NVIDIA’s better-than-expected results announced Wednesday have served to assuage market concerns over an artificial intelligence (AI) bubble. This is illogical. If NVIDIA continues to receive strong orders for its chips, it only shows that people continue to put up data centres, not that these data centres and the AI they deliver will find revenue-generating applications that would collectively justify the gargantuan investments going into the sector, or the gravity-defying valuations being given to AI firms. That remains to be seen.

Concluding that NVIDIA’s bumper results rule out an AI bubble is like concluding, during the dotcom bubble at the turn of the century, that AOL’s acquisition of Time-Warner for a fancy sum of $165 billion ‘proved’ that there was no bubble, and that all internet company valuations were perfectly justified.

Bubbles have spherical boundaries that distort the vision of anyone trying to assess what the world looks like from within the bubble.

However, the NVIDIA results announcement did serve a useful purpose. The company’s boss, Jensen Huang, said that rumours of the death of software companies at the hands of AI firms that churn out ever-cleverer agents are highly exaggerated. Software companies will continue to perform useful functions, he said.

This column had said much the same in its edition on February 6, while commenting on the sudden plunge in software company prices following Anthropic’s announcement of clever tools that many feared would make software companies redundant.

The Great Asset Bet

The government has announced a second instalment of the asset monetisation programme that targeted Rs 6 trillion and realised 90% of the target, according to an official release. The National Asset Monetisation Pipeline 2 (NMP2) has a bigger ambition.

According to the Press Information Bureau release on the launch of the programme, NMP2 is to materialise a whopping Rs 16.72 trillion over the next five years. However, according to the Niti Aayog report, on which the monetisation scheme is based, the target for the next five years is a little over Rs 10 trillion, and the rest would be realised over several years beyond 2030.

The term asset monetisation would suggest that state-owned assets would be leased or sold to private companies to generate liquidity that would be used to create fresh assets. The full amount of Rs 16.72 trillion is not expected to come from such use of state assets: Rs 5.8 trillion is estimated to come from private investment associated with the sale or lease of state assets.

If a state-owned asset is functioning well and generating revenues, what is to be gained from handing it over to the private sector, on a permanent or a temporary basis? There are multiple gains.

One is in terms of efficiency, operational as well as pricing — the public resents state-entities raising user charges, but expects that to be the normal behaviour for private entities. Another is liquidity for the government, without having to borrow, which would enable building fresh assets, for the creation of which the private sector might not have sufficient appetite or capacity. Given India’s political economy, certain early-stage risks of a project are mitigated by state-ownership, so that a state-initiated project has lower financing costs, as compared to a similar project in the private sector.

However, the success of any asset monetisation project depends on how transparently the selection of private entities, who would take charge of the assets being monetised, is being conducted. Further, there has to be efficient regulation of the activity of the privatised assets, especially of those that constitute local monopolies — airports or multimodal logistical hubs.

If these concerns are sufficiently addressed, NEP 2 could be a useful tool for augmenting investment in the Indian economy.

America’s Growth Despite Tariffs

A significant insight from American president Donald Trump’s long peroration at his State of the Union address to Congress is that even in the world’s oldest democracy, institutions barely hold up to keep autocracy at bay.

The Supreme Court’s invalidation of Trump’s so-called reciprocal tariffs showed that the judiciary had the capacity to stand up against an overreaching executive, that the checks and balances that were supposed to keep all branches of the state alive and kicking, without any one branch domineering the others, were functional. However, the legislature totally failed to play its institutional role and, far from reining in a rogue president, endorsed and celebrated his subversion of democratic norms.

The entire world was keen to find out what Trump would tell the American people about his plans for Iran. Would he drag his country into yet another prolonged war in the Middle East, or would he be content to extract a replacement for the nuclear deal he had scrapped in his first term? Trump kept his Iran cards close to his chest.

“We are in negotiations with them; they want to make a deal but we haven’t heard those secret words: 'We will never have a nuclear weapon’,” said Trump. In this, he was being disingenuous. It is Iran’s stated policy that they do not intend to make the bomb, that its nuclear programme is for peaceful purposes.

Trump was economical with the truth on other matters as well. He has tamed inflation, accelerated growth and made trade partners pay the import duties that have poured into the American exchequer. He has brought illegal immigration to a halt, made the US armed forces so mighty that other nations are struck dumb by awe or fear, stopped eight wars, including a would-be nuclear exchange between India and Pakistan that threatened to kill 35 million people, strengthened NATO, lowered healthcare costs, and induced investment flows into the US worth $18 trillion. Every single one of these claims has been fact-checked by American media and found wanting.

Manufacturing accounts for 13% of US GDP, while services account for more than 80%, and agriculture-based activities account for about 6%. All of Trump’s tariffs directly harm or help the manufacturing or the farm sector. The AI boom and associated demand for data centre construction and addition to power generation capacity sustain investment, as does housing.

The US economy continues to show robust growth despite, and not because of, Trump’s tariffs, thanks to the dominance of services, including tech.