Now we know why AI companies are panicking. Their revenue has peaked but their costs keep rising. The race to fund AI data centers first is now backfiring on the big banks

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The Difference between the dot com bubble and the AI bubble is actually every simple yet no one seems to be talking about it surprisingly…

The dotcom bubble was pumped up by mal investment in unprofitable equities that got pumped to moon by expectations of future profitability from the revolutionary technology called “The Internet”. Investors paid for companies that either made no money or bought companies at valuations that made no sense based on their future growth rate.

The AI Bubble is a concentration bubble. Alot of capital is being pumped into VERY profitable companies but those companies are cyclical in nature. The expectation for most investors is that the AI CAPEX cycle will never and we’re never going back to a time when semiconductors end up at negative growth and thus multiples should reflect that durability.

You also have an entire generation that is hyper focused on equities and have never done any work on understand how debt impacts enterprise value and the multiples the market will pay on that debt overhang risk as well as cashflow that has to be diverted to debt servicing instead of buybacks.

The worst case scenario is that we get a simultaneous bust of capital allocators waking up and realizing… holy crap the moats we thought we had dont actually exist.

The lynchpin to EVERYTHING is OpenAI and Anthropic.

If at any point, if the market believes that OpenAI and Anthropic cannot meet its obligations, the entire AI economy collapses.

All that capital will rush out of the AI trade and into safe haven assets like Treasuries.

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