Technology is real, prices are fake.
Recently, people have been asking me, how far along is this wave of AI? Is it about to collapse? As someone who has been through the cryptocurrency market for many years, today I will speak some hard truths.
History never simply repeats itself, but is always astonishingly similar. Before the internet bubble in 2000, everyone was shouting 'This time it's different,' and what happened? Technology indeed changed the world, but countless investors lost everything. Today’s AI market is almost repeating the same psychological trajectory: the technological breakthroughs are real, the commercial imagination is also real, but capital has brutally pushed 'reality' to the point of distortion.
One, what stage are we actually at in the AI bubble?
If viewed through the lens of classic bubble models, AI is likely at the intersection of early investment and frenzy acceleration, far from its conclusion.
Why do I say this? There are four hard pieces of evidence:
First, valuations have not yet reached a crazy level. Currently, the price-earnings ratio of the six major AI giants in the US stock market is about 35 times, whereas during the 2000 internet bubble, the leading companies had price-earnings ratios above 60 times, almost double what it is now.
Second, large companies can still afford to spend on AI. Today's tech giants have stable main business cash flows to support AI investments, unlike in 2000 when they relied on equity financing for survival.
Third, the 'gold' at the application end has begun to show. From ChatGPT to various AI applications, the penetration speed is faster than any new technology in history. More importantly, computing power is still in short supply; every GPU you can find is being utilized.
Fourth, the macro environment is still favorable. The Federal Reserve has entered a rate-cutting cycle, which is completely opposite to the continuous rate hikes before the 2000 internet bubble burst.
Two, the real risk is not the bubble itself, but systemic kidnapping.
Many people do not realize that AI investment has become the 'invisible engine' of the US economy. If AI investment slows down, the profit growth of US stocks will immediately collapse, and employment, infrastructure, electricity, chips, and cloud services will all be dragged down in a chain reaction.
This is fundamentally different from the year 2000: back then it was 'the internet bubble collapsing the economy', today it is 'the economy starting to rely on the AI bubble for survival'.
What’s even more concerning is the risk of capital circulation. Companies like Nvidia and OpenAI have formed a closed capital circulation system: Nvidia invests in OpenAI, and OpenAI uses that money to buy Nvidia chips, which inflates the valuations of all parties involved.
This model is reminiscent of Cisco during the internet bubble—by funding customers to purchase equipment, it indirectly drives demand and artificially inflates valuations.
Three, what will happen if the AI bubble bursts?
First, let’s talk about the US stock market: it won’t be an 80% complete collapse like in 2000, but there may be a structural bear market of 30%-45%, lasting 2-4 years.
Most critically, the 'seven giants' of the US stock market have accounted for more than 30% of the total market capitalization of the S&P 500 index. This means that even if you are a conservative index investor, you have unknowingly bet a large amount of assets on AI.
Speaking of Bitcoin: at the early stage of a bubble burst, BTC will almost certainly follow the decline because it is still seen as a high-risk asset. But in the medium to long term, BTC's 'role transformation' will happen faster than US stocks because it does not depend on corporate profits, capital expenditures, or AI profit-making stories.
A truth many are reluctant to acknowledge: the bursting of the AI bubble may actually be one of the best catalysts for long-term BTC growth. When the tech narrative collapses and valuation models fail, people will re-recognize the value of decentralized assets.
Four, survival strategies for ordinary people.
As ordinary investors, our goal is not to predict when the bubble will burst but to ensure we are not liquidated. Three points of advice:
1. Don’t be a directional gambler, but a friend of time.
Not all-in on AI, nor clearing out of the stock market, much less leveraging. Time is your only ally.
2. Prioritize cash flow.
The real winners during a bubble are not the smartest judges but those who still have money to keep buying when others are in panic.
3. Rationally view Bitcoin.
Don’t fantasize that BTC is a tool for getting rich; rather, view it as an insurance position against systemic risk. It doesn’t need you to be right every time; it just needs to protect your assets when extreme situations occur.
Five, conclusion.
AI is not a scam; it is indeed changing the world. But 'technology changes the world' does not equate to 'prices are reasonable'. A fast-moving train, the driver knows there may be a curve ahead, but no one dares to hit the brakes first.
The truly smart investors are not those who jump out of the vehicle but those who buckle their seatbelts, don’t stand in the front row, and keep some fare for the ride home. Only when the dust settles will the real opportunities emerge.
In this market dominated by AI narratives, maintaining independent thinking may be our strongest defensive tool.
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