I recently gave a business talk about how, yes, there is an AI bubble, but AI trends are real and will change society. I used two of the same three companies you did to say just because a bubble bursts, it doesn’t prevent some companies from changing society anyway. I used Amazon, Apple, and Microsoft.
The best advice I read recently was not to exit the market. As long as the music plays, they will keep on dancing. But the advice was to sell your more speculative investments and raise your cash percentage a bit. Keep the rock solid investments which, like Apple in 2000-2001 did fall with everything else. But the rock solid ones bounce right back, while the ones playing with accounting fiction struggle to recover. If you have a bit more cash, you are more cushioned in a crash.
Finally, just because a crash may be coming, it can take longer than you think is rational. Irrational market behavior is a feature, not a bug.
I mostly agree, but I'll push back on one thing: - 'Keep the rock solid investments' assumes you can reliably identify them in real-time.
In 1999, Cisco, Intel, and Microsoft were the solid plays. All three were profitable, dominant, and essential infrastructure. All three fell 60-80%. Microsoft took 15 years to recover its 2000 high. Intel never did.
The issue is valuation. Apple survived because by 2000 it was cheap relative to assets. Cisco collapsed because it was priced for perfection. Both were decent companies.
The 2025 scenario is Microsoft at 30x earnings 'rock solid' or is it pricing in AI revenue that may take 5 years to materialize? I don't know. Neither does anyone else. That's the risk here.
I won’t disagree other than to say we are just talking timing. The ones that are rock solid (profitable, making a product or service in great demand) do bounce back, though yes, it can take a while. But nobody who held Apple regretted it in the long run.
Oh yes indeed, between Nvidia created tech stock jitters and the Orange Buffoon, the stock markets have had more troughs and spikes than my ECG readings lately; I'm starting to think my grandparents' investment strategy of piling funds under the pillow is the safest option! :) Your post nails it as always, there is in my opinion a very large bubble blowing up which is going to either slowly deflate or burst dramatically in the foreseeable future - as for valuations, it's the ultimate kicking of the can down the road. Here in Oz you can purchase a car on finance with a balloon payment at the end..... so those who want to buy a car they can't really afford for say $100K, can have a balloon payment of say 40% at the end of the loan of 5 years; at the end of year 5 they have a balloon payment of $40K on a car likely worth $30K at best - I see these AI stocks resembling that but exponentially more dramatic! Buckle up Sis!!
The markets are giving me whiplash, too. Your grandparents’ pillow strategy is starting to sound very appealing 😂. My grandmother used to do the same thing.
She hated banks.
History has shown that these kinds of bubbles always leave someone holding the bag… hopefully not us 😉.
Happy early Wednesday morning (ish) Sis? I claim the 5th.... how's yours?
Ha ha right, I used to say they were nuts but, in hindsight (like the best investors) they had skills! Fingers crossed we're not holding the bag, unless there's good stuff in it! Ha ha
Of course... it's Thanksgiving - Happy Thanksgiving to you and Ryan. I hope you have a wonderful weekend. I am very grateful for you Sis! Take care and keep smiling! 🤗
AI is real - it is. The problem, as you brilliantly frame it, is the fucking accounting fiction: $16 spent for every $1 earned in AI revenue is market signaling driven by FOMO, not profit-seeking.
We're all blinding waiting for When assets become obsolete in two years but are stretched out to five on the balance sheet, it's a deliberate misrepresentation of reality that makes the dot-com era look like amateur hour by comparison.
Thiel's move isn't hedging; it's recognizing that the emperor of the AI hardware gold rush currently has no clothes, and is walking around naked.
Market signaling driven by FOMO is the entire game right now.
The naked emperor with an astronomical market cap is such a perfect image. Everyone can see it. They're just hoping they're not the last one holding the bag when the music stops.
I have a feeling they will ask American taxpayers to bail them out in 16 months.
Apologies for the tardy response, last week was busy (in a nice way). Pattern spotting is a great talent - I'm quite envious of people who can recognise pattens.
Eyyy what's up Neela! Just dropping a comment not just coz the article's fire (and so interesting to see you riffing on Michael Burry's fascinating article) but also to say hello! 👋
I had to take a bit of a break from Substack to focus on competing priorities but stepping back into the community again. Looking forward to catching up and re-connecting again!
Thanks for this! A company I worked in - well, heck, many of the companies I worked for - would do exactly this: financial misdirection, paint a rosy picture, hiding the details in chunks of numbers. Of course, the CFOs - they're the ones highly paid - to do exactly this. UGH.
Neela, I really enjoyed this piece. It feels like classic you: sharp, memorable, and built around a core point that lands with real force. That 15:1 (or 16:1) spending-to-revenue ratio is the most striking statistic I have seen on the AI boom all year. Pairing it with Thiel’s complete exit from Nvidia and Burry’s detective work on depreciation creates a genuinely influential combination. It is the kind of piece that makes even the most optimistic readers pause and reconsider their assumptions, which is precisely what strong contrarian writing should do.
If I have one gentle point of pushback, offered in the spirit of friendly debate, the 1999 comparison, while emotionally spot-on, may slightly exaggerate the current setup's overall fragility. Today’s capital is concentrated in a small set of trillion-dollar companies with robust cash flows and quiet government support. That is very different from the late-nineties landscape of hundreds of unprofitable startups and retail margins. To me, the downside looks more like a painful 20 to 40 percent reset than a full-scale 2000-style collapse. But that is a question of magnitude, not direction.
In any case, this is the most readable version of the idea that the industry is spending as if the payoff is already here, while the revenue remains mostly theoretical.
I hear you on the structural differences. The capital concentration today is real and significant, but it's more for me about the tempo of investment versus the pace of monetization. A 20–40% reset wouldn’t surprise me, and frankly, aligns with what emerging data suggests. I appreciate your input here.
This is the best, most accessible analysis of the Ai bubble I've ever read. While I already knew that Ai companies had yet to have real, sustainable net profits, I now see and understand the concerning red flags that you pointed out. I am not in this field. So, thank you Neela!
Thanks. I admire how well you decipher trends in your field. It is a field that my brain can’t assess as well as you do. So, thank you! Have a wonderful holiday, amiga!
As much as I can't stand reading about Thiel (because of the type of human being he is, lol), when he dumped Nvidia, it felt significant.
So much of this is outside my wheelhouse (I can't wrap my head around the valuations of some of these companies), but I wonder how the chaos & instability of the US govt will impact it all (and what will happen to the dollar along the way).
I understand exactly how you feel, Kim. I abhor Mr Thiel.
The US political turbulence is a major wild card, especially for dollar strength. None of this is happening in a vacuum, which is what makes the coming year so fascinating. Good luck to all of us. Thank you so much for subscribing and for taking the time :)
Hey Neela, Happy Saturday from South Lake Tahoe (vacationing within California so it will be economically the “tip of the spear” in soft succession ). This reminds me of another economic observation one of my political mentors told me more than 20 years ago--that the only mainstream media outlet to read was ‘The Wall Street Journal’ because to understand the American empire, one must “follow the money.”
You've got this one exactly right Neela! The bubble will burst and it will burst soon.
It will take a few more years, but we will see some interesting things for sure.
Thank you so much for showing up here Dinah :)
I recently gave a business talk about how, yes, there is an AI bubble, but AI trends are real and will change society. I used two of the same three companies you did to say just because a bubble bursts, it doesn’t prevent some companies from changing society anyway. I used Amazon, Apple, and Microsoft.
The best advice I read recently was not to exit the market. As long as the music plays, they will keep on dancing. But the advice was to sell your more speculative investments and raise your cash percentage a bit. Keep the rock solid investments which, like Apple in 2000-2001 did fall with everything else. But the rock solid ones bounce right back, while the ones playing with accounting fiction struggle to recover. If you have a bit more cash, you are more cushioned in a crash.
Finally, just because a crash may be coming, it can take longer than you think is rational. Irrational market behavior is a feature, not a bug.
Happy Tuesday Nick,
I mostly agree, but I'll push back on one thing: - 'Keep the rock solid investments' assumes you can reliably identify them in real-time.
In 1999, Cisco, Intel, and Microsoft were the solid plays. All three were profitable, dominant, and essential infrastructure. All three fell 60-80%. Microsoft took 15 years to recover its 2000 high. Intel never did.
The issue is valuation. Apple survived because by 2000 it was cheap relative to assets. Cisco collapsed because it was priced for perfection. Both were decent companies.
The 2025 scenario is Microsoft at 30x earnings 'rock solid' or is it pricing in AI revenue that may take 5 years to materialize? I don't know. Neither does anyone else. That's the risk here.
I appreciate you chiming in and restacking.
I won’t disagree other than to say we are just talking timing. The ones that are rock solid (profitable, making a product or service in great demand) do bounce back, though yes, it can take a while. But nobody who held Apple regretted it in the long run.
Nobody did.
Thank you Nick :)
There is an insane intertwined system with Nvidia, Oracle, Microsoft, Apple et al. that is way off now. Thanks for the pattern recognizing here!
Good eye bro. That systemic interdependence is exactly what makes single stock analysis misleading right now. I calll it the daisy chain lol
Thank you for chiming in bro.
Happy Tuesday!
Oh yes indeed, between Nvidia created tech stock jitters and the Orange Buffoon, the stock markets have had more troughs and spikes than my ECG readings lately; I'm starting to think my grandparents' investment strategy of piling funds under the pillow is the safest option! :) Your post nails it as always, there is in my opinion a very large bubble blowing up which is going to either slowly deflate or burst dramatically in the foreseeable future - as for valuations, it's the ultimate kicking of the can down the road. Here in Oz you can purchase a car on finance with a balloon payment at the end..... so those who want to buy a car they can't really afford for say $100K, can have a balloon payment of say 40% at the end of the loan of 5 years; at the end of year 5 they have a balloon payment of $40K on a car likely worth $30K at best - I see these AI stocks resembling that but exponentially more dramatic! Buckle up Sis!!
Happy Wednesday evening bro
How is your week going?
The markets are giving me whiplash, too. Your grandparents’ pillow strategy is starting to sound very appealing 😂. My grandmother used to do the same thing.
She hated banks.
History has shown that these kinds of bubbles always leave someone holding the bag… hopefully not us 😉.
Thank you so much for taking the time :)
Happy early Wednesday morning (ish) Sis? I claim the 5th.... how's yours?
Ha ha right, I used to say they were nuts but, in hindsight (like the best investors) they had skills! Fingers crossed we're not holding the bag, unless there's good stuff in it! Ha ha
You're beyond welcome Sis 🙏 🤗
I am looking forward to a nice, long weekend here.
Grateful for you bro 🤗
Of course... it's Thanksgiving - Happy Thanksgiving to you and Ryan. I hope you have a wonderful weekend. I am very grateful for you Sis! Take care and keep smiling! 🤗
thank you so much bro 🫂
AI is real - it is. The problem, as you brilliantly frame it, is the fucking accounting fiction: $16 spent for every $1 earned in AI revenue is market signaling driven by FOMO, not profit-seeking.
We're all blinding waiting for When assets become obsolete in two years but are stretched out to five on the balance sheet, it's a deliberate misrepresentation of reality that makes the dot-com era look like amateur hour by comparison.
Thiel's move isn't hedging; it's recognizing that the emperor of the AI hardware gold rush currently has no clothes, and is walking around naked.
Just an astronomical market cap sis.
You know it, sis.
Market signaling driven by FOMO is the entire game right now.
The naked emperor with an astronomical market cap is such a perfect image. Everyone can see it. They're just hoping they're not the last one holding the bag when the music stops.
I have a feeling they will ask American taxpayers to bail them out in 16 months.
Let's see how that goes.
Thank you so much for taking the time.
I have no idea what the future will hold with AI, but I'm glad Chester made an appearance.
He sure did.
He gave me good luck on Medium with this article.
I should include him in all my future articles.
Happy Friday Marcus
Apologies for the tardy response, last week was busy (in a nice way). Pattern spotting is a great talent - I'm quite envious of people who can recognise pattens.
Happy December Tina
No apologies necessary.
Trust me, I get it lol
It’s my superpower :)
I'm sitting in my little patternless corner looking at you enviously!
hehehehehe
why?
sometimes I don’t want to see patterns except the ones on my tablecloth.
Perhaps I should get a tablecloth, then I could tell people honestly that I see patterns in everyday life, ha ha!
You made me LOL
You can do that Tina.
Eyyy what's up Neela! Just dropping a comment not just coz the article's fire (and so interesting to see you riffing on Michael Burry's fascinating article) but also to say hello! 👋
I had to take a bit of a break from Substack to focus on competing priorities but stepping back into the community again. Looking forward to catching up and re-connecting again!
So good to see your name pop up again!
Life happens - totally get needing to step back for priorities.
Honestly, taking breaks and coming back is probably healthier than the rest of us who are chronically online 😂
As always, I appreciate your support, Scott.
Thanks for this! A company I worked in - well, heck, many of the companies I worked for - would do exactly this: financial misdirection, paint a rosy picture, hiding the details in chunks of numbers. Of course, the CFOs - they're the ones highly paid - to do exactly this. UGH.
And somehow the numbers always look just fine… until they don’t.
It’s so common in tech, Parves.
And you’re right… CFOs are handsomely rewarded for the illusion.
Thank you for taking the time.
Well, shit!!!
I never got that reaction before Kisane. 🤣
Anything with the word SHIT is positive.
Welcome to my community 🙌
So glad I’ve found you ☺️
I look forward to it.
Enjoy the rest of your week Kisane.
Neela, I really enjoyed this piece. It feels like classic you: sharp, memorable, and built around a core point that lands with real force. That 15:1 (or 16:1) spending-to-revenue ratio is the most striking statistic I have seen on the AI boom all year. Pairing it with Thiel’s complete exit from Nvidia and Burry’s detective work on depreciation creates a genuinely influential combination. It is the kind of piece that makes even the most optimistic readers pause and reconsider their assumptions, which is precisely what strong contrarian writing should do.
If I have one gentle point of pushback, offered in the spirit of friendly debate, the 1999 comparison, while emotionally spot-on, may slightly exaggerate the current setup's overall fragility. Today’s capital is concentrated in a small set of trillion-dollar companies with robust cash flows and quiet government support. That is very different from the late-nineties landscape of hundreds of unprofitable startups and retail margins. To me, the downside looks more like a painful 20 to 40 percent reset than a full-scale 2000-style collapse. But that is a question of magnitude, not direction.
In any case, this is the most readable version of the idea that the industry is spending as if the payoff is already here, while the revenue remains mostly theoretical.
Keep writing, dear friend.
Happy Wednesday, Lucille
So sorry for the delayed reply.
I completely missed this comment...
You can push back at any time :)
I hear you on the structural differences. The capital concentration today is real and significant, but it's more for me about the tempo of investment versus the pace of monetization. A 20–40% reset wouldn’t surprise me, and frankly, aligns with what emerging data suggests. I appreciate your input here.
How is your week going ???
💡
Thank you for stopping by Destiny …
This is the best, most accessible analysis of the Ai bubble I've ever read. While I already knew that Ai companies had yet to have real, sustainable net profits, I now see and understand the concerning red flags that you pointed out. I am not in this field. So, thank you Neela!
Thank you so much, Luna.
I’m glad the way I broke it down made the whole thing feel less intimidating. If you ever want a sanity check on any other tech topic, I’ve got you.
Enjoy the holiday Luna 🤍🤗
Thanks. I admire how well you decipher trends in your field. It is a field that my brain can’t assess as well as you do. So, thank you! Have a wonderful holiday, amiga!
thank you Luna 🫂
Great piece, thank you.
Hey Paul
Thank you so much for reading and for the feedback :)
Great article, Neela,
As much as I can't stand reading about Thiel (because of the type of human being he is, lol), when he dumped Nvidia, it felt significant.
So much of this is outside my wheelhouse (I can't wrap my head around the valuations of some of these companies), but I wonder how the chaos & instability of the US govt will impact it all (and what will happen to the dollar along the way).
It will be interesting to say the least.
I understand exactly how you feel, Kim. I abhor Mr Thiel.
The US political turbulence is a major wild card, especially for dollar strength. None of this is happening in a vacuum, which is what makes the coming year so fascinating. Good luck to all of us. Thank you so much for subscribing and for taking the time :)
You're so welcome, I love your content & am thrilled to have found you and connected with you.
Yeah, he's a piece of work. Lol.
Happy Thanksgiving Kim
I hope you have a wonderful holiday :)
Hey Neela, Happy Saturday from South Lake Tahoe (vacationing within California so it will be economically the “tip of the spear” in soft succession ). This reminds me of another economic observation one of my political mentors told me more than 20 years ago--that the only mainstream media outlet to read was ‘The Wall Street Journal’ because to understand the American empire, one must “follow the money.”
Hi James
How are you?
enjoy Tahoe!
Your mentor wasn’t wrong, if you follow the money, you usually find the truth.
The WSJ is the one outlet that still treats economics like the spine of the whole narrative.
Thank you for taking the time to read, restack, and leave feedback.
I appreciate you.
enjoy your holiday weekend!
Thanks Neela. Appreciate you. You have a good weekend 😄
thank you James :)