Bubble Controversy Fades... US AI Companies' Earnings Soar

Amid Recent Bubble Concerns Raised by Vanguard
AI-Related Stocks Report Strong Q3 Earnings

Amid ongoing debates about the artificial intelligence (AI) bubble, semiconductor design company Marvell Technology and customer relationship management (CRM) software company Salesforce, both actively riding the AI boom, have reported earnings that exceeded market expectations.

On the 3rd (local time), Marvell announced that its third-quarter revenue and earnings per share (EPS) reached $1.52 billion and 43 cents, respectively. These figures surpassed the average analyst estimates compiled by Bloomberg ($1.45 billion and 41 cents).

Marvell also issued a positive guidance for the upcoming fourth quarter. It forecasted revenue and EPS of $1.8 billion and 64 cents, respectively, exceeding market expectations of $1.64 billion and 52 cents.

Marvell is a company that produces data processing units (DPUs) which enhance data transfer efficiency between data centers in AI environments, and has been recognized early on as an AI-related stock. Matt Murphy, Marvell’s CEO, stated, “The increase in AI demand drove our third-quarter revenue and fourth-quarter guidance.”

Marvell’s stock, which closed slightly down on the New York Stock Exchange that day, surged more than 10% in after-hours trading following the strong earnings announcement.

Salesforce, which launched an AI platform called ‘Agentforce’ last October, also revealed earnings that validate the AI boom.

Salesforce’s third-quarter revenue was $9.44 billion, surpassing market expectations of $9.35 billion. Its operating margin, a measure of profitability, was 33.1%, exceeding the average estimate of 32.2%.

However, its third-quarter EPS was $2.41, slightly below the market estimate of $2.44. Salesforce explained this was due to losses in its investment segment.

Salesforce expects strong demand for Agentforce to positively impact its guidance. According to Bloomberg News, CEO Marc Benioff said last month, “Demand is so tremendous that Salesforce needs to hire 1,000 additional employees to sell Agentforce.”

Salesforce’s stock also closed slightly down on the New York Stock Exchange that day but jumped more than 9% in after-hours trading following the earnings release. Although Salesforce faced AI investment risk concerns after a first-quarter earnings shock, it has dispelled related worries by posting earnings surprises in both the second and current quarters.

The strong earnings of these two companies have drawn attention as they come amid renewed AI bubble concerns in Wall Street. Vanguard, one of the three largest asset management firms in the U.S., recently highlighted the AI bubble theory in a memo, stating, “Assuming AI technology has a similar effect on productivity and job innovation as computers did since the 1980s, there is a 60-65% probability that AI will have a greater impact than computers. However, today’s U.S. stock market is pricing in a 90% probability,” emphasizing the AI bubble concern.

As fierce debates continue among investors over whether companies riding the AI boom are overvalued, the strong earnings and positive guidance from AI-related companies are seen as factors that could help alleviate bubble concerns.