The Case for a Bubble

The key word in this chart is expected and we know that unexpected situations occur which can hamper plans. This is coming at a time when organizations are already laying off people which leads some to analyze whether they are truly front running the AI efficiencies or looking for funds to pay for all of this spend coming for the build out of the infrastructure needed for the technology. We saw this happen back in the dotcom bubble when Cisco was soaring given the demand for the networking needed with fiber buildout being behind the demand. It did not stop the bubble from bursting.

In the end, it is all about the net earnings that the new technology will bring. Revenues will continue to be important but margins will reign as the multiples on valuations are expecting stronger growth through these efficiencies. Why would this time be different? I think the signs are near as these AI companies come for more capital with private raises and IPOs which will surely redistribute capital in an interesting fashion. However, it will also expose these players to investor quarter by quarter (short-term) expectations rather that looking for the long-term. It could be a recipe for the bubble to burst.