What is the scare factor here. Is it about stock market investments, or about privatly funded startups? Or is it a fear that AI will revolutionize business practices, and as a result, established companies will fail? Tons of money goes into AI. Investors weigh risks against cost of capital. Is that risk the cause for the hype? Should we be afraid investors are paying too much for capital that might turn out to be a failed startup?
The fear is that a lot of the cash flow in the AI industry is circular, and mostly being paid for by investors. The problem is that companies are purchasing products using their own stock. OpenAI gives stock to Nvidia in exchange for GPUs, causing Nvidia’s and OpenAI’s stock prices to rise. But the question is, where did the money to produce those GPUs come from? Neither OpenAI nor Nvidia spent money, yet OpenAI got products.
Furthermore, AI has artificially raised demand. No one wants an AI to tell them what to eat for lunch, but in order for Google to have a “profitable” AI division, they must implement AI into everything to raise the stock price.
Worse still, Nvidia is involved in a tactic to sell GPUs at a discount in exchange for the data centers they sell to using the GPUs. In other words, Nvidia is paying other companies to use their products!
This isn’t about whether AI is a risky investment, it’s about AI companies abusing the market and whether real demand can catch up with artificial demand.