The AI bubble

Michael Burry made his short position against Nvidia and Palantir public, attracting the obvious, short-sighted discussion on each side of the bet. Financial journalism started incorporating AI bubble in its language more often. C-suite managers rushed to submit filings to sell their positions in their own companies. Stock prices hardly moved though.

As the conversation around AI stocks unfolds, people started comparing Nvidia to Enron while Nvidia allegedly messaged financial analysts to explain themselves. I keep observing trying to decipher the human impact, of which finance is often the proxy.

It's an exciting new world of promises, products, profits and ways of detaching value from reality. It's pure chaos right now. As in any new society-shifting promise, a deeper and quieter realization will eventually emerge. Noise is all we get rushed to make sudden decisions on which only a few can profit. Money is always made within information asymmetry.

Unlike many, I don't think I'm right, or know the future. My opinion doesn't go out as a short sentence on X. Reasoning requires arguments which take time and space.

AI has already given us computer vision, machine learning, reward models, game theory, language-based computer interactions, knowledge collection and repurposing at scale. This is certainly worth a lot of attention.

On the other hand, AI hardly improves creativity, critical thinking, problem solving skills. The one single trait that improved, and made humanity survive, is the ability to get better, gain skills. I don't think that AI will give us this.

It's easy to recognize who is mastering the tool and who is in rightful fear of it. It's the few who would have mastered any other tool as they possess the skills that make humanity, in general, thrive. I can see how low-skilled workers fear to lose their jobs; it's been true since the industrial revolution, it's just now extending at a faster pace beyond manual labour. It's extending the income inequality that governments and policies are tasked to rebalance.

Eventually, markets always describe reality. In 2000, tech stocks fell to a much lower baseline, some companies went belly up, some other thrived. Valuations kept raising since then, describing the importance of IT in our lives. I believe that AI companies will follow the same process.

I'm bearish on the current cycle of finance around AI companies. I think we are in a bubble of expectations that will eventually burst once we realize what this technology is and the net positive really are. When the markets will incorporate the views of people who sat and formed a quiet opinion that is both realistic and sustainable.

Michael Burry might be early, but he is not wrong. Many accuse him of transitioning to the influencer life because he started a paid newsletter and shut down his hedge fund. I think he did it to be able to afford to be right despite being early.