The WSJ is publishing articles almost daily about the immense spending on AI, the lack of customer end-user purchasing of the service and the incredible debts needed to build out the vision for the future. Here is the latest. I think that speculators are finally getting the message that the AI stock bubble may be a true, classic bubble with no near-term profits.

stockcharts.com: SharpCharts | StockCharts.com

Since the Magnificent 7 stocks are now 40% of the cap weighted S&P500 index many people who simply invest in a low-cost index fund will be heavily impacted if (when) the bubble bursts.

wsj.com - When AI hype meets AI reality a reckoning in charts

When AI Hype Meets AI Reality: A Reckoning in 6 Charts
Record capital expenditures and data-center planning run up against the ground truths of physical infrastructure

By Christopher Mims and Nate Rattner, The Wall Street Journal

Here’s a way to evaluate the riskiness of the world’s collective investment in artificial intelligence: Can we even build all the necessary physical infrastructure? And if so, will the resulting AI-powered products generate enough revenue to pay back that investment?…

There is effectively “infinite” money available right now to build out new data centers, says Jim Schneider, a senior research analyst at Goldman Sachs. All this investment has translated into record spending on the stuff that goes into data centers—aka “AI supercomputers”—all those chips, servers, HVAC systems, transformers, gas turbines, power lines and power plants.

There are absolute, physical limits to how quickly all of that can be delivered. As a result, some projects are already being delayed….

Then JPMorgan Fundamental Research calculated how much new revenue these companies will have to generate to justify that $5 trillion investment in AI supercomputers [through 2030]. The result: AI products would have to create an additional $650 billion a year, indefinitely, to give investors a reasonable 10% annual return. That’s more than 150% of Apple’s yearly revenue, and a far cry from OpenAI’s current revenue of about $20 billion a year….

The takeaway: The projections of AI companies and their partners don’t reflect shortages of equipment. At the same time, these projections assume a gargantuan market for AI-powered products and services. Analysts can’t agree whether that market will materialize as quickly as promised…. [end quote]

The AI bubble resembles the railroad bubble of the 1840s (UK) and 1870s (US) and the internet bubble of 2000. Eventually these technologies became widely used and transformative. But the early investors lost their shirts due to over-investment before the paying customers showed up.

Wendy