Andrew Curtayne: Milford Asset Management expert on whether we're in an AI bubble

More financial experts have raised concerns about an AI bubble - and what it could mean for the wider economy.

Multiple AI companies are attracting the attention of investors, and this interest is projected to grow, but concerns have been raised.

Milford Asset Management Andrew Curtayne explained further.

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Episode Transcript

Speaker 1 (00:00):
Andrew Curtain, Milford Asset Management is with us. Hello Andrew, afternoon.
Hit it Now a lot of us are trying to
figure out whether we're in an AI bubble or not.
Have we seen signs we might be, Yeah, there's this
sign to be more and more signs which are a
little bit concerning. Just the shared numbers that have been
talked about that's been spent in AI at the moment

(00:20):
is becoming quite outstanding. So globally we're talking about six
hundred billion dollars been invested in AI data centers, So
these are the data centers that are full of these
super chips which run the AI models. But that number
is expected generally by the market to go to over
one trillion per annum over the next couple of years.

(00:41):
And if you believe the CEO of DA Video Agents
and Huang, he's talking about three to four trillion annually
been spent by the end of the year. So that's
that's around two and a half percent of the global GDP.
So it's just three incredible numbers that you're talking about.
And then so amongst that, you're getting a lot of
stock prices which are and then certain companies which which
are flying very high, up sort of one hundred percent

(01:03):
this year, up over a couple of hundred percent over
a couple of years, so it's kind of a few
are the signs that are of the bubble, and a
lot of sort of deals happening into between companies, Open
ai signing deals with all sorts of companies, so this
is becoming a little bit more concerned. So are you
going to make a call whether we're in an AI
bubble or not. It's a really really difficult question to

(01:25):
answer because one of those ones, that's if the technolo
if AO technology ends up delivering on what it's hyped
to be, and so what the people like Sam Oltman
from open ai and Jenson and Lanquin never If it
does what they say it's going to do, then you
can probably justify what's going on, right, But the problem
is doesn't meet those expectations over the next few years,

(01:45):
and if it falls short of those expectations, if all
of a sudden, AI isn't the game changing technology we
thought it was going to be, and it does all
the jobs for us and we can focus on important
tasks rather than doing sort of time intensive data processing,
then then all this all this investment is probably going
to be overdone and they will prove to be a bubble.

(02:06):
But one of the challenges and that you sort of
have them trying to sort of time times that when
the spending might slow down, is actually looking at the
companies that are that are doing the spending. And in
previous technology cycles was funded by companies that maybe weren't
quite as strong as what the ones are doing it today.
So the company spending the most in AI are the

(02:26):
likes of Microsoft, Amazon, Google, Meta. You're talking about multi
trillion dollar companies with hundreds of billions that dollars a
cash on their balance sheet. And if they want and
they do believe in this technology at the moment, you
listen to the CEOs and they absolutely believe in the technology.
So if they want to increase the spending, they can
easily do that. And if they decide to do that,
then the share prices may well keep going up in

(02:47):
a lot of these companies. So what are the developments
that you're going to be looking out for in the
I don't know, let's say the coming weeks. Right now,
we've got the results seasons kicking off in the US
next week. We in the space of two days. We
have all the largest technology companies in the world reporting results,
so Microsoft, Amazon, Google, Meta, and Apple. Now what the

(03:10):
market's going to be really focused on is what they
say one about AI and the technology. And I think
it's pretty much a given that they're all going to
say the technology is great and it's going to change
the world. But do they follow that through with a
big increase in capital spending expectations? So do they come
out and say, oh, look, we're going to now increase
sell AI data center investments by another ten to twenty

(03:31):
billion dollars versus what we told you three months ago.
And if they do that, that might give the market
legs to continue. The risk is the market sort of
is expecting them to do to come out with that statement,
and if they're a bit softer than expected, then that
could spook the market and you actually get a sell off.
Very interesting stuff, Andrew, thank you so much. It's a
fascinating topic. I'm looking forward to to seeing how this
plays out. Andrew Curtain, Milford Asset Management. For more from

(03:54):
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