Nvidia (NASDAQ: NVDA) stock will likely swing wildly one way or the other when the artificial intelligence (AI) chipmaker reports its second-quarter (Q2) results on 28 August. I doubt the response will be muted.

While the share price has fallen more than 20% in less than a month, all signs point towards another great quarter. Every time the firm’s reported one of these, the stock’s surged to a fresh record high.

However, there’s currently a tech stock sell-off gathering pace. So should I invest now or not?

Continued spending

Encouragingly for Nvidia, there doesn’t appear to be any slowdown in AI spending, at least according to recent earnings from the tech giants snapping up its chips by the boatload.

• Meta Platforms plans to spend about $38.5bn in 2024 on AI infrastructure.
• Alphabet expects to splash out another $12bn or so in the next two quarters, which will be “predominantly driven” by AI investments.
• Amazon CEO Andy Jassy said: “We are investing a lot across the board in AI and we’ll keep doing so as we like what we’re seeing”.
• Tesla CEO Elon Musk recently lamented that “demand for Nvidia hardware is so high that it’s often difficult to get the GPUs”.
• Microsoft just reported $19bn in capital expenditures in the last quarter.

Needless to say, all this spending bodes well for Nvidia’s Q2 numbers on 28 August and probably Q3 too. Therefore, it wouldn’t surprise me to see the stock bounce back strongly once markets stabilise.

Amara’s Law

However, I’m a long-term investor who buys stocks with a minimum holding period of five years in mind. And right now, I have absolutely no idea what AI spending will look like in 2029.

If it’s far less than today, then I expect Nvidia’s market-cap and share price will reflect that. On the other hand, spending could head higher but Nvidia sells less chips due to more competition.

All this brings to mind ‘Amara’s Law’, which came from Roy Amara, the Stanford computer scientist. He said: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”

Like the internet, AI will almost certainly transform the world in the long run. But we may be overestimating the technology’s impact right now. An AI bubble might be popping. This is the worry I have.

The trough of disillusionment

According to the Gartner Hype Cycle, the adoption of new technologies (like AI) follows five phases:

• Innovation Trigger
• Peak of Inflated Expectations
• Trough of Disillusionment
• Slope of Enlightenment
• Plateau of Productivity

The innovation trigger was the release of ChatGPT in late 2022. We may already have hit the peak of inflated expectations. One fund manager, for example, recently said that Nvidia could reach a $50trn market-cap!

Nobody knows when the so-called trough of disillusionment will come. But more analysts are questioning the return on investment in the AI space, so I reckon it’s in the post.

If Nvidia’s value keeps falling because investors become disillusioned with AI, then I’d consider investing due to the firm’s incredible innovation and world-class management team. But I don’t think we’re in the trough yet.

So in the meantime, I’ll buy other stocks while watching from the sidelines.