As the price of almost everything has increased, and American workers’ wages have all but stalled, politicians like President Donald Trump have tried to ease our minds by telling us that the economy is “doing great” and that the stock market is booming. “Record high, record high, record high,” Trump said at an event earlier this month in Florida.

Still, despite what has been a good year for the stock market, it’s hard to find a day in which a podcaster, influencer, or economist isn’t warning that the AI boom that’s powering the economy could be a bubble — one that is about to burst.

The company that’s driving Wall Street’s positive movement is Nvidia, the most valuable company on the planet. And that’s because the recent rash of data centers popping up across the country are filled with Nvidia’s graphic processing units, or chips.

So why did the health of this single company become an outsized force in the economy? And why does its health scare so many people? Today, Explained co-host Noel King asked economic commentator, educator, and author of In This Economy? Kyla Scanlon.

Below is an excerpt of their conversation, edited for length and clarity. There’s much more in the full podcast, so listen to Today, Explained wherever you get podcasts, including Apple Podcasts, Pandora, and Spotify.

Recently, the markets have been a rollercoaster. And when you ask why, the answer broadly is because of Nvidia. Why is the world holding its breath for Nvidia? What’s the worry here?

Well, Nvidia is kind of emblematic of the entire AI buildout. So every single tech firm from Microsoft to Meta to Amazon have based all of their future plans around Nvidia. (If you hear anything about “circular financing,” that’s what that means.)

Nvidia is just so wrapped into the broader market — is such a big part of AI — that if they sneeze, everybody else catches a cold. And so markets are a little bit nervous, because the entire AI story, [and] therefore the entire stock market, [and] therefore the entire economy depends on Nvidia maintaining pretty impossible growth metrics.

It really feels like this shouldn’t happen — that there shouldn’t be one company that’s big enough, important enough to make world markets like quiver.

What exactly happened here?

Nvidia just became so big so quickly, and the US economy decided to design itself around AI. You know, 40% of GDP growth is coming from AI buildout. And so Nvidia, because of that concentration, because of the bet that the US economy is making on AI — they have become somewhat of a macro variable.

You can kind of think of their earnings reports like you would a jobs report that we get from the BLS or an inflation report that we get. Earnings day for Nvidia is a test of the AI narrative, and is therefore a test of the US economy. And that just is because we’ve spent so much money on data centers [capital expenditure] — so much money on these chips and these companies just building out continuously. So that’s what happened.

Are there any other companies that hold this sort of sway? Does Walmart or Chevron have that kind of power?

No. Nvidia is such a big part of the S&P 500; it’s almost 8% of the entire index. It’s contributed, I think, a fifth of the index’s total gain this year.

Walmart is not that big of a percentage of the S&P 500, and it has not driven that much growth, that much earnings power, that much investment. Nvidia is really special in that way. …

The S&P 500 has always been pretty top heavy. There’s always been companies that are more important than other companies. But without Nvidia, the story of 2024, 2025, would look like economic stagnation.

You know the old saying, right: The stock market is not the economy. Is Nvidia just playing this enormous role in the markets, or does it represent an outsized portion of other parts of the economy? If Nvidia stumbles, do a million Americans lose their jobs?

I don’t think it would be something that extreme. The stock market is definitely not the economy, but they are increasingly intertwined because the AI narrative is so important. If Nvidia implodes, it wouldn’t be that, like, people who are doctors and bus drivers and construction workers would suddenly be without work.
It would just be that the stock market would collapse, and the economic growth narrative would collapse. And you could see secondary effects. Like maybe the construction firm decides to start laying off people because Nvidia leads to some sort of recession if they do end up imploding. But it would not be a direct correlation, no.

Everybody’s been asking, “Are we in an AI bubble?” And lately I’ve seen people suggesting that Nvidia will be one of the big signs telling us if it’s going to pop.

What do we know about the threat of an AI bubble and where Nvidia plays in?

If I had a nickel for every time somebody talked about the AI bubble, you know, I’d be able to invest in Nvidia. But I think that the way that you can think about it is: Nvidia is the entire AI thesis.

If all of a sudden, Nvidia stumbles — and there’s increasing worries that they’re going to, because their growth path is pretty impressive, and pretty unsustainable because it is so impressive — companies might pull back on spending tens of billions of dollars on data centers. Cloud providers would delay expansion, and startups built around “AI is the future” would face funding problems. The stock market would lose double-digit percentages. The regional construction booms tied to data centers would slow. Places like in Iowa where they’ve helped to revive local economies to a certain extent — everything from steel plants to electrical workers, to construction workers, land developers — would feel the shock.

And then of course if the stock market goes down, ultimately the broad economy does suffer, because then the Federal Reserve would have to come in with some sort of emergency funding plan. President Trump might have to come up with a fiscal policy plan to prevent the bottom from going out and having a massive blow-up.

The worry is if Nvidia does go [down], the entire AI supply chain becomes wobbly. And because the economy and stock market are so tied up into that, it could really lead to some other repercussions.

I wonder, at the end of the day, what you think a company like Nvidia means for the American economy. It is a beast. It takes up a huge share of the market.

What kind of position are we in here that we have a company that is this influential?

Well, Greg Ip from the Wall Street Journal wrote a great piece calling Nvidia the joyless tech revolution. And I think that is a really good way to think about it. The AI trade, if it works, [then] the benefits are going to be accrued to a select few people, right? So companies like Nvidia — people will invest in Nvidia a little bit. Companies like Open AI, companies like Anthropic — they’re going to really benefit if all of this ends up working out.

But the losses from AI are socialized. So if all of a sudden the data centers don’t work, if the AI trade totally blows up, you’re gonna have people’s retirement accounts really suffer, because the S&P 500 is what most people invest in for their retirement account, and Nvidia is a lot of the S&P 500 as we discussed. And then if the data centers don’t work out, you’re going to have a lot of local communities that have pinned hope on these things and have dreamed that they’ll work and add jobs. And so that’s kind of the issue with AI and Nvidia taking up such a big part of the economy.

That’s why Greg is calling it the joyless tech revolution — because a lot of people don’t like this. I think that’s a really important thing to consider. I believe the statistic was 6 out of 10 Americans, essentially, don’t want all of this. They don’t like what the AI companies are promising, especially when the CEOs come on and say that they’re going to take people’s jobs.

Then there’s also a chart from the [Financial Times] that I think encapsulates this broad conversation that we keep having really well, too, where it’s like: AI could either be the end of scarcity, meaning it solves everything; the end of humanity, meaning it kills everybody; or it could add 0.2 percentage points to GDP. And it’s just like how the internet was to a certain extent.

It seems like there’s the potential here that this problem of inequality that we’ve been dealing with now for about a generation could really be exacerbated.

The frustrating thing about the AI conversation is that everybody’s talking about it, but there’s no policy solution yet. We don’t have any idea of how we’re going to re-skill people. We don’t know if we need some form of UBI, universal basic income, to help people out during a time of transition.

We have so many lessons that we could learn from things like what happened to the Rust Belt, when manufacturing went overseas, and how that devastated local communities. We could see something like that happening with AI over time.