00:00from Wall Street to rural America today's AI is the economy and markets have priced it like a
00:13miracle that can't fail investors are really banking on incredible growth Microsoft Meta
00:19Alphabet they are just committing billions and billions of dollars to capital expenditures and
00:25expected to continue to you know raise those numbers over time the AI boom is more than just
00:30software it's construction so that's building out the data centers that's securing the energy that's
00:36needed the water that's needed but in this burgeoning industry what goes around doesn't
00:42necessarily come around a precarious investment strategy is emerging multi-billion dollar circular
00:51deals video will invest as much as 100 billion dollars in open AI the merry-go-round of money
00:56continues huge huge sums of money are just being passed between these enormous companies that are
01:04pouring hundreds of billions of dollars into the promise of AI and the promise is huge but 80
01:11of US businesses use AI so this is a structural shift like electricity or the internet but AI with
01:20all its potential remains largely unproven for profitability probably the biggest question
01:26in San Francisco right now is are we in an AI bubble and if we are then well how big is this bubble and how
01:32bad would it be if and when it does burst so is this the dawn of a new age of AI powered growth or the
01:40biggest bubble ever a circular deal is when companies are basically blowing money products
01:55services in between two of them Nvidia has said it's going to invest up to a hundred billion dollars in open
02:01AI at the same time open AI is a major customer of Nvidia services of their chips to make it even
02:10more complicated there are also sort of other middlemen one example is Oracle when I sometimes will
02:15lease compute from Oracle and so you have Oracle being a customer of Nvidia so you can see how there
02:22could be more sort of arrows back and forth between these companies but Nvidia open AI and Oracle are
02:29just part of the web the full picture entails a who's who of the AI landscape this money is kind of
02:36spinning around the same companies and that's why people are worried I don't think there's anything
02:40inappropriate about that in principle now if you start stacking these where they get to huge amounts
02:45of money then yeah you can you can you can overextend yourself of course it becomes kind of symbiotic
02:51and I think that's sort of the concern that's cropping up now is if one of those companies
02:54stumbles or doesn't do well does the whole thing fall apart a lot of this investment is going straight
03:01to the build-out of data centers across the nation we're really in an infrastructure build-out arms race
03:07have a look at construction spending in 2025 it's down in most sectors but not data centers or power
03:15stations we're seeing a lot of companies that are sort of the picks and shovels of the AI industry
03:20they're out there actually you know digging into the ground one recent estimate for Morgan Stanley
03:26predicts that companies will spend three trillion dollars on AI data centers that is obviously a
03:33major bet if you're in the business of selling picks and shovels you are living it up you are
03:38getting all the money you need and there's more demands than you can meet we're currently in a
03:49facility that was once upon a time a textile facility one of the largest ones on the eastern seaboard about
03:571 million square foot we realized we could actually repurpose it as a data center
04:03there is an insatiable demand for building data centers for making sure that we have the power to
04:13build the data centers the megawatts the infrastructure and the expertise we don't see any slowdown in that
04:20for a long while it comes to artificial intelligence time is not your friend so if you can get up and
04:28running in six months using a retrofit format versus a greenfield format which is starting from scratch
04:34which takes up to two years that's a much better proposition all these data centers need power the
04:42growth and utility costs is outpacing inflation utility companies have done really well especially
04:48ones that are providing energy to data centers construction stocks have done well but building
04:54fast isn't always built to last you don't just build a data center switch it on forget about
05:00it and make money you have to keep on investing to keep that technology working otherwise it will
05:05quickly become useless to the people you want to sell it to and so far all major AI projects are
05:13operating at a loss the problem is every time someone uses chat gpt open AI likely loses money those open
05:22AIs and Anthropics of the world are not yet profitable Sam Altman says open AI should be able to break even
05:28around 2029 2030 given the amount of cash that company is burning through right now and the amount
05:34it still needs to spend to build the data centers and pay for the computing power to do what it wants
05:40to do that feels like a tall order to me there's some concern about whether the AI startups are actually
05:46able to pay their bills when they're racking up these huge commitments to spending on data center
05:53infrastructure these AI data center companies they are the kind of canary in the coal mine they are the
06:00ones where we perhaps see on their balance sheet any first sign of companies pulling back from needing
06:06as much AI data center capacity right now all the companies they're all saying that the demand for AI products is
06:15really really high if that were to change if demand were to suddenly weaken that would become an issue to
06:23understand the stakes of today's AI boom you don't need a crystal ball just a quick trip down memory lane you've got mail in
06:33the dot-coms promised a brave new world instead we got wiped out savings empty office parks and five
06:40trillion dollars in vanished value the worst hit shares around the world have been the technology
06:45stocks including the dot-com companies even the strongest companies in that era took years to
06:52recover Amazon one of the big great famous survivors its share price didn't recover for another eight years
06:58after the dot-com crash happened Cisco one of the picks and shovel companies it took them 25 years
07:05before their stock price recovered there are definitely some similarities one is that there is circular deal
07:12making in both instances the question is is this bubble going to get to a level that goes beyond just
07:18kind of the normal ups and downs of tech booms but actually has major consequences for the economy
07:24the dot-com boom was devastating for the economy but I don't think it would compare to the far-reaching
07:31effects of the AI boom collapsing the money pouring in has been a huge contributor of growth to GDP
07:41helping boost a US economy otherwise hampered by tariffs and inflation everyday Americans are exposed to
07:48this risk via 401ks and other investment accounts that hold stakes in many of the big tech companies
07:54participating in the spending spree so does that mean the AI bubble is too big to pop there's definitely
08:01this question about are these companies becoming too big to fail if they were to go down that could have not
08:07just economic consequences there is a suggestion this might be like the global financial crisis where
08:14huge financial institutions needed money to survive to prevent a wider collapse of the economy then
08:22that's obviously a far greater problem for the US economy but despite these stakes many remain bullish on AI
08:32because of the evolving nature of the technology itself in the dot-com boom there were companies that
08:39were laying fiber optic cable like subsidiaries of a company were basically all spending in a
08:44circle you know and it did contribute to the dot-com bubble popping but after a while that became
08:51the backbone of internet broadband and that unused part of all the fiber optics that were built in
08:58the 90s actually ended up being extremely important for the internet and so we think with respect to data
09:05centers if there is potential excess capacity that's being built those data centers will eventually be used
09:11there's a scenario here where AI takes longer than we think and therefore the strongest company sure
09:19they'll survive but in the meantime there might be a huge hit to their valuations ultimately this
09:27technology is not going to burst there are certain companies that will not make it but AI itself is not a
09:34above all their real products it's clearly the biggest gamble the Wall Street has ever made and this is a
09:43street known for its gambling this is the wager to end them all
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