Image Source: Unsplash

Below are some of the most interesting things I came across this week.

INTERVIEW

Peter Berezin tells The Market, “During the dotcom bubble, telecom companies spent heavily on CapEx, but profits just didn’t materialize quickly enough. This led to a decline in their free cash flows and that ended the boom. Arguably, we’re seeing something similar today with the hyperscalers.”

CHART

Robert Armstrong quantifies these similarities writing, “This [chart] allows us to compare the size of the current tech capex boom to both the telecom/dotcom bubble of the 1990s (red line) and the housing boom of 2006 (purple). In both cases, the AI boom is of comparable size, at something more than six per cent of GDP.”

LINK

But, as Gary Marcus writes, “The current strategy of merely making A.I. bigger is deeply flawed — scientifically, economically and politically.”

LINK

As The Wall Street Journal reports, it may turn out that much of that spending could prove unnecessary as “consumers could just use cheaper, less-powerful models that require fewer resources.”

CHART

If so, the stock market may be headed for a “Wile E. Coyote moment,” as Peter Berezin puts it in the interview at the top of this post. In fact, the bond market, as SentimenTrader points out, may be signaling we are rapidly appraoching that moment.

More By This Author:

NVDA: ‘Ncredible’
Has The Stock Market Become ‘Unsinkable’?
Investors See Nothing But Blue Skies