Is AI Another Dot-Com Bubble?
Last week, a report came out that OpenAI was going to lose $5 billion this year, and that they will run out of money in 12 months unless they raise more cash. That isn’t going to happen. Investors like Microsoft and Sequoia will dump more money into OpenAI, so that isn’t a concern of mine. However, this news has contributed to a turnaround in AI sentiment. People have become more negative and have begun to ask, “What value does AI actually provide?” Today, we’re going to be talking about the “value” AI provides, and if we are in a bubble right now.
We are not in a bubble right now. If we were in a bubble, tons of people wouldn’t be saying “We’re in an AI bubble right now.” Just to clear it up, we are not in a bubble. However, the AI sentiment is turning.
During every earnings call, all the CEOs of the big tech companies have mentioned how going too hard on AI is better than too light because the long-term benefits outweigh the short-term costs. The subtext being that tech companies like Google and Microsoft know that they are overspending, and they know that sooner or later, shareholders will turn on that spending, and the CEOs are asking for more time. For the rest of the year, expect AI pessimism from investors. If your portfolio is heavily weighted with companies like Microsoft, Google, Meta, and Amazon, expect some depressed stock prices.
All these companies have dumped money into their own AI projects or investing in AI startups like Anthropic and OpenAI, and all these companies will be dealing with some rebellious investors, but you should not join in rebellion.
Frankly, this is like the dot-com bubble. Everybody knew that the internet and internet companies were going to devour the world, and they did. Business models that were thrown in the bin after the bust like ordering groceries online have become popular now, and titans like Google and Amazon were both phoenixes after the bust. Similarly, everybody knows that one day, AI will devour the world, but we are like ants trying to learn calculus. We are simply not there yet. We cannot understand how AI will develop, but as investors, we can bet on the most likely winners.
Microsoft is the most direct way of investing in a possible winner, OpenAI. OpenAI may become AOL, and OpenAI may become Google. We have no idea yet, but the probabilities say that OpenAI will become Google. Amazon is the most direct way to invest in Anthropic, who have a similarly cloudy path.
Prices will fall or stay stagnant in the big tech companies for six months, and really, pessimism will remain until AI companies start laying out genuine routes to making money, beyond here is this cool gimmick for you to subscribe to. I am 100% staying in the mega-cap tech stock because they are the most shielded from an AI meltdown while simultaneously being the most exposed to AI. If AI collapses, Google will be fine, but if AI becomes more important than the internet, Google will be rich enough to buy planets. Stay brave in the markets and keep your eyes on the horizon instead of the ground beneath your feet.
