Tesla and crypto, both on the periphery of the AI bubble, are even more striking examples. Tesla has a declining business making cars and batteries and a trillion dollar valuation based on the hope that 10 or 20 (partly) self-driving cars in Austin are the precursor of a robotaxi business that will dominate the world. Crypto is as big as NVIDIA and utterly useless.
These examples are helpful because the absence of any real value is obvious, implying that financial market valuations bear no relation to actual economic activity. That shows how much weight should be placed on the market valuations of AI stocks
I came to the comments to say what John has already said about crypto. In crypto the accounting gimmick takes a pure form because you just create your own token, keep a million for yourself, sell a handful (basically to yourself) for $10k, and then declare that your company’s net worth is $10 billion. If you can get people to loan you money based on that net worth calc, the con pays out nicely.
This is just GOLD: "When early investors give Mira Murati $2 billion in exchange for 1/6th of her company, the company is nominally valued at $12 billion. But that’s also an accounting gimmick. Murati has $2 billion. Once she has spent that money, she will have to go out and ask for some more. She still may not even have a product at that point. All she has is vibes."
I read, perhaps Krugman, that 75% of the US stock market growth is the tech companies and the rest is healthcare. Everything else in the US economy is doing nada. And healthcare is just because of an aging population. So a bubble. Although as many have said the market can stay stupid for far longer than you can stay solvent. Got at least a year to go is my guess.
In the matter of AI infrastructure, this panel discussion *at an energy finance conference* of the difficulty that gas plant constructors anticipate in satisfying demand is amazeballs. There is a big problem and no obvious way to make the ends meet.
Surely “ Spending on AI infrastructure] contributed more to growth in the U.S. economy in the past two quarters than all of consumer spending.” as you cite at the start does not imply the phrase you use near the end that AI expenditure represents “ more economic activity than all consumer spending. ”Contribution to growth is about the absolute change in value, not the value itself, right? Consumer expenditure can be huge but flat. If consumer expenditure saw zero or negative growth, then the new roof I just paid for on my house contributed more to growth than all consumer expenditure.
Not saying AI capex isn’t a huge number but it’s nothing like as big as consumer expenditure… and dammit, someone was wrong on the internet so I had to step in.
Kevin Phillips, who developed the Southern Strategy for Nixon, eventually turned into a powerful voice opposing the financialization of the U.S. economy. He foresaw the crisis induced by the flood of worthless derivatives and the cynical business community that profits from them. He also recognized the path we were on, the same one trod by the Dutch and British before us.
Tesla and crypto, both on the periphery of the AI bubble, are even more striking examples. Tesla has a declining business making cars and batteries and a trillion dollar valuation based on the hope that 10 or 20 (partly) self-driving cars in Austin are the precursor of a robotaxi business that will dominate the world. Crypto is as big as NVIDIA and utterly useless.
These examples are helpful because the absence of any real value is obvious, implying that financial market valuations bear no relation to actual economic activity. That shows how much weight should be placed on the market valuations of AI stocks
I came to the comments to say what John has already said about crypto. In crypto the accounting gimmick takes a pure form because you just create your own token, keep a million for yourself, sell a handful (basically to yourself) for $10k, and then declare that your company’s net worth is $10 billion. If you can get people to loan you money based on that net worth calc, the con pays out nicely.
This is just GOLD: "When early investors give Mira Murati $2 billion in exchange for 1/6th of her company, the company is nominally valued at $12 billion. But that’s also an accounting gimmick. Murati has $2 billion. Once she has spent that money, she will have to go out and ask for some more. She still may not even have a product at that point. All she has is vibes."
I read, perhaps Krugman, that 75% of the US stock market growth is the tech companies and the rest is healthcare. Everything else in the US economy is doing nada. And healthcare is just because of an aging population. So a bubble. Although as many have said the market can stay stupid for far longer than you can stay solvent. Got at least a year to go is my guess.
In the matter of AI infrastructure, this panel discussion *at an energy finance conference* of the difficulty that gas plant constructors anticipate in satisfying demand is amazeballs. There is a big problem and no obvious way to make the ends meet.
https://www.projectfinance.law/publications/2025/august/the-shift-back-to-gas/
Surely “ Spending on AI infrastructure] contributed more to growth in the U.S. economy in the past two quarters than all of consumer spending.” as you cite at the start does not imply the phrase you use near the end that AI expenditure represents “ more economic activity than all consumer spending. ”Contribution to growth is about the absolute change in value, not the value itself, right? Consumer expenditure can be huge but flat. If consumer expenditure saw zero or negative growth, then the new roof I just paid for on my house contributed more to growth than all consumer expenditure.
Not saying AI capex isn’t a huge number but it’s nothing like as big as consumer expenditure… and dammit, someone was wrong on the internet so I had to step in.
Kay’s book is fantastic!
Kevin Phillips, who developed the Southern Strategy for Nixon, eventually turned into a powerful voice opposing the financialization of the U.S. economy. He foresaw the crisis induced by the flood of worthless derivatives and the cynical business community that profits from them. He also recognized the path we were on, the same one trod by the Dutch and British before us.
https://prospect.org/features/bubble-bail/