Derek Thompson

And I've recently started to wonder, is there a bubble of people calling AI a bubble?

Today's guest says yes.

Azim Azhar is an investor and the author of the wonderful blog, Exponential View.

And before I introduce Azim, let's review why everybody seems so sure that AI is a bubble today.

Go back to the 1960s.

The Apollo program allocated about $300 billion in inflation-adjusted dollars to get America to the moon between the 1960s and the early 1970s.

The AI build-out requires companies to collectively fund a new Apollo program, not every 10 years, but every 10 months.

The hyperscalers, the big tech companies, and the frontier labs are collectively spending three to $400 billion every single year to bring artificial intelligence to life.

This is the most that any group of companies has ever spent to do just about anything.

The hallmark of a financial bubble is tricky financing.

Once you see companies going into debt or devising creative new financial vehicles to build something without a guaranteed return, you should start to be a little bit concerned.

I think we're clearly already there.

As Kudrowski explained in our previous episode, these hyperscalers are creating what are sometimes called special purpose vehicles, SPVs, like black boxes into which they throw some money and then some private capital firm throws some money and then that black box goes off and build a data center.

The fact that they're already moving AI infrastructure off their books makes me a little bit itchy about the possibility that they don't want investors to see just how expensive this thing is to build.

In September, the company Oracle's stock popped after it announced a future deal with OpenAI worth hundreds of billions of dollars.

There was a catch.

Oracle won't be able to finance that deal with its cash flow, with the money it actually makes from its business.

It'll have to take on a sensational amount of new debt.

JP Morgan's Michael Sembelist, who has been on the show before and is absolutely fantastic, described the deal this way, quote,

Oracle's stock jumped by 25% after being promised $60 billion a year from OpenAI, an amount of money OpenAI doesn't earn yet to provide cloud computing facilities that Oracle hasn't built yet, which will require 4.5 gigawatts of power, the equivalent of 2.25 Hoover dams, which America hasn't built yet.