r/valueinvesting
What are your thoughts on AI bubble, is it real or not?
Questioning the sustainability of AI capex: will hardware ROI justify massive investments before obsolescence?
- Rapid hardware obsolescence may prevent data centers from generating sufficient long-term profit.
- Massive capital expenditures might not be justified if AI applications fail to scale profitability quickly enough.
\- What is your opinion on the AI bubble?
\- If AI is really a bubble, why hasn't it burst already, especially after many of the industry's challenges and limitations became widely known?
\- Why does the market continue to invest so heavily in it?
\- Do you think these massive investments will ultimately be justified?
\- For example, data centers may remain useful for many years, but what about the hardware and equipment inside them?
\- Will they generate enough profit before they need to be replaced with newer and more powerful technology?
The technology is real... The valuation is not. It will correct and then grow hearlhtily.. don't chase highs and don't sell if you brought low. Keep the cash and buy when these stocks go low and people sell
Couldn’t agree more
They are building a shit load of data centers in my area. More scheduled over the next two years. They keep buying more and more land.
This is happening all over the country.
Why would anyone think this is going to stop ?
And what etf is good to invest in regarding data centers usage
Bubble, no because there is real money being spent and real profits being made. Overvaluation, yes. I think the distinction is worthy of a defined line between hype and real cash flows.
Where are the real profits being made? At least excluding NVDA and chips
There were real profits being made in the internet bubble, as well. Cisco Systems sold boatloads of network routers.
The issue with the LLM bubble is that end users, model developers and hyperscalers aren't seeing a ROI. IMO, they're unlikely to in the near future, as 1) there's limited utility to language simulators that can't model the real world, are poor at logic and math, and confidently report hallucinated falsehoods; 2) technical debts accumulating from unreliable, inefficient, insecure and unmaintainable code are growing faster than benefits; 3) hollowing out and loss of institutional expertise, as tens of thousands are laid off to pay for tokens and data center construction; 4) the hostility of younger generations to LLM slop are justified, and 5) its a dead end for AGI development.
IMO, the only entities that are making bank are the chip and other hardware makers and data center construction contractors, but they're selling shovels to a gold rush where there's only iron pyrite.
Besides short term winners like NVDA, AVGO and TSMC, the only megacap that's responded prudently and in their shareholder's interests is AAPL. Their researchers have led in delineating some of the limitations of LLMs, but they're leaving the malinvestment to others. Still wouldn't buy it at current valuations.
Real profits? Big tech giving money to model companies that then give it back to hyperscalers for cloud compute? That is real?
We could pay each each our net worths back and forth ad nauseum under the umbrella of outward facing product that serves humanity, we would demonstrate considerable sales....
That's ai... Tons of back and forth in the building, very little final "what's the point" end user, and as far as anyone can tell, not even profitable on that trickle of revenue...
It will be a bubble when people stop talking about it being a bubble.
There was no Internet bubble in 2000. Talk of the Internet bubble was in 1997, when Greenspan made his famous "irrational exuberance" speech.
Then the 1998 bear market came, and everyone felt vindicated. See, I told you it was a bubble! And it burst!
But then NASDAQ rose over 200% from the 1998 lows and it took two more years for the bubble to finally burst.
If we're in a bubble, it's still being inflated. Of course, we will have volatility, maybe even a cyclical bear market that will bring down the euphoria and make people fearful again. That will wind up being a generational buying opportunity.
I'm telling ya. Awesom reply.
Too big to fail
I wish I had a crystal ball, but it's definitely a scenario I'm preparing for.
The magnitude and velocity of the move from the March lows is unprecedented. While this thrust is quite bullish for the longer-term, it has put us into a severely overbought condition.
There are many gaps in price in this rally. Most gaps get filled. I can easily see a scenario where the market correction takes us all the way back to the prior all-time high. This would be around a 15% correction in NASDAQ 100, perfectly normal in a secular bull market, even though it will feel like the world is ending.
A 20% correction (technically a cyclical bear market) would take us back exactly to the April 7 level just before the gap the next day ignited this historic rally. That would fill all the gaps and certainly shake out all the excess.
I believe we are still in the middle innings of the AI buildout and stocks are going much higher over the next few years. But there will be nasty corrections along the way.
Ask an AI to compare the Nifty Fifty days to today.
it got saved by luck