What To Make Of This
I am going to reiterate the same thing I have said over and over, wtf is going on?
Sorry, I just don’t have any idea where these massive deals will end but the more I see of them, the more I believe that it will end badly. I know I am possibly not as well informed as the people making these deals but doesn’t it strike anyone that the amount of investments being put to work in the AI space may never, ever see a return on investment that warrants the investment?
Over a trillion dollars has been put to work in the last year or so. Building out infrastructure, investing in and owning part of each others business.
Today’s deal with OpenAI and AMD just strikes me as “Huh”. I know it’s a little more complicated than a straight purchase of shares. Their are warrants which give OpneAI the rights to buy up to 160million shares of AMD if certain levels are reached. You have to ask yourself why though.
Again, I don’t dig down in the weeds on these deals. I am not an investment banker. I just look at practicalities and the whys, what fors.
OpenAI has a valuation somewhere north of 500 billion dollars. In my mind and maybe for real, that is the highest valuation I have ever seen for a privately held company. Cargill, Mars? They could be eaten alive by this company.
So now they are using other peoples money to buy into AMD, a supplier, at a pretty hefty valuation. Just seems like the money that is being thrown around is getting a little out of hand.
Granted, AI, will take over the world and everyone thinks they want to be the first ones in but in reality, they are not. Smart money has been in for a bit and I am sure some of that smart money has started coming out.
If I owed a chunk of something that lets say started at 10 dollars and now it’s worth 500 dollars, why on Earth would I stay in? Where is it going? Will I be happy with a massive profit? Or do I want more.
No. I am out. Even in the rosiest of scenarios, there is only a certain amount of money to be made in an investment. No matter what every money manager in the World is telling you, stocks do not go up forever. They don’t.
Smart money knows this and gets the Hell out before the lemmings start this FOMO bullshit and ride these stocks to unheard of highs.
That is where we are now.
I am no genius but there is an endpoint. There is always an endpoint and euphoria clouds that vision but it is there, it will always be there.
We have met that point and anything from here is froth and, sorry, stupidity.
The infrastructure plays have played out.
The intelligence plays have played out.
It is done.
However, with new technology there is always an unseen play and that is where the money will go when it realizes that it has stretched the investment to a breaking point and that money needs to be put to work somewhere else.
Is it in utilities? Water? Lithium? Nuclear fusion? Maybe we need to relook at quantum computing and see what rock the next big play is hiding under.
All I am saying is that you know it’s the end when the simple, invest in the technology play is done. When the ideas are now so convoluted and complex that only the bankers actually get it (yet the CEO’s sign off on it). This is where the train derails and maybe it’s a 15% correction to more accurate pricing or something worse.
It is coming, don’t say you weren’t warned.