Advocating that the state should own and control major industries. Isn’t there a word for that? The Republicans used to warn of it all the time, I’m sure they did. What was it? Sociable? Sociability? Ah, I’m sure they’ll remember it soon enough - and just how much it used to frighten them.
Michael, they know it already, they’re just ignoring it for expediency’s sake. This is the age of situational ethics. If hypocrisy were electricity, the Federal government would generate enough power to pay off the national debt.
Again an excellent piece, Ed. It surprises me it is taking this long. But logic dictates things will blow up (or deflate) at some point.
You're asking if this is the America you live in (and, mind you, it impacts the rest of the world as well). And the answer is yes, absolutely. The banking disaster of 2008 might have called for a bailout as we could not do without the banking system. But the deeper dynamics were as they have always been, and are now: unfettered greed and a total disregard by the filthy rich for the rest of us.
Very little has been done to address that drive or reign in the excesses as a result. As long as unimaginable wealth remains the mother/father of all ambitions, AND is combined with a near total lack of any moral, social, financial and legal accountability (as was the case in the banking crisis, where only one middle manager was arrested, if I remember correctly), this will keep happening over and over, and on an ever larger scale. In the end, it does not matter if the government takes an ownership cut or not: The taxpayer will always be the one to pick up the tabs.
Indeed capitalism going up and socialism going down.
Larry Fink of Blackrock is talking the talk about the wealth divide and AI. But. He was just interviewed by Fareed Zakaria on GPS. At the very end of their talk Zakaria mentioned Trump ‘taking’ 10% of Intel.. Fink laughs saying.. and their stock took off. I thought it said a lot about those like Fink operating at the top of the market on trumps government intervention (aka the Socialism openly hidden in Conservatism)
My question is it too big to fail? Once you get hooked by the speed of AI “answers” what happens when you don’t have that access anymore? I know so many average joes using AI in their daily lives, me included and losing that access is hard to adjust to. I’ve been a small business owner for 20 years and nearing retirement after a 45 year career. If I could have harnessed AI in those 20 years rather than the last 2 I’m not sure how much more I could have accomplished but it sure would have been easier.
I’m no expert but I have a suspicion that at present AI is like using a 747 to get some milk from the corner store. There are likely very much more economical ways of providing answers to most questions (prompts) presently put to ChatGPT etc. These will come in due course if I’m right.
You are understating the earnings risk in the next stage downstream of the picks and shovel manufacturers, lets call them the handle, adze and blade manufacturers (to stretch the analogy...)
If OpenAI runs out of cash and the Hyperscalers have to retreat on their capex spend there is far too much profit and market cap now dependent on the semiconductor, data centre supply chain, electricity generator stocks, etc for this not to reverberate far and wide and cause severe problems for the equity market
The thing that is staggering to me is that the sheer improbability of this all working out is straightforward. The math doesn’t math. Under effectively no scenario does this work out well: either AI does what we’re told by Sauron and his acolytes it will do—usurp the entire human labor market—or the thing will collapse under its own weight and the economy goes *poof*
When I wrote this out a few months ago, the number of delusional cultists building this stuff who reached out (one my physical mail: subtle) to call me an idiot was eye opening. I hope more listen to you 🤣
The "irrational customer" framing is correct and it has a pattern that's worth following to its conclusion. Every major infrastructure buildout was funded by companies that went bankrupt building it.
The 1840s railroad boom overbuilt American rail capacity by 3x. Most of the companies that laid the track went under. The track survived and enabled the industrial economy. The 1990s telecom boom laid fiber that sat dark for a decade. The companies that paid for it collapsed. The fiber enabled the internet. In both cases the infrastructure outlasted the irrational customers who funded it, and the next generation of companies built on top of sunk-cost capacity they never had to pay for.
So the question isn't whether the AI trade is a bubble. It probably is. The question is what happens to $316B of installed compute after the companies that funded it restructure. If the GPUs survive the financial collapse of the business models that bought them, the next wave builds on top of infrastructure that's already paid for. That's not a consolation for the current investors. It's a prediction about who actually wins.
It seems to me that the AI bubble might burst around the midterms, don't you think? As Trump loses political leverage, his pro-AI policies are facing increased scrutiny from markets and investors. I expect both AI acceptance and Trump's political standing to face a similar downturn after November.
If rich smart guys like you are losing hope we know where this ends. Hungry masses won't sit idly by. Eventually all this uniparty government rot will come undone.
Great piece. A hot fudge sundae of both Informative and Scary- all at once. Several of my peers feel this may become the dot-com bubble bust of our time. The numbers just don't jive...Unless it only results in 1-2 players loosing their shirt, with the few best-in-class, remaining. Keep up the great insights.
Excellent . So much is it a bubble yes no yes no yes no. Well there it is, beyond a bubble bad. Great straight forward explanation - I have come to count on you for this. Thanks.
Advocating that the state should own and control major industries. Isn’t there a word for that? The Republicans used to warn of it all the time, I’m sure they did. What was it? Sociable? Sociability? Ah, I’m sure they’ll remember it soon enough - and just how much it used to frighten them.
Michael, they know it already, they’re just ignoring it for expediency’s sake. This is the age of situational ethics. If hypocrisy were electricity, the Federal government would generate enough power to pay off the national debt.
Again an excellent piece, Ed. It surprises me it is taking this long. But logic dictates things will blow up (or deflate) at some point.
You're asking if this is the America you live in (and, mind you, it impacts the rest of the world as well). And the answer is yes, absolutely. The banking disaster of 2008 might have called for a bailout as we could not do without the banking system. But the deeper dynamics were as they have always been, and are now: unfettered greed and a total disregard by the filthy rich for the rest of us.
Very little has been done to address that drive or reign in the excesses as a result. As long as unimaginable wealth remains the mother/father of all ambitions, AND is combined with a near total lack of any moral, social, financial and legal accountability (as was the case in the banking crisis, where only one middle manager was arrested, if I remember correctly), this will keep happening over and over, and on an ever larger scale. In the end, it does not matter if the government takes an ownership cut or not: The taxpayer will always be the one to pick up the tabs.
Indeed capitalism going up and socialism going down.
I’m just waiting for the shoe to drop already
Larry Fink of Blackrock is talking the talk about the wealth divide and AI. But. He was just interviewed by Fareed Zakaria on GPS. At the very end of their talk Zakaria mentioned Trump ‘taking’ 10% of Intel.. Fink laughs saying.. and their stock took off. I thought it said a lot about those like Fink operating at the top of the market on trumps government intervention (aka the Socialism openly hidden in Conservatism)
My question is it too big to fail? Once you get hooked by the speed of AI “answers” what happens when you don’t have that access anymore? I know so many average joes using AI in their daily lives, me included and losing that access is hard to adjust to. I’ve been a small business owner for 20 years and nearing retirement after a 45 year career. If I could have harnessed AI in those 20 years rather than the last 2 I’m not sure how much more I could have accomplished but it sure would have been easier.
I’m no expert but I have a suspicion that at present AI is like using a 747 to get some milk from the corner store. There are likely very much more economical ways of providing answers to most questions (prompts) presently put to ChatGPT etc. These will come in due course if I’m right.
You are understating the earnings risk in the next stage downstream of the picks and shovel manufacturers, lets call them the handle, adze and blade manufacturers (to stretch the analogy...)
If OpenAI runs out of cash and the Hyperscalers have to retreat on their capex spend there is far too much profit and market cap now dependent on the semiconductor, data centre supply chain, electricity generator stocks, etc for this not to reverberate far and wide and cause severe problems for the equity market
The thing that is staggering to me is that the sheer improbability of this all working out is straightforward. The math doesn’t math. Under effectively no scenario does this work out well: either AI does what we’re told by Sauron and his acolytes it will do—usurp the entire human labor market—or the thing will collapse under its own weight and the economy goes *poof*
When I wrote this out a few months ago, the number of delusional cultists building this stuff who reached out (one my physical mail: subtle) to call me an idiot was eye opening. I hope more listen to you 🤣
Big tech “free marketers” were screaming for government bailouts of Silicon Valley Bank and they’ll do the same with AI.
The "irrational customer" framing is correct and it has a pattern that's worth following to its conclusion. Every major infrastructure buildout was funded by companies that went bankrupt building it.
The 1840s railroad boom overbuilt American rail capacity by 3x. Most of the companies that laid the track went under. The track survived and enabled the industrial economy. The 1990s telecom boom laid fiber that sat dark for a decade. The companies that paid for it collapsed. The fiber enabled the internet. In both cases the infrastructure outlasted the irrational customers who funded it, and the next generation of companies built on top of sunk-cost capacity they never had to pay for.
So the question isn't whether the AI trade is a bubble. It probably is. The question is what happens to $316B of installed compute after the companies that funded it restructure. If the GPUs survive the financial collapse of the business models that bought them, the next wave builds on top of infrastructure that's already paid for. That's not a consolation for the current investors. It's a prediction about who actually wins.
It seems to me that the AI bubble might burst around the midterms, don't you think? As Trump loses political leverage, his pro-AI policies are facing increased scrutiny from markets and investors. I expect both AI acceptance and Trump's political standing to face a similar downturn after November.
The bailout will happen . Expect a "China" wins AI paronia peaking just before that
If rich smart guys like you are losing hope we know where this ends. Hungry masses won't sit idly by. Eventually all this uniparty government rot will come undone.
I'm hopeful for a peaceful revolution.
Well said, Ed, from start to finish.
Great piece. A hot fudge sundae of both Informative and Scary- all at once. Several of my peers feel this may become the dot-com bubble bust of our time. The numbers just don't jive...Unless it only results in 1-2 players loosing their shirt, with the few best-in-class, remaining. Keep up the great insights.
Excellent . So much is it a bubble yes no yes no yes no. Well there it is, beyond a bubble bad. Great straight forward explanation - I have come to count on you for this. Thanks.