Chipmaker Nvidia’s earnings aren’t normally the biggest story in fashion. But this week, concerns about an AI bubble reached a boiling point — with big implications for the key US market, where holiday sales are forecast to top $1 trillion for the first time this year, according to the National Retail Federation.

For European luxury firms, the resilience of the US consumer has been propping up companies like LVMH throughout the current down-cycle and fuelling growth for outliers like Hermès and Richemont.

What’s happening with AI and the US economy? Investor euphoria about the transformative potential of this technology is translating into a) a highly concentrated pile-in to the biggest tech stocks exposed to AI, and b) a massive infrastructure build-out to meet needs for hardware, data centres and energy.

AI-adjacent tech giants now account for one-third of the S&P 500’s valuation and a majority of the Nasdaq: pretty much anyone with a stock portfolio is exposed.

While AI investment via public markets is concentrated among just a few big tech companies, some economists see the sector’s growth as almost singularly responsible for any pockets of wealth-driven “feel good” factor fuelling demand in the US: 75 percent of the S&P 500’s growth can be attributed to AI-linked stocks since the launch of ChatGPT in November 2022, JP Morgan analyst Michael Cembalest wrote in a recent note.

AI investment accounted for 92 percent of GDP growth in the first half of this year, Harvard economist Jason Furman said. That is to say, without AI the US economy would be more or less flat.

Just because it’s big doesn’t mean it’s a bubble. The publicly-traded tech stocks benefitting from this year’s rally are mostly highly profitable companies in a way early “dot-com” stocks never were. But there are concerns about timing: in order to justify valuations, AI adoption will need to keep growing exponentially, with companies rolling out the technology throughout their organisations. End users will need to start paying handsomely for the technology — and fast enough for debt-funded bets on chips, data centres and power plants to meet their obligations to lenders before their hardware becomes obsolete.

This week, tech bulls had hoped Nvidia’s earnings would dispel concerns of a market bubble that had prompted the S&P 500 to slip in the days leading up to the chip-maker’s quarterly release.

Wednesday night, the world’s first $5 trillion dollar company reported revenues that trounced expectations and raised its guidance for the quarter underway. Markets appeared convinced, with the Nasdaq opening up 2 percent, but quickly reversed course as investors sold off tech stocks. The tech-heavy US index has lost 12 percent since peaking earlier this month.

AI scepticism spread to Asian markets Friday morning, with tech giant SoftBank’s shares tumbling 10 percent.

It’s unclear whether investors are taking profit after a bang-up year for tech stocks, or if sentiment is cooling off on AI more durably.

The latter would have significant read-across for luxury: well-off US customers — the industry’s most resilient client base in recent years — are particularly sensitive to what’s going on in the stock market. (In China, by contrast, the prevailing wisdom has it that wealthy customers are more sensitive to property values).

US customers made up 24 percent of luxury goods sales in 2024, according to UBS. Sales to US buyers are expected to rise 2 percent this year, compared to a 6 percent drop for Chinese customers.

In the broader retail landscape, less wealthy Americans (and, by extension, less expensive brands) aren’t as likely to be influenced by swings in the stock market. But a sell-off could pile onto pre-existing economic malaise following a lengthy government shutdown (which suspended many public salaries for weeks) and uncertainty over the impact of tariffs.

According to The Economist and YouGov’s November 17 poll, 56 percent of US adult citizens say the economy is getting worse, compared to 37 percent who said so at the start of the year. Perception is largely split along partisan lines: 85 percent of Democrats see the US economy getting worse under Donald Trump, compared to 19 percent of Republicans.