AI Bubble Burst Risk
Bertie warns AI bubble may burst but Vik says markets are resilient.
In brief
Bertie warns AI bubble may burst but Vik says markets are resilient. Bertie fears AI bubble burst after reading warnings on excessive investment, public opposition to data centres, and rising interest rates, but Vik argues markets have already priced in the risk. Originally reported by mint.
Bertie reads warnings
Bertie found three articles warning of excessive ai investment, public opposition to data centres, and rising interest rates.
“this is like the railroads”
Public opposes data centres
An american survey showed overwhelming opposition to building data centres due to rising electricity costs and job losses.
“overwhelming majority of americans were opposed”
Rising interest rates
Global interest rates and bond yields threaten to crush ai mal-investment by tightening liquidity.
“the biggest home of mal-investment, the macro commentator said, was ai”
Bertie's concern
Bertie believed the ai bubble was on its last legs and ready to burst.
“the ai bubble was on its last legs”
Vik's perspective
Vik argued markets have already priced in ai risks and the bubble may deflate gradually rather than collapse suddenly.
“what you are saying has been said and understood for a while now”
Stock price drops
Amazon dropped from 28 times earnings to 20, microsoft from 30 to 25, and nvidia from 35 to 17 times earnings.
“amazon is down from 28 times earnings to 20”
Market resilience
The nasdaq and s&p 500 remain at all-time highs despite ai stock price declines.
“the nasdaq and the s&p 500 are at new all-time highs”
Bubbles deflate slowly
Bubbles can deflate gradually as markets assume current growth won't last, leading to lower multiples for the same earnings.
“bubbles can deflate slowly when markets assume that today's strong growth is not going to last long”
Bertie's realization
Bertie understood the ai bubble might leak air slowly rather than burst suddenly.
“it's like the morning after a birthday party, the balloons you pasted on the wall did not burst in the night”
The takeaway
Bertie fears AI bubble burst after reading warnings on excessive investment, public opposition to data centres, and rising interest rates, but Vik argues markets have already priced in the risk.
