If the current artificial intelligence, AI boom proves to be a bubble, the Nasdaq Composite could fall more than 81 % from its current level, according to Wolfteam Ltd.'s projections and estimates.
Currently, according to many metrics the Nasdaq Composite current level is almost at the level of the Nasdaq Composite at the height of the Dot Com bubble. From peek to trough at the 2000 Dot Com bubble and subsequent bust the Nasdaq Composite fell 77 %.
This time around, if the AI bubble bursts, the fall of the Nasdaq Composite could be a little bit worst, in Wolfteam Ltd.'s view.
It is true that the leading technology companies with more than 1.35 trillion USDs in market capitalization each, like NVIDIA, Apple, Microsoft, Alphabet, Amazon, Meta and Tesla are extremely profitable, partially excluding Tesla due to its relatively low profitability. But Cisco and Microsoft were hugely profitable during the Dot Com boom also. In 2000 it turned out that that level of profitability was simply unsustainable. The leading technology companies in 2000 invested a lot in fiber optic infrastructure and the world needed decades to fully utilize that internet infrastructure.
It turned out that the technology giants in the 2000 boom over invested in internet technology infrastructure in the short-term, which hit their profits. But in the long-term, 10-15 years that over investment turned out good for society and the technology community.
Similarly now the hyperscalers Amazon, Alphabet, Microsoft and Meta are spending 100s of billions of USD per year in artificial intelligence, AI infrastructure. It may well turn out that in the short-run hyperscalers Amazon, Alphabet, Microsoft and Meta are over investing, but in 10-15 years the AI infrastructure they are now building may be fully utilized.
In the worst case scenario, the graphical processing unites chips mainly NVIDIA manufactures in the current AI data centers could turn out to be obsolete in 5 years, replaced by newer, with far better technology GPU chips. Which will deprecate the value of the current AI data centers and hit the hyperscalers Amazon, Alphabet, Microsoft and Meta with hundreds of billions USDs of losses.
Such a scenario at the moment has a probability of around 25 %, according to Wolfteam Ltd.'s projections and estimates.
If the AI dreams of robots everywhere, billions of robots serving humanity and AI data changing our lives, how produce and consume leisure come to fruition in the most optimistic scenarios of Wall Street research analysts, investors and Silicon Valley investors and technologists, NVIDIA, Apple, Microsoft, Alphabet, Amazon, Meta and Tesla could prove grossly undervalued.
10 comments:
It would bee too early to talk about a bubble. AI is deep tech, which takes many years to develop and mature, meaning it will take years till AI starts to fade
Processors are changed, but not at the same time, thus expected to be a smooth transition.
When talking about AI in financial trading, the users will fairly soon realize that AI is not making them more profitable, perhaps the opposite. AI in financial trading is already beginning to have a bad reputation. Expected, since AI cannot be used mainstream to make a trading strategy - else we would all become billionaires. AI is Robo Advisors 2.0.
.. since you are in M&A, some of the AI solutions will be big hits, others not.
Since it takes at least 5 years for a company to develop a finished and matured solution, they will keep their value. After market introduction it will takes some years to prove the idea, burning money to show traction, improving valuation - till it all collapses. The moment of such collapse is typically 8-11 years depending how persistent they are, and of when the investors pull the plug.
Generally, I agree, but the AI hyperscalers technology companies are investing hundreds of billions of USDs in AI data centers and if something goes aloof and the investments do no meet expectations, 'investors could well pull the plug' and the capital flows going into AI could dry up. And then the Nasdaq Composite could register a huge fall and drag down the S&P 500 and the Dow Jones Industrial Average and the world economy with it.
Yes - but as mentioned the AI applications have to be developed and matured, which takes many years. Thus is takes many years before anyone knows where this will go. Add years of hope, and we are at 10 years. AI is typically a database - nothing new really, except for the name.
Agreed. The markets, however, usually discount the future and large changes in the expected final outcome could cause great volatility, also negative in the current stock market indices state.
To predict 5 years ahead requires a specialist, to predict 10 years ahead requires a decades long experience spanning many areas. This is part of strategic product planning. The best can quite precisely predict 10 years.
Well, predicting the future is notoriously difficult, in my humble opinion. :-)
Yes, experience helps, but there are just too many factors, which influence the future of complicated systems like the stock market, societal outcomes, etc. to be 100 % certain of the outcome. Humanity is getting better at predicting the future, though. Technology and computing power definitely help.
However, good analysis could help tremendously in making better decisions and improving outcomes!
It is possible, but requires access to data and research. 400 years ago you would have been burned on fire is you predicted the weather.
You must at least have a qualified guess, how would you else be able to plan a product which takes 5 years to develop?
The Western countries focus at war, memes, corruption and money laundering theft from the taxpayers, keeping tech for them self. The rest 80% of the world focus at peaceful trading and development - they share their tech. Russia share their jet tech, China chares AI tech as open source. The West is done, bankrupt, 20-30 years behind China. China is now self supplied in chips, latest 3nm. Russian jets now comprise 0% Western components. We have a completely new situation, multipolar world, where the 80% are detaching from the West. This is not going to end well for the West, which I am part of - but have placed a company in Hungary, part of EU and a bridge between the two worlds. There is a Bank Of China.
There it not an AI bobble as such, but rather the West is behind in this field, is focusing on using AI for dominance, where the rest focus at other types of AI, open source AI s, share these AI´s for free. The valuations of Western AI`s are 10 times higher. The high valuations is the usual VC pumping and meme building of something having no value. Two different worlds, two different business models. The gap is increasing monthly on almost all levels.
Thus to judge AI, one must add geopolitical analysis and understanding. Thus an analysis comprise; strategic + product planning + commercial business + economical + financial + tech + geopolitics + ability to predict 5-10 years ahead, sum together to a final conclusion.
Forecasts on the future of AI are an educated guess. To predict the future with certainty is highly improbable. Anyone can judge AI from his own opinion. So he can make decisions. The posts and comments here are not an investment recommendation. AI can certainly be analyzed. Its possible outcomes also.
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