TL;DR
A quant analyst argues that while AI asset prices may get ahead of fundamentals and overbuilding is likely eventually, we're not yet in a full AI bubble—current compute demand remains tight.
Key Takeaways
- 1Bubbles are defined by asset prices detaching from fundamentals, not just by tight resource demand
- 2The speaker identified a 'baby bubble' in AI starting in May 2023, suggesting it could mature into something more substantial
- 3Overbuilding in AI infrastructure is inevitable but hasn't happened yet despite current compute constraints
- 4Asset price movements alone (like stock tripling then dropping 20%) don't definitively indicate a bubble
Notable Quotes
“I've been saying since 2023, this was May, I I posted this on Twitter that there was a baby bubble in AI.”
— Speaker
“to me, a bubble means a different thing. It means an entire trajectory and we are certainly part of that trajectory. Eventually, we're going to overbuild, but we're not there yet.”
— Speaker
Chapters
1. Defining a Bubble
The speaker clarifies that a bubble is fundamentally about asset prices getting ahead of fundamentals, not simply tight compute demand. They discuss how hard it is to define and identify bubbles in real time.
2. The Baby Bubble Phase
Since May 2023, the speaker has been saying AI is in a 'baby bubble' phase. They view this as a trajectory that could eventually mature, rather than an immediate crash scenario.
3. Overbuilding as the Next Phase
The speaker predicts that overbuilding in AI infrastructure will eventually occur, but we haven't reached that stage yet. Current tight compute demand suggests the market is still in a growth phase.
Glossary
- Bubble
- A market condition where asset prices become significantly disconnected from underlying fundamentals, typically followed by a sharp price correction
- Baby bubble
- An early-stage bubble that may eventually mature into a larger trend rather than immediately collapse
- Compute demand
- The market's need and competition for computational resources and processing power
- Overbuilding
- Excessive investment and construction of infrastructure beyond what is currently needed by the market