Web Summit in Lisbon: Nvidia CEO Resignation, Concerns Over US Debt Crisis and AI Bubble

The sudden resignation of Jensen Huang from his role as CEO of semiconductor giant Nvidia, the risks of the AI bubble bursting, and the escalating US national debt dominated the discussions on the final day of the Web Summit in the Portuguese capital, Lisbon, one of Europe's premier technology events.

These sessions were held as part of an intensive schedule on Thursday following the cancellation of Wednesday's events, which occurred after the Portuguese government declared a state of emergency ahead of Storm Charles. The storm's impact was ultimately confined to heavy rainfall and minor localized flooding in Lisbon without making a direct hit on the city.

Huang's Resignation and Pressure on Nvidia Shares

Jensen Huang announced his resignation on Thursday following disclosures of extramarital relationships, coupled with suspicions and investigations by US intelligence agencies alleging that one of the women involved had ties to espionage activities on behalf of China—allegations that Beijing has denied. Chief Financial Officer Colette Kress has stepped in as interim CEO while the board of directors seeks a permanent replacement.

Nvidia's stock plunged by roughly 15% at market open before trimming losses to settle down by around 5%, trading near $164 per share. With this decline, the stock has shed more than 30% of its value compared to its all-time high of $243 reached on October 5.

In a panel discussion organized by Euronews, Adam Kobeissi, founder and editor-in-chief of The Kobeissi Letter, noted that Huang's departure represents a clear setback for medium-term investors, although he remains optimistic regarding the company's future performance. Kobeissi downplayed expectations that these developments would derail the anticipated initial public offering (IPO) of Anthropic, the AI company behind the Claude models, which is seeking a valuation of up to $1.4 trillion (€1.25 trillion) with backing from seven major tech firms, including Nvidia.

US-China AI Rivalry

For his part, economist James Galbraith, a professor at the University of Texas at Austin, questioned the hundreds of billions being poured by major corporations such as Microsoft, Alphabet, Amazon, and Meta into AI infrastructure, pointing out the possibility that Chinese technology could deliver more cost-effective solutions than those provided by American firms.

Galbraith characterized the international landscape as a confrontation between two economic models: the US market excels in the ease of raising private capital but is hampered by slow policy- and decision-making, whereas Chinese centralization enables direct intervention and rapid coordination of technological research and development. Accordingly, the expert cautiously suggested that Beijing might be better positioned to lead the sector and potentially emerge as the world's largest economy in the coming decades.

US Debt Crisis: The Specter of Insolvency and Elevated Interest Rates

The panel's warnings shifted toward the vulnerabilities of public debt markets. Kobeissi emphasized that one-fifth of US federal spending ($1 out of every $5) is directed solely toward paying interest on the debt rather than reducing the principal. He supported this with Treasury Department data showing $1.1 trillion (€988 billion) spent on net interest during the fiscal year ending in September, accounting for 19% of total government revenues.

Kobeissi noted that the debt-to-GDP ratio has reached levels comparable to the World War II era, even without a technical recession occurring since the COVID-19 pandemic. He indicated that bond markets are positioned to stay in a higher-for-longer interest rate environment, with central banks unable to cut rates under present conditions. He cautioned that the current trajectory threatens potential insolvency over the next 10 to 20 years, though he ruled out an immediate systemic crisis akin to that of 2008.

Professor Galbraith also underscored that the policy compromises achieved during the COVID-19 crisis between President Donald Trump and Congress may prove difficult to replicate today, given political polarization and the recent midterm election results in which Democrats secured 255 seats in the House of Representatives compared to 169 for Republicans. He stressed that financial crises are consistently difficult to time, despite the unmistakable presence of alarming warning signs.