Are We in an AI Bubble?

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Transcript

00:00I think we probably are in an AI bubble of some sort.

00:03The question is, is it going to burst?

00:06Is there going to be a so-called correction?

00:09Meaning it's not so much that there's this huge drop in the market, 20% drop in share

00:15prices for the big tech companies, millions of people lose their jobs.

00:20This would be a little bit more like the 2008 financial crisis.

00:23I don't think we'll necessarily get to that point.

00:26And the reason for that is so much of the AI boom has been financed by large tech companies

00:35that are extremely well capitalized.

00:38They have tons of money on their balance sheets.

00:40Meta, for example, made more than $60 billion last year, net profit.

00:46Google made even more.

00:47These companies, in theory, can afford a lot of this, but not all of it.

00:52And so a lot of the shortfall in the costs, which have been estimated to be $3 trillion

00:58over the next three to four years, is going to also have to come from debt trading by banks.

01:06Clever financing.

01:07There's still a question of market sentiment.

01:10I think that's where we might see some kind of correction, if you will.

01:15We saw an example of that in January of this year, when DeepSeek, this little company out

01:20of China, released a model that was as good as ChachiPT, but built for a fraction of the

01:26price.

01:26And they put all the information out on the internet for anybody to copy.

01:30That sparked a huge freak out in Silicon Valley.

01:33Share prices dropped.

01:35And there was a sense that all the money that people were spending on AI in the US and in

01:39the West was just a big old waste of money.

01:41That sentiment has flipped back, like, oh, this is actually worth the money and worth

01:47the investment.

01:49But I think that showed how volatile or how potentially volatile the market could become.

01:55It's almost like when you blow up a balloon, the bigger it gets, the tighter the balloon

02:01becomes.

02:01And so you only need a very small thing to potentially pop it.

02:06And so what might that small thing be?

02:08It could be a profit warning from one of the AI companies.

02:13It could be someone like Anthropic or OpenAI saying, we had thought we were going to make

02:19X billion next year.

02:21It's probably going to be half of that.

02:24Something like that, I think, could create a big kind of another freak out in the market.

02:29And we could see some share price drops.