It was a few weeks ago announced That OpenAi will invest up to $ 300 billion in Oracle’s Cloud Computing.
This week, Nvidia committed $ 100 billion in investments in OpenAI.
Oracle spend billions of dollars on the GPUs of Nvidia.
NVIDIA invests in OpenAI, who then invests in Oracle, who then invests in Nvidia and Finkle is Einhorn and Einhorn is Finkle.
We have reached the mutual insured destruction phase of the AI bubble where the technical giants have decided that they are all in this together. If someone is going to take the risk of massive capital expenditures, they will all take the risk.
And yes, I am ready to call this a bubble, purely based on the history of surplus investments in innovation.
During the DOT-Com bubble of the 1990s, the telecom companies recorded more than 80 million miles of fiber optical cables. Five years after the bubble, 85% of these fiber -optic cables were still unused.
The Nasdaq crashed more than 80%.
The railway bubble of the 1800s also comes to mind. Here are some facts and figures that I found during the investigation Don’t fall for it:
- There were 500 new railway companies by 1845
- In the same year, the Board of Trade alone considered about 8,000 miles of new lane in Great Britain, almost 20x the length of England.
- The costs of the Buildout were more than the national income of the entire country.
- There were 14 biweekly newsletters about the railway industry in Omloop.
- Charles Darwin became entangled in the bubble and lost 60% of his investment.
The good news is that both bubbles were great for innovation.
By 1855 there were more than 8,000 miles of railway track in use, giving Great Britain the highest density of railway tracks in the world, the length of France or Germany measures seven times. The Telecomm Bubble has helped YouTube, social media, streaming films, video calls and everything else that people had dreamed about in the 1990s and more.
There are some similarities with the current AI -Build -Out, but also many differences.
The DOT-Com bubble was fed by investor speculation at immature companies that did not yield a profit. Today’s technology companies print cash flow with incredibly high margins.
Almost all the money for the railways came from individuals. Retail investors fed the bubble.
The AI tree comes from the house. It is led by the technical CEOs that make these decisions about capitarian tastings.
In the 1990s, Bill Gates said:
Goudstoot encourages the tendency to encourage boisterous investments. A few will bear fruit, but when the frenzy is behind us, we will look back unbelieving at the wreck of failed companies and wonder: ‘Who has financed those companies? What was going on in their minds? Was that just a mania at work? ‘
Here is something Mark Zuckerberg said in an interview recently:
If we finally miss a few hundred billion dollars, I think that will clearly be very unfortunate. But what I would say is that I actually think the risk on the other side is higher. If you are too slow if you build too slowly and super intelligence is possible in three years, but you have built it up in five years, then you are just out of a position about what I think is the most important technology that makes the most new products and innovation and value creation and history possible.
In other words – we are not going to distinguish this. If it becomes a mania, it is so.
These technical leaders are not stupid. They know the history of investment. But they say that the risk is by not spending enough.
So Case closed? This is a bubble that will certainly pop?
If this is really a bubble of epic proportions, it is one of the weirdest we’ve ever seen.
According to The Wall Street JournalThere is now $ 7.7 trillion Are in money market funds:
It is a bull market in cash interests.
Gold is more than 40% higher this year alone and touches new highlights of all time on a healthy clip. Since Chatgpt was released in November 2022, Gold actually performs better than the Nasdaq 100:
How can a relic that has been used for thousands of years, better than the biggest, worst technology companies we have ever seen during an orgy from AI spending?
The other part that makes the current situation difficult to understand are the companies that lead the AI bubble the foundations to support it. JP Morgan’s Michael Cembalest Shared the following in a new investigation this week:
AI -related shares account for 75% of the S&P 500 return, 80% of profit growth and 90% of the growth of capital expenditure since Chatgpt was launched in November 2022.
These companies spend like drunk sailors, but they can all afford the drink!
I understand why many investors are worried about the prospects of a bubble. When they burst, it is usually painful. If you have invested in the market, you have a lot of exposure to the gigantic Tech stock:
Only because this feels as if some of the greatest bubbles in history don’t make it easier to handicap.
The thing that gives me the most now is that everyone who has ever studied market history now calls this a bubble. It seems so clear. Markets are rarely so easy.
So what if you are convinced that we are in a bubble? What actions do you have to take?
I will share some thoughts on this topic next week.
In the meantime, Michael and I dissolved the AI bubble from all corners and much more about this week’s animal spirits:
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Is this 1996 or 1999?
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