The dotcom era had the Pets.com sock puppet as the Howard Dean shark jump moment. What will the AI era have ?
There’s a lot of circular flows with AI. That’s very concerning. Ironically, Copilot AI wrote an excellent summary for me to post here!!! It’s very impactful tech, there is no question… but have people paid far, far too much for it? There were canal booms and busts (meaning the Erie canal), railroad booms, electricity booms, radio booms, “-onoics” boom of the late 1960s, anything with onics was good like “electronics”, Internet 1.0, and now… AI? You be the judge. I have very little in these stocks.
Written by CoPilot AI by Microsoft:
The current AI industry is experiencing a striking pattern of circular money flows, where major players are investing in each other in ways that inflate valuations and fuel rapid expansion—but also raise concerns about sustainability and speculation.
The $300 Billion Investment Loop
A prime example involves OpenAI, Oracle, and NVIDIA:
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OpenAI committed $300 billion over five years to Oracle for cloud infrastructure.
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Oracle spends tens of billions on NVIDIA chips to support that infrastructure.
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NVIDIA, in turn, invests in OpenAI and benefits from its chip sales to Oracle.
This creates a closed loop where the same money cycles between companies, boosting stock prices and market caps without necessarily generating real profits.
Vendor Financing & Speculative Deals
Some deals resemble vendor-financing schemes from past tech bubbles:
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Sellers (e.g., chipmakers or cloud providers) help finance buyers (AI startups) to purchase their own products.
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This inflates demand and valuation, but may not reflect sustainable business models.
Financial Strain on Hyperscalers
Major cloud providers (like Microsoft, Google, Amazon) are seeing:
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Negative free cash flow growth, down ~16% over the next year.
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Slowing revenue in core segments like search and digital ads.
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Rising capital expenditures for AI infrastructure that may not yield short-term returns.
Global Investment Trends
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Private AI investment hit $252.3 billion in 2024, with generative AI alone attracting $33.9 billion.
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The U.S. leads globally, investing nearly 12× more than China.
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Despite high spending, most companies report modest financial gains from AI—often less than 10% in cost savings or 5% in revenue growth.
Bubble Concerns
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NVIDIA’s market cap has soared to $4.5 trillion—more than the GDP of most countries.
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Investors are paying 30× future earnings, betting on endless AI demand.
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Even OpenAI’s CEO, Sam Altman, has warned that current AI investment levels may be irrational.
These circular flows are fueling innovation and infrastructure—but they also resemble the speculative dynamics of past tech bubbles.
AI will kill or replace us sooner than later. As such, it is entirely different from any other boom we’ve had in recorded history.
ExxonMobil has $350 billion revenue and $30 billion profit.
OpenAI $13 billion revenue and losses in the multiple billions.
OpenAI has more stock market value than ExxonMobil.
“But we’re growing!” Your stock market value is growing… and your company burns cash like a drunken sailor.
Stock market values are based on perception and mass psychology.