I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public.
Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox.
The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.
> Hyperscalers are in big trouble if the build out suddenly stalls.
How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).
> * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings
That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there.
> * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize
> * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble
OK? It could also mean there is.
> I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.
The argument is, as I understand it:
* Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings
* Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize
* OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble
I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public.
Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox.
The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.
but google, meta, microsoft and amazon were making a ton of money even before the AI boom.
OpenAI and Anthropic's can go bust, but ads, windows and cloud hosting would still make a ton of money without them.
> Hyperscalers are in big trouble if the build out suddenly stalls.
How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).
> * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings
That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there.
> * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize
This does not reconcile with the large amount of empty datacenters and GPUs which have not been installed: https://www.wheresyoured.at/ais-economics-dont-make-sense-ad...
> * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble
OK? It could also mean there is.
> I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.
Oh yes, this time it will be different, of course. (Like the last time.)