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Will Chinese Tech Hype Cycle Burst America’s AI Capex Bubble?
Forget DeepSeek. That's yesterday's AI disruption, and it's out of style already. Everybody's wearing Qwen now.
Wait, what's "Qwen"? Qwen's Alibaba's disruptor candidate, and news that its open-source model, QwQ, can go toe-to-toe with DeepSeek using far less in the way of data looked like yet another kick in the shins to America's vaunted hyper-scalers, who still generally insist the only real and true path to the AI dystopia none of us were allowed to vote on goes through unbridled spending i
All this rhymes with overdoing the internet in 1999/2000. We weren’t wrong per-se, just way too enthusiastic.
AI is incredible technology that will be part of most industries over time, but this all smells like eventual low barriers to entry that everyone will just have in their offerings and products and challenging to monetize in any way that would warrant multiples north of 30X or 40X for market caps. Am I missing something?
I just finished reading “Artificial Intelligence: A Guide for Thinking Humans” by Melanie Mitchell. She gives a great overview of what AI can and can’t do. She also discusses the hot and cold cycles of AI enthusiasm and the huge amounts of money that flow in during the hot cycles. Well worth the read.
” the risk isn’t so much that interest in AI will wane as it is investors will question assumptions about the correlation between spending and innovation. Put differently: The risk isn’t an “AI winter,” but rather a bursting of the US AI capex bubble.”
Exactly.
The writing on the wall has been more & clear if you cared to look. Each new resource & cash intensive LLM has been producing less and less return.
But it’s not just big tech who have been pouring money into datacenter buildouts. Billions have been added by VC and private equity firms desperate to find uses for their cash piles.