We remember the internet bubble. This mania looks and feels the same
a day ago
- #Investment Risks
- #AI Bubble
- #Technology Boom
- The AI revolution is only three years old but has already sparked debates about whether it's a bubble or a boom, reminiscent of the internet bubble in 1999.
- AI spending is skyrocketing, with global AI capital expenditures and venture capital investments exceeding $600 billion in 2025, potentially reaching $1.5 trillion by 2025.
- Major tech companies like Microsoft, Alphabet, Meta, and Amazon are spending heavily on AI, but their stock prices have declined recently, raising concerns about overspending.
- The AI bubble is inflating faster than the internet bubble, with spending projected to hit $750 billion annually by 2027, but the long-term profitability of AI remains uncertain.
- OpenAI is a prime example of the spending frenzy, with $55 billion raised and a $500 billion valuation, despite not being profitable or cash flow positive.
- Vendor financing and leverage are increasing in the AI ecosystem, with companies like NVIDIA and OpenAI acting like banks, creating complex and risky financial arrangements.
- Crazy deals and valuations are emerging, such as Thinking Machines raising $2 billion in its first round and Anthropic reaching a $170 billion valuation.
- Competition with China is fueling the AI bubble, with concerns about losing the AI race and the potential for Chinese dominance in AI technology and infrastructure.
- The US economic and political instability, along with the national security implications of AI, adds to the risks and uncertainties of the AI bubble.
- Experts like Sam Altman, Jeff Bezos, and Jamie Dimon acknowledge signs of business excess in AI, comparing it to the internet bubble's irrational exuberance.