The Al Bubble Is A Lot Worse Than You Think

About this video

• Video Title: The AI Bubble Is A Lot Worse Than You Think
• Channel: Andrei Jikh
• Speakers: Andrei Jikh
• Duration: 00:21:45

Overview

This video discusses the potential AI bubble, examining how AI companies are being valued, the role of circular financing in inflating these valuations, and the implications for the broader economy and investors. It also touches on the current performance of Bitcoin in relation to tech stocks and offers personal investment strategies.

Key takeaways

• AI's Dominance in Index Funds: A significant portion of investments in basic S&P 500 funds goes to a few large tech companies heavily involved in AI, such as Nvidia, Microsoft, and Apple.
• Valuation Discrepancy: AI companies are priced as if they will become the largest money-making engine in history, exceeding the combined revenue of major tech giants, which is a potential red flag.
• Circular Financing: A feedback loop exists where money flows between companies like Nvidia, OpenAI, and cloud providers (e.g., Oracle, Microsoft), inflating valuations without necessarily creating fundamental value.
• Government Involvement: The immense capital required for AI development might necessitate government intervention, with some suggesting the government could act as an insurer of last resort, due to the strategic importance of AI for national interests.
• Market Indicators: Actions by investors like Warren Buffett (selling stock, holding cash) and Michael Burry (betting against Nvidia and Palantir) suggest concern about the current market valuations.
• Bitcoin's Performance: Bitcoin's recent decline, despite positive macro factors, is analyzed through technical (50-week moving average) and macro (liquidity transition, end of quantitative tightening) lenses, suggesting it might be a canary in the coal mine for broader market stress.
• Personal Investment Strategy: The speaker plans to continue reinvesting dividends, save cash, and avoid leverage, advocating for a slow and steady approach, especially with a long-term investment horizon.