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.
5 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.
Post a Comment