Activist investor Elliott Management reportedly claimed AI is overhyped and Nvidia’s high share price was in “bubble land”, as it cast doubt over the current and future potential of the technology.

In a letter sent to its clients seen by the Financial Times, Elliott told investors it is sceptical big technology companies will continue to buy Nvidia’s GPUs in such high volumes, as AI is ultimately overhyped and many touted applications are not ready for commercial use.

It further argued that many of the technology’s use cases are “never going to be cost-efficient, are never going to actually work right, will take up too much energy or will prove to be untrustworthy”, the letter apparently read.

The warning came shortly before a major slump in the stock market, with technology shares hit by broadly poor earnings.

Fellow chipmaker Intel also last week outlined plans to reduce its headcount by more than 15 per cent, as part of a multi-billion dollar cost saving plan.

At the time of writing, Nvidia shares declined to $107.27, from a high of $135.58 in June when it became the world’s most valuable company for a brief period. Its share price has also been hit by reports it is set to delay the launch of its next-generation AI chip, although the company has moved to deny the claim.

Elliott is renowned for being outspoken about the technology and telecoms sector, and has launched high-profile battles with companies it has invested in, such as AT&T, Telecom Italia, X and most recently tower company Crown Castle.

The company added it has avoided investing in bubble stocks. Filings show it held a small stake of a holding worth $4.5 million in Nvidia in March.