AI bubble: investor concerns and strong AI bottleneck trades

What happened: Nvidia's CEO highlighted a new bottleneck in AI, the speed of data transfer, driving investments in companies like Coherent and Lumentum. Meanwhile, Bank of America flagged bubble risk in AI stocks, leading to a 7% drop in Intel, 5% in AMD, and 6% in Taiwan Semiconductor. Bitdeer Technologies, an AI infrastructure platform, was listed among the worst-performing AI stocks under $30. Apollo's chief economist criticized AI's impact on profit margins outside tech. Bullish articles pointed to AI's communication bottleneck and potential solutions in photonics and optical connectivity, with Astera Labs and Coherent seeing strong growth.

Market impact: The AI sector experienced mixed sentiment, with investors reassessing spending patterns and interest rate outlooks. AI-linked companies saw volatility, and tech stocks faced questions about valuation. Memory chipmaker Micron's strong earnings reinforced demand for computing resources but also raised concerns about AI buildout sustainability. Asian shares ended mixed, with investors cautious about high valuations in AI-related stocks.

What to watch next: Upcoming earnings from Nvidia (Aug 17) and AMD (Aug 29) will provide insights into AI demand and pricing power. The AI infrastructure buildout's sustainability will be tested by Micron's future earnings (Aug 30) and broader economic indicators like GDP growth and inflation data. Regulatory scrutiny on AI and tech stocks, hinted at in the 'Gemini 5' stress test, may also impact the narrative.