Name: If Not Bubble... Why Bubble Shaped?
Uploaded: 2025-11-07T05:21:15.000Z
Duration: 11 min 5 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

If you ask anybody what they think about the investment market surrounding AI, they are all going to say the same thing.

And it's easy to see why they might think so.

The entire market is being carried by a few firms speculating about the future of AI.

They are all playing a game of, say, a bigger number every quarter.

The products they are releasing are a long way from covering the cost they are incurring.

And every day it just looks like this whole game is being held together by tech CEOs passing around the same pile of money to make their numbers look good.

This is to say nothing of the outside geopolitical risks that could smother this whole industry.

The more you look into the current state of the market, the less flattering it looks behind the scenes.

But the most dangerous thing in the world is not what you don't know, it's what you know for sure that simply ain't true.

If everybody has agreed that this is a bubble, then why are informed investors still piling billions of dollars into it every month?

Are they dumber than us or do they see something that regular people don't?

Now, I want to say that for the record, I think this whole thing is absolutely cooked.

However, the best way to really understand something is to not seek out information that confirms your beliefs, but

So to play devil's advocate, how is it possible that this whole thing is not just speculative mania?

We as a country need these investments if we're going to be the leader in AI technology.

Jensen Nvidia is making $100 billion investment in OpenAI.

The world's top tech companies are pouring billions into building new data centers in the U.S.

it'll be a world of incredible material abundance.

It'll be a world where individual ability impact whatever is just so far beyond what a person can do today.

But the economic impact of these deals, it turns out, is indistinguishable from full control.

Now, the thing about bubbles is that usually they take some kind of outside force to pop them.

The dot com collapse was kicked off by a combination of factors, but three really stand out.

Microsoft being sued for violation of antitrust laws.

MicroStrategy doing a massive revising of their financial results, causing their stock to fall 60% in a single day and getting them into hot water with the sec.

And a single article that pointed out the unviable business model that a lot of Dot com companies were running on.

A few years later, the housing bubble was popped by the subprime mortgage crisis, which itself was kicked off by rate resets and loan originators filing for bankruptcy.

So if the AI industry was in a bubble, it's had a lot of things that have come a long way which could have popped it Market instability around tariffs, legislative controls over AI chips, rising interest rates, legal challenges over training data, organizational shocks, infrastructure problems concerning studies over business use cases, and

what looks like increasingly desperate attempts to generate any kind of revenue.

That's not to mention that if one article back in 2000 could start unraveling the dot com bubble, surely the daily articles coming out about the problems in this industry should do the same, right?

Well, so far at least, the market has pretty much just shrugged all of this off.

And it's been able to do this for three very important reasons.

The first is where all of this money is actually coming from.

Over the last decade and a half, big US tech companies have slowly built up an enormous pile of cash.

Outside of insurance or financial firms, which are legally mandated to have cash on hand for compliance reasons, tech companies like Microsoft, Meta, Apple and Alphabet have more cash than any other companies on the planet.

After saving it away for the better part of two decades.

They had been doing this for two reasons.

The first was that before 2017, tax laws heavily incentivized shifting cash into offshore accounts primarily held in Ireland.

The exact structures that they used to erode these profits into a haven like this were very complicated, but

once the cash was there, they couldn't really touch it unless they wanted to pay tax on it.

This means that they just slowly accumulated cash, waiting for something to use it on.

However, in 2017, these companies were offered a one time deal to bring back these offshore savings into America for a small tax concession which gave them all a lot of dry powder to make some big local investments.

Now, they have used a lot of that money to do share buybacks, and

they have kept a lot of it abroad to fund their international operations.

But they also earmarked billions for future capital expenditures.

Now, the second reason they built such huge cash reserves was because for a while these companies were actually struggling to find projects worth investing in.

They had become so dominant in their respective markets that spending a lot of money on development was seen as an unnecessary expense that wasn't really worth the risk.

the big companies that are driving most of the expenditure on data centers are almost making up for a lost decade where they were arguably not investing enough money into new projects.

This also applies to all of the money they are introducing into the system to support less established firms like OpenAI.

Sure, the money is getting passed around a lot once it's in the system, but

the initial source of these funds is largely coming from piles of cash these companies had sitting on the sidelines.

This means, compared to something like the housing bubble, which was propped up on a lot of debt and rigid derivatives, these companies are at least building atop a solid fiscal foundation.

Now, of course, having a strong foundation does not guarantee that the house you build on top of it will also be good.

Similarly, just because these companies happen to be holding onto trillions of dollars doesn't necessarily mean that setting it all on fire to chase one single bet is a good idea.

It also doesn't mean that regular investors won't get burned if this money suddenly gets yoinked back off the table.

So it's time to learn how money works to find out what else could possibly explain this all not being a bubble.

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That's Cape co Getcape One of the most concerning trends that has developed in this space is the circular dealing between all of the companies involved in different areas of this industry.

We first covered this about two months ago when Oracle's stock price spiked after reporting a huge data center rental commitment from OpenAI, who had raised billions of dollars from Nvidia, who made that money in the first place by selling graphics cards to companies like Oracle.

Since then, the deals have only gotten bigger and reporters have done a really good job piecing together just how far and wide this web of financial f ckery goes.

Now, most commentary has rightfully called this out as companies pulling themselves up by their own bootstraps.

They are making their revenue look better than they really are by investing in their own customers.

Not exactly a sustainable business model.

However, to play devil's advocate again, there is something to be said about this strategy from a risk mitigation perspective.

When people look back with the benefit of hindsight at the dot com bubble, they all say the same thing.

after a major correction there were still some big winners that emerged, some of them being the same tech companies involved in the AI market right now.

Nvidia investing into a company like OpenAI right now looks a little bit suspicious, but

had a company like AOL invested in Amazon Back in 1999, we would probably be a little less critical.

By investing up and down the supply chain, if you could call it that, these companies are in theory maximizing the chance that they will capture the value eventually generated through AI.

There is also one other really important detail that a lot of people gloss over when exposing this financial circle jerk.

It's easy to look at this and conclude that this whole market is just a Ponzi scheme popped up by investor hype.

The only problem with that deduction though is that they aren't really taking investors money netted out, the major players in this industry are paying out far more money through dividends and stock buybacks than they are taking in through stock issuance or borrowing.

When compared again to the dot com bubble, the story was very different.

Hyped companies were dependent on bringing in a continuous stream of investor money to keep the lights on in businesses that made no profit and often didn't even make any revenue.

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If Not Bubble... Why Bubble Shaped?

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