AI is a bubble so they say. However, I say it is not.
So lets go back 3 years when I wrote here on Forbes:
Nov 24, 2022, 07:52am EST
AI: The Next Candidate For A Market Boom, Bubble, Bust
Not a bad call which I hope you read. So maybe there is a bust to come, but I believe we are firmly in the boom phase. A bubble, well that is in the future.
Then a little under 3 years ago I wrote here:
Feb 16, 2023
AI Dooms Humanity But Not In The Way You Think
Now reading the news, you would think everyone believes its over for Homo Sap. AI is Arnie and he is about to appear from some factory somewhere and terminate us all.
Relax it is not going to happen. I’ve had a couple of years to think about that and I conclude AI is great for us damp, bald, monkeys. Humanity is going to do great. Silicon needs Carbon, its that simple.
Then nearly two years ago I wrote:
Feb 12, 2024
AI will boil the Oceans.
Will Boil The Oceans
Well Elon Musk reckons he will boil the solar system instead and then the galaxy, though he is starting small by boiling the US stock market. The Starlink IPO will be the biggest ever, so apparently he can start the process of draining the sun dry. Why am I getting ‘Ming the Merciless’ vibes?
Why I go back to these articles is not to do a victory lap, though that is quite satisfying its to try and substantiate the possibility of what I am about to predict as being credible. While it is said that past performance is no guide to the future performance of a stock, that might be the case for a pundit too, but here goes with my prediction for what is up next for us and the AI revolution.
The US government is going to have to print new money like it has never printed before: oceans of money, or as Musk might say ‘galaxies of money.’
GULP!
We its not as bad as it sounds, though it could be.
Not only is AI going to boil the oceans and warm up the void of space a trice, it is going to suck every dollar bill out of the financial system and price everyone else out of the debt market… unless. That unless is, unless the government hit CTRL -P and hits it hard. It will have to feed the beast massive amounts of capital or the beast will gobble up everyone else’s liquidity lunch including the government.
The government will need to print untold trillions, so much so in the next decade zeros will be appended to our calculations.
So that sounds like a road to hyperinflation. Yet it is and it isn’t. It could go either way.
The price of the material that goes into AI will go vertical for sure and to be frank Nvidia has set the pace for that with a market cap that disconnects from the history of share pricing even by dotcom standards. Also the price of anything attached to AI will follow, be it energy, commodities like copper and for example anyone half capable of servicing an aircon unit or putting up a big metal shed to house servers. There is and will continue to be a ‘gold rush’ and ‘gold rush’ pricing for key elements that make up AI and its infrastructure.
We have to consider only the US and China is in the AI race at the moment, Europe, India etc have yet to be shocked out of their torpor and they likely will be when they sense the upcoming taste of the lash of subjugation from artificially smarted adversaries.
However it goes an elevated rate of inflation is likely unavoidable, but the key above all else is whether AI delivers real and substantial gains in productivity.
If it doesn’t then there will be an almighty crash, if it does then growth in the global economy will explode.
If you print money and build producing assets, everything pans out. If you print for no reason or in the case of war, profound negativity, the outcome is huge doses of inflation in the aftermath. However, AI looks to be a huge productivity multiplier, that’s the hope and dream.
Meanwhile people find it hard to imagine what people will do when AI replaces them but the answer is, nor did the 95% of the total population that farmed the land as the steam engine was invented. But sure enough, productive work, and lots of it, was invented.
So here we are entering a new phase. If the government prints, there will either be a huge economic boom with elevated inflation, or if there are no productivity gains, there will be massive inflation and the biggest technology flop ever. If government doesn’t print, there be a liquidity and financial crisis of huge proportions. The good news is a Government prints money by its very nature so we can heavily discount a liquidity crisis, so that means boom or bust is the call.
My monies on a boom.