AI Bubble: A Credit Story, Not an Earnings Story
The author argues that the current AI bubble is not about technological advancements but rather a real estate play. The rapid growth of data centers and associated infrastructure is driven by the notion that AI CAPEX represents a multi-trillion dollar technology build-out, deserving of insane growth multiples.
However, the author believes this is an incorrect intellectual framing. They compare the current situation to 2008's credit bust, where financial institutions over-built data centers and other infrastructure, leading to solvency issues when growth decelerated.
The author notes that AI companies will continue to earn massive profits but the forward multiples will contract, causing solvency issues for weaker AI credits. This will ultimately lead to a government bailout in the name of 'national security.'