AI Bubble Fears Creeping In (Patreon)

Today the OpenAI news of Sam Altman looking for a handout from the govt raised my eyebrows. OpenAI begging for federal loans means private capital is drying up.

I was tied up for a chunk of the day, concerned with the Tesla annual meeting, but just tonight thinking about a few different things, and I'm very worried about how maybe opening I could create an avalanche of problems.

Why the AI Bubble Might Be Real

There are definitely valuations out there, eg, Coreweave, HPC miners.... valuations are nutty.... eg Corewave has $15BN in debt and loses $300M a qtr. OpenAI is prob losing $15BN every 6 mths.

PS someone tried to serve Sam Altman a Subpoena on stage today - soon the gig will be up for this shady character.

Then there is the circular cash, eg, Nvidia, OpenAI, and CoreWeave keep funding and buying from each other, inflating profits on paper. NVDA will be ok if the music stops but the others I am not so sure.

Also, AI giants hide billions off their books, echoing Enron’s playbook. When credit tightens, it could collapse. Eg, META is being sneaky and hiding $30BN off the books

Another issue that cropped up is Chips wear out fast—massive ongoing costs that kill profits if funding slows. They are basically redundant after 12 to 18 months and amortize fast. This also needs to be accounted for.

There are also rumors of Nvidia buying back idle compute shows oversupply and weak demand. Also, black GPUs, ie, ones that are off, as folks cannot afford the electricity.

I am not raising the alarm, but there are a series of items that are concerning... a scene we have all seen play out before.

TLDR

Again, not to be an alarmist, but if AI blows up, both GDP and the stock market crash, and that could be one of the greater black swans that we expect to hit over the next 2 quarters. Keep some powder dry.

The good news if it does happen - money printers will go into high gear and that would be good for Bitcoin....

Final note... TSLA stock could fall in a market crash due to its beta... but Tesla does real stuff and is lean and mean, has $42BN in cash and spins off $4BN in FCF a qtr.