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Thinking that a loss-leading strategy is not going to pay off for the current AI ecosystem and AI skepticism are not the same thing, is it? You can think that the AI is very impressive and also that there's no way that Anthropic will ever climb out of its hole, or alternatively you can be the fiercest AI skeptic in the world and think that everyone will pay billions for a glorified chatbot.
That's what he thinks. Surely he should just put his money where his mouth is? If Anthropic AIs cannot design or maintain any significant projects beyond a CRUD application and this isn't going to significantly change then presumably Anthropic is not worth near a trillion dollars and so the biggest industrial buildout in human history is a waste of money.
The premise that they're incapable of doing anything beyond CRUD and yet also they're completing long expert-level cyber infiltration exercises is bizarre and incoherent to me... but that's what he thinks.
Anthropic isn’t yet public. You can’t easily directly bet against it.
To short Nvidia would require the belief the hyperscaler will abandon the scaling. That’s really hard to time.
Are you shorting a bunch of companies that would be killed by AI? P/E for many suggest they are highly overvalued if AI can displace in the next year or so.
It isn’t obvious hyper scalers are making rational decisions. Apple isn’t hyper scaling (it is leasing). Doesn’t seem like a terrible idea…
Yeah but why aren't the hyperscalers abandoning scaling? Microsoft, Amazon, Google, Facebook made a deliberate choice to halt buybacks and spend hundreds of billions on AI. They made this choice based on something, they're spending $700 billion this year! You don't invest that much as a modern financialized American corporation without being sure about what you're doing.
He should be thinking that, if further significant improvements are impossible, then capex will plunge as soon as this is realized. But this isn't happening, we see continual improvements on a monthly basis.
Apple is more of a hardware company, they have a different business model to Microsoft and the others. AI is understandably not their great strength. They might reasonably calculate that they are not going to win a struggle with Google Deepmind on AI with regard to talent or compute or determination. AI is the lifeblood of Google, devices are the lifeblood of Apple.
You do realize sometimes corporations make the wrong choice? Also corporations choose what the market rewards them for. If they cut capex because they didn’t think there would be major improvements, their stock would plummet because it would mean all of their prior capex spending will never make an ROI.
The market doesn't necessarily reward companies for investing, it rewards stock buybacks (which were all the rage amongst big tech up until the AI boom).
If they wanted to juice their stocks, they'd just continue buybacks rather than buying GPUs.
It'd be surprising if these large, old, well-established software companies all catch AI fever at the same time. These are all survivors of the dotcom bubble, not fledgling newcomers with more credulous leadership.
This just isn’t true. The market generally prefers buybacks to dividends due to EPS, etc. However, the theory behind distributions (including buybacks) is that a SH can generate more return with the cash compared to the company. If the company can generate a higher return with the cash, they would not distribute and the SH would enjoy value creation via higher stock price.
By forgoing buybacks and instead spending a bunch on capex, these companies are signaling they can make more on the cash compared to the general market conditions. This is certainly the story these companies are selling as well.
None of this means the companies are wrong. But right now they are being heavily rewarded for investing in AI. If they stopped and started doing buybacks, they’d almost certainly drop in value.
Finally established companies fail literally all of the time.
Have you missed the last 30-40 years of financialized capitalism where shareholders encouraged companies to forego investment, cut R&D and provide short term profits?
Aggressive investment has absolutely not been rewarded by shareholders in the recent past. And nor is it rewarded today.
Investors understandably are not rewarding companies just for investing in AI without showing that it's raising revenue (which it is, even with Meta who's making a fortune off improved ad targeting). They only reward investment that seems to be delivering returns. And even then they're skittish about big investments.
You must have missed the rise of the mag 7 who didn’t pay dividends of any sort for a very long time (some still don’t) and cash was reinvested. Just think of how much more valuable the company would be if they just had done more buybacks!!!!
The idea that “buybacks” is what drives stock prices is a meme created by Dems almost entirely out of whole cloth.
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