The Ants & the Grasshopper

Continuing the discussion from Paranoia in the AI Era and this graph

image

I said:

So today’s news:

Suggests “bubble”. We are living through what to me looks increasingly like “dotcom redux”. AI and the companies that power it are certainly benefiting from far more than just hype, but I think the world, as measured by NVidia market cap as the proxy, has got somewhat ahead of itself here.

As of today, 8 of the top 10 companies, measured by market cap, are US based, and 7 of them are tech companies:

And when their extreme valuation is based on hype, notwithstanding what I just said, and given many real economies are in per-capita recession, if not outright recession, and that AI is promising to turn the social contract that binds most developed societies, upside down, and more recently even The Economist is publishing articles like this:

I’d say it’s probably time to dust off Aesop’s old fable: The Ants & the Grasshopper and think a bit.

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That is an enormous fall in a short span of time without any noticeable reason?! Unless we think Jensen Huang selling nearly $95 million worth of stock would trigger it?

There is a very good reason; trillions chasing “value”, leading to massive (over?)valuations premised on future sustainable revenues that won’t materialise for a long time (if ever), but the mountains of cash that is driving this is highly leverage on relatively short term debt. In an nutshell; musical chairs.

but if Nvidia goes…

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