馃馃 AI: THE NEW BUBBLE? 馃馃
It's difficult to predict. Every speculative bubble forms when everyone believes a new paradigm has emerged and they want to profit from it. No matter what financial bubble analysis you do (railways in 1830, the gold rush in 1850, the crash in 1929, oil in 1970, dot-com in 2000, or subprime mortgages in 2008), when one is triggered, everyone focuses on opening related businesses, overinvests in that sector, and believes high returns are the standard. In fact, if you don't participate, you're labeled "unskilled" and "outdated," if not naive. The pattern is the same: when everyone has witnessed the huge profits of a few, they want to jump in to generate the same because they've "validated" that this will be the new "average returns".
AI will be the next technological revolution, and it will replace you. Don't doubt it. However, the cycle has likely only just begun and hasn't burst yet (it could only has bearish traps). Today, many "experts" are warning about the bubble; people doubt AI because they've seen errors in the responses of AI models and still believe in the superiority of the average person's "intellectual/creative" abilities. Many aren't yet convinced.
In fact, it's simply an oligopoly of companies focused on this. Many returns and valuations are questionable and generate fear, not the complacency of believing it's a safe investment. There are high valuations, but "the market can remain irrational longer than you can remain solvent" (J. M. Keynes) . Perhaps the bubble will burst when everyone expects a correction to buy in, or when iconic AI models go public: #ChatGPT, #Grok, #Gemini, #DeepSeek, #MetaAI, #Claude, #Perplexity, #Midjourney, etc.
The chart shows an example of some metrics (Return Over Capital Employed vs Revenues Growth) in the AI supply chain. Some relevant companies are:
- Semiconductors: Nvidia, AMD, Broadcom, Taiwan Semiconductors Manufacturing, ASML
- AI models: Microsoft, Meta, Oracle, Google, Palantir
- Infrastructure: Amazon, Equinix, Digital Realty Trust
- Energy and critical components: NuScale Power, Vertiv Holdings
When everyone says the market will crash or keep rising, it's more likely to stay sideways. It's hard to predict. Maybe this isn't a big bubble, and the big one is yet to come.
The best analysis is yours!
J. Joel Padilla
Copyright: Joel Padilla 2025
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