WHY DO SOME PEOPLE BELIEVE AI COMPANIES ARE A BUBBLE?
๐น Money circulating in a loop
Chip spending โ chip revenues rise โ valuations increase โ new funding โ investment into AI companies โ repeat.
As a result, much of the capital circulates within the AI ecosystem, with limited contribution from end users so far.
๐น Why itโs seen as a potential bubble
โ Valuations are rising faster than real profits
โ Massive spending based on future expectations
โ Many AI companies are both customers and partners of each other
โ Heavy upfront infrastructure burn, revenues come later
๐น But the spending is real
โ Real chips
โ Real data centers
โ Real models
โ Real businesses already using AI
๐น Main risk
Building too much, too early.
๐น Warning signs to watch
โ Revenue growth slows while spending keeps rising
โ Underutilized or excess data center capacity
โ Declining chip demand
โ Companies begin cutting AI budgets
If these appear, valuations can correct very quickly.