Transcription
So, I think the AI bubble is a bubble and it will pop. But I think of it more like the dotcom bubble, which is to say the internet came of age in the late 90s and there was a pop, but the internet is still here and is more powerful and a bigger force than ever.
So, I think something like that will probably happen with AI, meaning there's definitely overinvestment and probably investment in the wrong areas. And so, there will be some kind of comeuppance. I don't think that means that AI is not a thing. I think AI is a probably, you know, a generational shift for for everybody.
But there will be a correction. There will be a correction. The question that we don't know this time around is if you believe that every financial crisis is a function of too much leverage in the system, too much borrowing money, right? In 1929, it was too many people borrowing for for stocks. In in 2008, it was too many people borrowing for subprime loans and the like. It could be that there's too much borrowing going on around these AI data centers.
People don't appreciate. Yes, you know, Google and Facebook, they're all spending hundreds of billions of dollars, but to build these data centers, there's energy companies that are taking on extraordinary amount of debt, construction companies, real estate companies. I mean, there's a and that debt we can't see anymore. That's actually another big thing. It used to be that you'd get a loan from a bank and so the the system could see the debt in the system, the leverage in the system. Today, it's all moved into what they call the shadows into this private credit business. And so we don't really know what's going on and that's a little scary.
And I'll give you one more little not to scare everybody, but you know, you're starting to see what they call roundtrip deals. These like circular deals where so Nvidia and OpenAI did this very unusual deal a couple weeks ago where OpenAI is buying chips like crazy from Nvidia, but OpenAI can't afford to buy all the chips that it's committing to buy. It doesn't make it doesn't make money. It's losing money right now. So what's happened? Nvidia invests money into OpenAI. So they have now committed to give them a hundred billion which then they're going to take the hundred billion and buy the Nvidia chips. So it's a completely circular transaction. It's like magic. And then just I think two weeks ago now a similar deal. OpenAI is going to buy chips from AMD. Can't afford to buy the chips in AMD. says to itself, "Well, if we announce that we're going to buy chips from AMD, AMD's stock is likely to go up. So, we're gonna get a stake in AMD and when the shares magically go up, we'll now have money from those and then we'll go buy the chips."
What's wrong with that? Well, it just reflects that there's not a sort of underlying stability in that market. You know, when you get into what's called vendor financing, when the vendor basically has to finance you, it can come back to bite you. Now yes if open AI turns out to be a you know a massive success and super profitable maybe no harm no harm no foul, but if it doesn't, you know the whole sort of ecosystem can Right.