It is widely accepted that there is an AI bubble in the financial markets at the moment
No its not. No one serious truly believes
1. AI is going away
2. its obvious that the total market cap of AI related stocks will go down more than 60-70%
Its obviously true that there are some related AI companies that will go bust as with any new technology. And its also true that the rise won't be monotonic.
What we instead get is perpetually pushed timelines for the bubbles and a religious belief that the end will come and people would pay for it.
To drive my point further, I ask for a single metric you would like to see that should be a certain way for you to believe it is not a bubble. Should the revenues have been 2x higher? Should the costs be 3x lower? Anything?
For me to believe this is not a bubble, I'd want to see that revenues exceed expenses by a large enough factor to sustain the business (often a 10% or greater profit margin). Right now, every one of these companies is following the Uber business model: give the product away at below market prices to hopefully capture the market and force their competitors to go bankrupt first. They're also speed running the bubble with massive data center builds that will increase their debt and future interest payments on that debt.
The question for me isn't "is this a bubble", it's "how many of these companies will be left after it pops". The few companies that remain are likely worth their current inflated value. But I'd want to see the back of the envelope math showing that all of the companies together will be able to earn the necessary profit to justify their valuations, how much revenue would that require, and how does that compare to the current tech purchasing today.
Comments
No its not. No one serious truly believes
1. AI is going away
2. its obvious that the total market cap of AI related stocks will go down more than 60-70%
Its obviously true that there are some related AI companies that will go bust as with any new technology. And its also true that the rise won't be monotonic.
What we instead get is perpetually pushed timelines for the bubbles and a religious belief that the end will come and people would pay for it.
To drive my point further, I ask for a single metric you would like to see that should be a certain way for you to believe it is not a bubble. Should the revenues have been 2x higher? Should the costs be 3x lower? Anything?
For me to believe this is not a bubble, I'd want to see that revenues exceed expenses by a large enough factor to sustain the business (often a 10% or greater profit margin). Right now, every one of these companies is following the Uber business model: give the product away at below market prices to hopefully capture the market and force their competitors to go bankrupt first. They're also speed running the bubble with massive data center builds that will increase their debt and future interest payments on that debt.
The question for me isn't "is this a bubble", it's "how many of these companies will be left after it pops". The few companies that remain are likely worth their current inflated value. But I'd want to see the back of the envelope math showing that all of the companies together will be able to earn the necessary profit to justify their valuations, how much revenue would that require, and how does that compare to the current tech purchasing today.