One evening, Bertie found himself in a well-worn leather chair at the Fat Cats Club. As regular readers know, our man is an old-school investor, which means he still believes in reading and prefers to do it from printed pages. Therefore, every so often, he stuffs his piled-up reading material into a cloth bag and makes his way to the Fat Cats library.
As Bertie adjusted his glasses and began skimming through his haul, he noticed how obsessed the global intelligentsia was with artificial intelligence (AI), and specifically with what would cause the AI bubble to burst. "This is like the railroads," argued one columnist, and then proceeded to make the case that the underlying technology, then and now, is revolutionary, but the huge amount of investment chasing it would ensure that returns for everyone would be piddly, if any. This, the columnist concluded, would cause investment to stall, and with it, everything that the bubble had lifted skywards would be slammed back to earth. Bertie found himself nodding at this line of thought.
Another erudite article explored the social angle and began by quoting an American survey, which said that an overwhelming majority of Americans were opposed to building data centres in their home states. They were protesting against rising electricity costs and the general perception that AI would cause widespread job losses. Politicians would have no option but to legislate curbs on data centre investments, argued the article. And that would cause the bubble to pop. Bertie nodded again.
By the time Bertie picked up the third piece, the AI doomsayers were preaching to the choir. This one talked about rising interest rates and bond yields across the world, and how they would be the death knell for any mal-investment. The biggest home of mal-investment, the macro commentator said, was AI, and the gravitational force of higher rates and tightening liquidity would bring it back to earth.
By now, Bertie was convinced that the AI bubble was on its last legs and was already thinking of ways to benefit from the coming apocalypse. He left the library for some well-deserved refreshment and headed to the cafeteria for his usual cup of masala chai. As Bertie relayed his order across the café counter, he heard a familiar voice say, "… and chamomile for me!" Bertie turned around to face his old mate, Vik. Many years ago, the two had been dorm-mates at a red-bricked business school.