The biggest sign of a bubble to start appearing. While Jeff Bezos talks about her benefits, an expert warns: “The situation gets out of control”

“When speculative bubbles appear, intelligent people become too excited about a grain of truth,” Sam Altman recently said for the American Tech The Verge.

• An economic bubble is a period when the prices of assets increase rapidly and dramatically, exceeding their real value. This phenomenon, also known as a speculative bubble, involves transactions with high volumes at exaggerated prices, often leading to a sudden collapse of prices and sometimes to an economic crisis.

The artificial intelligence market is in a bubble phase, against the background of enthusiasm and huge expenses in the industry. An expert in economics spoke to Axios journalists about the biggest sign that Bula would start to appear.

The warning that put on the market AI

“We are in a phase in which investors as a whole are too excited about you? My opinion is that yes. It is the most important thing that has happened for a long time? My opinion is also yes,” Altman said in August for The Verge.

The CEO of Apeneai has made anxiety in the market for artificial intelligence, where investors have become cautious about new transactions, and actions have registered visible fluctuations in the last few weeks.

And the founder of Amazon, Jeff Bezos, recently spoke about the fact that artificial intelligence is currently in a “in a speculative bubble”. But according to him, the technology is “real” and will bring huge benefits to society. “Artificial intelligence is real and will change each industry,” Bezos said at the beginning of September, at Italian Tech Week, according to CNBC, quoted by News.ro.

“The situation gets out of control”

Dario Perkins, the general director of the Department of Global Marcroeconomics of the TS Lombard Economic Consulting Company, told Axios that the biggest sign that Bula would begin to appear are the debts that the technological companies have.

The respective debts and the way they are structured represent “almost a recognition that the situation gets out of control,” said Dario Perkins.

Axios explains that debts represent the alarm signal for market bubbles: the real estate debt has fueled the global financial crisis; The corporate debt led to the collapse of the dotcoms. “Now, the technological companies that run the ascending market today are quiet, sometimes through private creditors, who do their less visible duty for shareholders,” notes the American publication.

Regarding the yield of expenses to have, the big technology companies “I say they do not care if the investment has any yield, because they are in a race … This is definitely an alarm,” says Perkins.

He sees two major problems in what happens at this time in the AI ​​market: increasing the lever effect to finance the expensive infrastructure of Ai (no use of a small capital amount to control a much larger investment position, thus amplifying both the profit and loss potential) and little opportunities to make money once.

The big technology companies are going to private markets of debt and special purpose entities. And this, writes Axios, is a problem because this type of loan should not be reflected in balance sheets.

“Companies such as Meta should not present the debt as theirs,” says Perkins. He compares the current financing tactics with the subprime era, when the companies transferred the risk outside the balance sheets to calm the investors.

Meta is looking to get $ 29 billion through private capital for the construction of its AI data center.
Other technological giants resort to the public market to be indebted. Oracle recently issued dollars of $ 18 billion to finance their expansion in the field of AI and infrastructure.

The current earnings boom cannot last endlessly

The experts who spoke with Axios reminded of the old Keynesian Adagiu (no maximum or an economic principle based on John Maynard Keynes, who claims that an unpaid and poorly paid population leads to a decrease in purchasing power): “The market may remain irrational longer than you can remain.”

In other words, this technology -driven market could still have the potential to create more wealth before Bula breaks. Perkins, however, is not convinced. “I would not touch these things now,” says Perkins, adding that, comparing this market with Bula Dotcom, “we are much closer to 2000 than 1995.”

Why do technology companies spend so much to win the race, if the risk of a bubble is so predictable?

Because the market rewards them, even if it “does not make an economic sense to spend at this level, because they have no chance to recover the value of capital expenses”.

Paul Kedrosky also observes how companies move financing outside the balance sheet: “For me, this reflects that I do not want credit rating agencies to see what they spend.”

Thus, hidden debts, recycling investments and interior sales are examples of warning signs of a late cycle, says Perkins.

Perkins does not believe that the economy is related to AI, as other macroeconomic strategies have argued. This means that investors who are well diversified in the US economy and globally may still have benefits, even if Bula would break.

However, if the highly profitable technological companies have to mask their loans to finance the expenses with AI, it means that they are not confident that they will soon obtain the necessary yields to justify such investments. And this suggests that even the expenses that feed the current winnings boom cannot last endlessly, notes Axios.

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