Looking beyond the Bubble
The AI boom has triggered endless speculation about bubbles and valuations (for example this recent article from the Guardian Boom or bubble? Inside the $3tn AI datacentre spending spree | Artificial intelligence (AI) | The Guardian or the recent podcast from Prof G Markets on the “Red Flags at Open AI”).
But is focusing on whether AI is a bubble missing the real story: the capital flowing into AI is building the backbone of our future. Even if current valuations are too optimistic (despite Nvidia’s reported stronger-than-expected revenues last week), the infrastructure being deployed today will outlast the hype and enable the next era of computing and beyond.
Why Michael Burry’s Short Doesn’t Change the Long Game
Michael Burry, famed for The Big Short, has taken a $1.1 billion short position against Nvidia and Palantir, warning of dot-com-like exuberance. He may be right about near-term volatility.
Bloomberg, and many others, have charted the interconnected web of capital flows between hyperscalers, chipmakers, and cloud providers: Nvidia at $4.5 trillion, OpenAI at $500 billion. Deals like Oracle’s $300 billion cloud partnership and Nvidia’s $100 billion commitments highlight how capital is converging on infrastructure as the ultimate prize.
Unlike the ephemeral websites of 2000 however, today’s investments are in hard infrastructure – assets that will power AI, edge computing, and digital services for decades. As Wakdenar Szkezak states in his Financial Times article Investors need to look beyond the ‘bragawatts’ in AI infrastructure boom “railway investors in the 19th century lost fortunes, yet the tracks they financed stitched together national markets.”
The Backbone Being Built
Hard infrastructure is being built and it is a multi-layered transformation:
- Hyperscale Data Centres: Massive facilities optimized for AI workloads, with high-density GPU clusters and advanced liquid cooling systems.
- Energy Infrastructure: Multi-gigawatt renewable energy projects and grid upgrades to power AI compute.
- Fibre Networks: Global high-capacity fibre routes to reduce latency for AI services.
- Edge Computing Nodes: Smaller, distributed data centres bringing AI closer to users for real-time applications.
- Specialized Hardware Supply Chains: From Nvidia’s H100 GPUs to custom ASICs and networking gear.
- Cooling Innovation: Immersion cooling and heat reuse systems to manage thermal loads sustainably.
The Real Question
Therefore, instead of asking if AI is a bubble, ask: How will this infrastructure reshape the digital economy for decades to come? Even if some investors lose (and it is looking likely they will), the world gains a foundation for innovation – AI today, quantum tomorrow, and technologies we haven’t imagined yet – enduring assets that will underpin the next era of digital services.
Subcribe to news and viewsHistory offers perspective that infrastructure built is rarely wasted and forms a foundation that outlasts the cycle - even if not every investor is spared in the disruption.
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