Is the AI bubble POPPING?

Is the AI bubble popping? Well, first of all, we won’t know until the rearview mirror. Just like with the dot-com bust and the great financial crisis, the GFC, none of those things can be fully interpreted until after they happen. But, we are starting to see some early cracks in the AI bubble. So, first of all, is AI a bubble? Yes. Uh it’s unequivocal that a bunch of people are going to lose money on AI investments. Right now, because we are pre-bubble popping or at least not it’s, you know, nowhere close to fully popped, uh we don’t know who’s going to lose money on those investments. It’s impossible that all of the money invested in AI is going to get paid back and that all of the investors are going to get a good return on investment. That is just mathematically impossible. Very similar to the dot-com boom. The internet is obviously a huge deal that has revolutionized the lives of basically everyone on Earth or a huge percentage of people on Earth, but that did not mean that a ton of people did not lose a ton of money in the dot-com bust. Uh for every winning company that turned into one of the magnificent seven, there were numerous people that lost money on Yahoo and AltaVista and, you know, Ask Jeeves and pets.com and a gazillion other companies that got out competed by other companies. Now, we know now that the internet was a huge deal and that, you know, a large percentage of the top most valuable companies in the world are internet companies. Um in fact, Apple and Amazon and Google and Facebook would not be what they are today without the internet. And those are four of the magnificent seven. Uh same with Nvidia. Uh it would not be here where it is without the internet. Uh same with Microsoft. So, some of the largest companies in the world absolutely transformed everything and they became very valuable and then crashed in the dot-com bust um in 2020 or sorry, 2001 and 2002, but uh they went on to become the most valuable companies in the world, but numerous companies did not make that leap, meaning their stock went way up during the good times of the dot com boom, and then crashed, and then they literally went away, or the they were acquired for pennies on the dollar. So, AI will go through the same thing. We know that AI is incredibly valuable as a tool. AI has changed the world, it will transform the world. The ability for anyone to have the intelligence of a, you know, of a PhD level person at their fingertips 24/7 that never gets tired, that you can ask unlimited questions, that is incredibly valuable. So, AI is here to stay, it’s incredibly valuable. If you’re not using ChatGPT or Claude or Grok, you should be. Those are revolutionary technologies, but that does not mean that all of the money invested in them will get paid back. Right now, all of those companies, which includes Facebook and Microsoft and uh Google and um and numerous others are investing hundreds of billions of dollars in AI infrastructure. Not all of that is going to be a good return on investment. There will be one or two winners in AI in the United States, and there will probably be some major winners in AI in China. And if you have not listened to the last two episodes from Jack Mallers, the CEO and founder of Strike, s t r i k e, you really need to listen to him. He has some fantastic insights on AI and the intersection of AI and Bitcoin. But, one of his primary thesis, uh you know, the thesis that he goes through on those episodes is that a lot of money that would be in Bitcoin has been sidelined into AI investments by people who think AI is going to give them a better return on investment than Bitcoin. That will go away when the AI bubble definitively pops, and these AI companies stop absorbing just ridiculous amounts of capital from the market. I mean, it’s to the magnitude of of of trillions of dollars is getting put into AI infrastructure, AI data centers, AI chips. I mean, it’s just beyond insane the amount of investment that’s in going in right now. Um which again doesn’t mean the technology is not amazing. It doesn’t mean the dot-com boom ultimately the emerging winners of that were not, you know, hugely successful and transformed our lives. It just meant that there was a lot of losers along the way, which there will also be with AI. So, sometime in the near future AI is going to stop sucking all of the money out of the economy, including money that would otherwise be headed toward Bitcoin, driving the price higher. Um and people will realize that, hey, even as amazing as AI is, just like as amazing in the as the internet was back in the dot-com bust, that does not mean every internet investment is going to pay off. And certainly the same is true for AI. It does not mean every AI investment is going to pay off. Um so, there will be a winner. Maybe it’s a, you know, Anthropic with Claude. Maybe it’s OpenAI with ChatGPT. You know, it’s probably not Google with Gemini or uh you know, whichever company has, I don’t know, Llama or I don’t know. I’ve lost track of all the AI models. It tends to be that the winners tend to be stand-alone companies. Usually the winners in a new category are not uh Walmart, you know, along launching walmart.com. It’s usually Amazon or some new company. So, my prediction would be the winners in AI will be stand-alone new companies. They will not be existing companies that just happened to enter the AI race later and outcompete. That’s just almost never what happens. So, something will be successful, but they will not all be successful. There is no conceivable way that all of the money that has gone into AI will ever get be paid back in the form of, you know, of returns on money borrowed or in the form of returns on investments in stock. Some of them will, but most will not. Uh but that doesn’t mean AI will not transform our lives. AI is going to transform our lives and continue to transform our lives regardless of whether certain investments are good or bad investments. Uh but the good news for Bitcoin is over the last year, especially over the last year, um that has been a major drag on the price of Bitcoin is that everybody who wakes up every morning, unless they’re a hardcore Bitcoin enthusiast like me, and I’m a huge fan of AI and Bitcoin, I just don’t I don’t think I’m smart enough, and I don’t think almost anybody else is smart enough to know in advance which AI stocks are going to be a big deal. And Anthropic with Claude and OpenAI with ChatGPT are not even public companies, which means there’s not even a way for people like you and me to invest in them, even if we wanted to. So, as a result, I don’t think it makes sense for the average person to invest in AI. I think it makes all the sense in the world for the average person to invest in Bitcoin. Um but that regardless, all of the people who are not committed to one investment or another, they just are trying to invest in whatever’s moving fast at that moment. For the last year, what has been moving the fastest at every given moment is AI, anything to do with AI. Because again, it looks like, and this will not be proven to be true in the long term, but it looks like everything in AI is a winner. Like everything. It’s all a winner. Of course, that’s not true, but when it looks like that, then AI is able to soak up trillions of dollars of wealth uh as everybody on the planet builds out data centers, and they are all certain that they’re all going to get rich. And over time, it will become clear that a small number of them will get rich, and that only a couple of companies are going to accrue the vast majority of the wealth from the AI sector, and we just don’t know which exact companies those are right now. But as soon as the AI bubble either finishes popping, if assuming it’s started, or starts to pop, if it has or not started, uh that will eliminate a major drag on the price of Bitcoin cuz people will say, “Hey, instead of this just obvious thing that looked like a a home run in all scenarios, which is AI investments, uh they will actually be looking for something which is a technology in the early part of its adoption cycle uh that the whole world needs and there’s only one of and there’s exactly one of those in the world and it’s called Bitcoin and I think it’s fantastic investment and as soon as the AI bubble pops, everyone else on the planet will realize, “Hey, there’s still Bitcoin and it’s still fantastic.” And just like if you had a company or an asset then that you thought was amazing during the dot-com boom, it was really hard for anybody to get interested in it because they all thought they were going to get rich on some new dot-com company. And again, most of those went belly up. And the same will be true right now. Everybody thinks they’re all going to get rich on AI, so why would they bother investing in Bitcoin or anything else? And the truth is, yeah, there will be some amazing AI companies and AI will transform our lives and continue to do so, but for most people is a bad investment and when that becomes clear, they will go looking for a better investment and Bitcoin will be wait waiting to welcome them with loving arms just like it always has. Uh so, uh whether the AI bubble popping has already started or is about to start, it’s only a matter of time until uh it is not the massive competing sucking sound of for investment capital uh that’s drawing capital away from Bitcoin the way it has been uh for the last year or so.