Submission + - The AI Bubble That Isn't There (forbes.com)
smooth wombat writes: Michael Burry recently said he believes the AI market is in a bubble. Why should anyone listen to him? He's the guy who famously predicted the subprime mortgage crisis and made $100 million for himself, and $725 million for his hedge fund investors, by shorting the mortgage bond market. Will he be right in his most recent prediction? Only time will tell, but according to Jason Alexander at Forbes, Burry, and many others, are looking at AI the wrong way. For him, there is no AI bubble. Instead, AI is following the pattern of the electrical grid, the phone system and yes, the internet, all of which looked irrational at the time. His belief is people are applying outdated models to the AI buildout which makes it seem an irrational bubble. His words:
The irony is that the “AI bubble” narrative is itself a bubble, inflated by people applying outdated analogies to a phenomenon that does not fit them. Critics point to OpenAI’s operating losses, its heavy compute requirements and the fact that its expenses dwarf its revenues.
Under classical software economics, these would indeed be warning signs. But AI is not following the cost structures of apps or social platforms. It is following the cost structures of infrastructure.
The early electrical grid looked irrational. The first telephone networks looked irrational. Railroads looked irrational. In every major infrastructural transition, society endured long periods of heavy spending, imbalance and apparent excess. These were not signs of bubbles. They were signs that the substrate of daily life was being rebuilt.
OpenAI’s spending is no more indicative of a bubble than Edison’s power stations or Bell’s early switchboards. The economics only appear flawed if one assumes the system they are building already exists.
What we are witnessing is not a speculative mania but a structural transformation driven by thermodynamics, power density and a global shift toward energy-based intelligence.
The bubble narrative persists because many observers are diagnosing this moment with the wrong conceptual tools. They are treating an energy-driven transformation as if it were a software upgrade.
The irony is that the “AI bubble” narrative is itself a bubble, inflated by people applying outdated analogies to a phenomenon that does not fit them. Critics point to OpenAI’s operating losses, its heavy compute requirements and the fact that its expenses dwarf its revenues.
Under classical software economics, these would indeed be warning signs. But AI is not following the cost structures of apps or social platforms. It is following the cost structures of infrastructure.
The early electrical grid looked irrational. The first telephone networks looked irrational. Railroads looked irrational. In every major infrastructural transition, society endured long periods of heavy spending, imbalance and apparent excess. These were not signs of bubbles. They were signs that the substrate of daily life was being rebuilt.
OpenAI’s spending is no more indicative of a bubble than Edison’s power stations or Bell’s early switchboards. The economics only appear flawed if one assumes the system they are building already exists.
What we are witnessing is not a speculative mania but a structural transformation driven by thermodynamics, power density and a global shift toward energy-based intelligence.
The bubble narrative persists because many observers are diagnosing this moment with the wrong conceptual tools. They are treating an energy-driven transformation as if it were a software upgrade.
