JIM GRANT: 'AI Is “One of the Greatest Bubbles of All Time”'

 

"Q:We heard a stat recently that if you combine SpaceX, OpenAI, Anthropic potential IPOs, inflation adjusted, these are so large, they're as big as all the IPOs in the nineties combined. What do you think about that?

"A: I think that the excitement surrounding the potentialities of artificial intelligence dwarf the excitement generated by the worldwide web and by the internet and by fibre-optic cables. And I think the dollars, of course, even when adjusted for inflation are larger today. And I think that the role of the Fed[eral Reserve Bank] is more intrusive, more problematical than it was then. And I think that a great deal is riding on the efficacy of the technology on which the world's hopes are hanging. And a great deal is also contingent on whether we collectively have correctly calculated (or miscalculated) the demand for tokens, for data centres, and for the rest of the capital that goes into artificial intelligence.

"So you know, you'd think that any technology with 'intelligence' in the very word would be up to date [on the] supply and demand [for it]. But I think there's reason to doubt that. I think there's a great deal of overbuilding, double ordering, just like there was in the late 1990s [with the Dot.Com bubble]. People thought, well, such is the high degree of organisation of all the information relevant to the marketplace that there will be nothing like the macro miscalculations of yesteryear. But it turns out that the human speculative spirit is a pretty wild thing and is not necessarily grounded by better technology.

"On the contrary, sometimes that can only incite it. So I think that [this] today is one of the greatest bubbles of all time. ...

"A guy from Uber, a COO of Uber, a CFO, was quoted the other day as saying, well, it's it's certainly a wondrous technology. We don't see it in our profit and loss. We can't really rationalise the expense just now. This is all kind of the jury's still out on this. It's wonderful -- it's not wonderful; it is hallucinating -- it is smarter than you ever dreamt ...

"What we do know is that the capital draw on AI is as great as it was on the [nineteenth-century] railroad [boom]. And the value proposition of railroads is very simple ...Now it is what? AI, augmenting human intelligence, planning it?

"We don't know. But the capital draw is immense, and there are dollars that are riding on the success of this and on the correct calculation of supply and demand for semiconductors, for data centres and the like. All this is terrifically important and also unknowable at the moment. So this makes it a time well worth living in."

~ Jim Grant interviewed on the Meb Faber Podcast on 'AI Is “One of the Greatest Bubbles of All Time”'

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What Defines an Asset Bubble? What Got Us Out of the Depression? - ROBERT MURPHY SHOW

"... some notion of irrationality or mania intrinsic to it is ... a required ingredient [of an asset bubble]. Because if you don't have that, it's not a bubble. And and that's how I use the term. 

"So, for example, as opposed to a boom. ...  like if they got rid of the IRS ... and we're sure it's not coming back. I think that would lead to an economic boom, but that wouldn't be a bubble. Okay, there might be a bubble involved if it overshoots ... I wouldn't call that a bubble because a bubble's going to pop. Like that's the whole point. That's why they call it that ...

"I would say for it to be a bubble where it unmoored from the fundamentals, and people kind of know it is. ...[that] at some point, this is going to crash hard, but as long as you think you can get out, it can keep going. And so, to me that's clearly a bubble. And again, I think a necessary ingredient of that is there some element that people know this is unmoored from reality.  ... 

" I'm going to say I don't think loose money or government interference or whatever is a part of the definition. ... [T]here could be a bubble even in An-Capistan if there could just be a mania. That could happen, but I think it would be relatively modest, other things being equal, for the same amount of irrationality and willingness to take a gamble or whatever ...

[H]aving a Federal Reserve Bank thrown into the mix is only going to allow that irrationality to get multiplied... So, the biggest bubbles are necessarily going to go along with a central bank."