Furthermore, many stocks trade at exorbitant valuations, and there are still questions about the extent of AI's capabilities and what could happen to the economy if AI advances as some bulls expect.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
If an AI bubble is about to burst, history says this one move is crucial right now.
What could pop the AI bubble?
The interesting thing about market crashes is that they are typically unexpected. After all, if everybody is concerned about a crash for a specific reason, they are likely to prepare for it, so whatever ends this current bull market will likely be a surprise.That said, the big concerns right now stem from the key players powering most of the AI revolution and financing most of it.
Right now, frontier AI , such as those from OpenAI and Anthropic, seem to be the main drivers of revenue growth and planned capital expenditures on AI infrastructure for hyperscalers.
However, these companies now have large valuations and are reportedly nearing initial public offerings, which many fear is one of the last main avenues for a big capital raise. If one of these companies were to go down, would there be others to take its place and rent all the AI compute that the hyperscalers are building?
There's also concern that while OpenAI and Anthropic dominate the LLM landscape right now, they could soon have competition from open-source models, which are reportedly much cheaper for businesses to use.
Nvidia, the dominant AI chipmaker, now also seems to be providing much of the industry's financing, whether by helping a fund a data center build-out or by investing in its customers and suppliers.
It's even been discussed that the possibility of creating securities collateralized by chips to fund other big AI projects. Critics have called many of these arrangements circular and see them as a warning sign.
