The Chip Insider®– Risk of an AI Bubble
Summary:
Scenarios: Risk of an AI Bubble
This should not be asked as a question. It’s a statement. There is no risk. There is an AI Bubble. Consider this: In ten years, AI compute has gone from a scale of money losing millions to over $100B today. It took the semiconductor industry almost 40 years to eclipse that amount. AI should grow past the $1T milestone in six years, something that took the semiconductor industry 32 years to accomplish. It’s taken the throne of fastest-growing industry in record time. That makes it hard to deny this is not a bubble. All I can say is enjoy it while you can. Or as Prince sang, “Party like it’s 1999.” At the same time, prepare for the reversal so the fall isn't a career-killing mistake.
Remember that just because there’s a bubble over something, it doesn’t mean something is not real or of no value. Remember reading about the Tulip-bulb bubble of the 1600s? Today, tulip bulbs are a cornerstone of the Netherlands’ ag production. In addition to lithography, the Dutch dominate the tulip bulb market… Fast forward to 1870’s America and there was the railroad bubble around what was the country’s greatest infrastructure buildout in its history… Then there was the auto-industrial bubble of the 1920s, which was part of what led to the Great Depression… we still drive cars today. Move the timeline to 1999-2000, when there was the internet bubble… Out of it came giants like Meta, Alphabet, and Amazon.
Bubbles are not bad; they are part of … Bubbles occur when speculators confuse a price trend with the actual value of something. It’s the belief in that historical price trend being factual that catch speculators out, because there are few facts in the future… especially when it comes to monetary matters. The use value of the internet was as clear in 2000 as it is today…
The lesson to learn from these histories is that the value financial markets place on things has little to do with their true ability to create value in the real economy. They have everything to do with perceptions of value, which can change lightning fast… What always distinguishes the winners from the losers is their ability to create real value in terms of…
On the Horizon: As for creating differentiable value, so far, the business of AI seems closer to … Then there’s the China versus the West geopolitical problem. It’s arguably more a …
The bottom line is that there’s still lots of opportunities to find the great AI monetization model. Until then it’s a competitive slugfest.
Dan’s Book Shelf: 1873: The Rothschilds, the First Great Depression, and the Making of the Modern World: by Liaquat Ahamed is an excellent read that has so many touchpoints to what’s happening today with the massive buildout of the AI Infrastructure...
“Those that fail to learn from history are doomed to repeat it.” — Winston Churchill
