue when it comes to monetizing generative AI. Another measure of AI effectiveness (which has already shown some benefits) is measuring whether AI makes workers more efficient. This could be another way to defend the massive amounts of AI spending, but it also comes at the cost of cutting jobs.

AI still has a long way to go to prove its relevance, and Nvidia's stock price will be incredibly vulnerable if AI spending drops. However, I think that time is still a long way off, as evidenced by Nvidia's statements that it is sold out of GPUs. The biggest item investors need to keep their eye on is whether AI can be monetized, because if it can't, the AI spending train could slow down, which would harm Nvidia's business substantially.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.