AI Boom or Bubble?

In February, AI whiz Andrew Tulloch co-founded Thinking Machines Lab from scratch.

Less than 100 days later, Meta’s Mark Zuckerberg offered him A$1.5 billion.

And Tulloch knocked it back.

Zuckerberg clearly thought it was cheap. Tulloch clearly thought he could make a lot more by keeping it.

Meanwhile, people are asking; Are we in an AI bubble?

By almost every measure… yes.

Right now, investors are paying up to $7 for every $1 of assets for AI stocks.

That’s like paying $7 million for a $1 million house.

The last time this happened was in the late ’90s when the internet exploded.

The information superhighway went from a dirt road to a 20-lane freeway overnight. The only bottlenecks were those screeching dial-up connections.

Everyone believed we were moving from ‘bricks and mortar’ to “clicks and order.”

And investors went mad for dot.com stocks.

I remember the MYOB float. The hype was insane and it’s stock price shot the lights out.

People thought accountants would soon be extinct. Today, the demand for accountants has never been stronger.

Meanwhile, Fairfax Media dismissed the whole internet thing as a fad.

Then the bubble burst.

Microsoft, Apple, and Amazon lost 67–95% of their value almost overnight.

For a moment, it looked like Fairfax was right.

Until…

A few years later, a bunch of e-commerce businesses emerged from the ashes.

Three in particular – Realestate.com, Seek.com, and Carsales.com – didn’t just survive.

They tore the classifieds straight out of the Sydney Morning Herald and each grew larger than Fairfax itself.

Now the SMH has shriveled into a flimsy tabloid the dog wouldn’t even fetch.

The same thing will happen with AI.

This bubble will burst and news bulletins will be flashing red.

However, some commentators reckon this isn’t as bad as the dot-com bubble because “AI companies are making money.”

But Microsoft and Apple were making money in 2000 and Amazon was close. That didn’t save them from a big fall.

Here’s the real risk: 95% of businesses pouring cash into AI aren’t seeing a return.

That’s why we’ve witnessed layoffs at ANZ, NAB, Facebook, with plenty more to follow.

But don’t write off AI just yet.

Because the pattern never changes.

Boom. Bust. Reinvention.

Andrew Tulloch just bet a billion bucks he can out-Zuck Zuckerberg.

Have a great weekend!

Adam

Back paddock – just when the caterpillar thought the world was coming to and end, it turned into a butterfly.