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Are the tech giants destroying their own golden age by fire-hosing money into #Artificial Intelligence ?
“These guys are overinvesting. They have no real prayer of making a handsome return on their investments. And they are moving into competition with each other,” Grantham said. “It’s like they’re digging trenches and getting the machine guns well oiled, aiming at each other. This is the kind of quiet before the storm, the phony war. But they’re lining up, ready for battle.”
He added, “This is not how they got rich and happy.”
Between 1998 and 2000, Jeremy Grantham was one of the few highly public skeptics from the world of finance urging investors to avoid internet-related shares, a contrarian stance. When the market ultimately collapsed in early 2000, GMO regained all it had lost and more, turning Grantham into something of a stock market celebrity. Now, he sees something on the AI horizon.
Grantham argues that previously impregnable tech corporations — including Meta, Amazon, Microsoft, and Alphabet — are about to see their profits squeezed as never before, first by costs related to their simultaneous rush to spend hundreds of billions of dollars on data centers, and later by the fact that the AI businesses they are building with those data centers will ultimately pit these market monsters against one another.
That sort of head-to-head competition, while good for consumers, is all but certain to damage profits, he says.
Financial history, BCA Research’s Peter Berezin pointed out, is full of episodes where important, productivity-boosting inventions didn’t actually turn out to be profitable for the mass of companies and investors sinking capital into them.
During the internet boom, tech company profits essentially went nowhere for years, Berezin said. And while stock prices soared, the ongoing lack of profitability eventually eroded investor confidence, contributing to the market crash.
https://sherwood.news/mar..
