Now all we need is an AI business model big enough to support all those data centers.
The coding market is one of the few success stories, but it is only so big, and we are already seeing its limits. If nothing else, software producers are more likely than others to take AI in house using tailored systems on local hardware.
The advertising market does not need peak AI to short circuit web search to cut out information providers. The scientific market faces both Trump era headwinds and reliance on users likely to develop their own systems for in house use.
An investment on the order of a trillion dollars needs a return on the order of a hundred billion dollars to provide suitable returns. Is the idea that each American will be spending $30 a month for an AI assistant? Is there some big industry out there that could benefit from AI spending, in aggregate, on an order of ten billion dollars a month? The current all-in investment pattern would make sense if AI were a sure thing.
Let's say a company is certain to have 2 years, and only 2 years, of stellar earnings that are 10X of prior years, and then demand softens to a bit higher than historical levels. They plan to use those earnings not to pay dividends (deemed tax inefficient), but to buy back their own stock. Everyone front runs these buybacks, which makes it a momentum stock that rises even faster and higher. So the firm will buy back its stock at the worst possible time. As the buybacks wane, the stock price plummets. This is insanity. It is a system designed to create speculation, not investment; cyclicality rather than stability.
Good analysis.
Now all we need is an AI business model big enough to support all those data centers.
The coding market is one of the few success stories, but it is only so big, and we are already seeing its limits. If nothing else, software producers are more likely than others to take AI in house using tailored systems on local hardware.
The advertising market does not need peak AI to short circuit web search to cut out information providers. The scientific market faces both Trump era headwinds and reliance on users likely to develop their own systems for in house use.
An investment on the order of a trillion dollars needs a return on the order of a hundred billion dollars to provide suitable returns. Is the idea that each American will be spending $30 a month for an AI assistant? Is there some big industry out there that could benefit from AI spending, in aggregate, on an order of ten billion dollars a month? The current all-in investment pattern would make sense if AI were a sure thing.
Yes...
Nice Analysis...Thx
Let's say a company is certain to have 2 years, and only 2 years, of stellar earnings that are 10X of prior years, and then demand softens to a bit higher than historical levels. They plan to use those earnings not to pay dividends (deemed tax inefficient), but to buy back their own stock. Everyone front runs these buybacks, which makes it a momentum stock that rises even faster and higher. So the firm will buy back its stock at the worst possible time. As the buybacks wane, the stock price plummets. This is insanity. It is a system designed to create speculation, not investment; cyclicality rather than stability.