Sam Dickie: Fisher Funds expert on whether the AI bubble is set to pop

There's growing concerns from experts about the risks surrounding AI investments.

Investors believe AI is at risk of forming a stock market bubble, and some analysts are worried about the risks coming home to roost.

Fisher Funds expert Sam Dickie explained further.

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Episode Transcript

Speaker 1 (00:00):
Now let's deal with the AI bubble. We have talked

(00:02):
a lot about the AI bubble on the show, and
in October we talked about the emerging warning signs around
the investments and the fears of the bubble. And now
analysts are saying we're seeing some of that risk come
home to re. Sam Dickey from Fisher fundss with me
on this Hi.

Speaker 2 (00:13):
Sam, good evening here.

Speaker 1 (00:15):
Okay, Now, Sam remind us of the specific risks so
that we were worried about here.

Speaker 2 (00:20):
Yes, there was a few there. So we were talking
last month about three things. So the vendor financing, so
sellers of goods leaning money to customers, so supplies like
Nvidia AMD leaning billions to customers so they can buy
their own products is arguably artificial demand and sort of
reminded you and I either of Nortel and Lucent in

(00:42):
the late nineties learning money to telcos to buy their equipment.
That was number one. Two was just the sheer size
of the deal. So we talked about the eye popping
deal that Oracle did with open Ai, whereby open Ai
signed a contract to pay Oracle three hundred billion dollars
over five years to train in for it's AI models,
but bearing in mind open Ai only had fifteen billion

(01:04):
a revenue. And then there was companies like call Weave,
a company that buys accelerated compute chips, sticks them in
data centers, and re rents them at massive scale. What
was loss making. And the final thing we talked about
was the yawning gap between the valuations of these companies
were trading at and the on the ground reality of
AI use cases. So there was sort of four or
five risks we were discussing.

Speaker 1 (01:25):
And where are we at today?

Speaker 2 (01:26):
Do you think, well, I think of there's good news
that we've had a healthy dose of reality in the
last sort of two or three weeks. And give you
a few numbers there the basket of AI winners, So
that's a couple of handfuls of AI winners in the
US that we track. They've already fallen sort of fifteen
to twenty percent. But the riskier stuff like Oracle, like

(01:47):
core Weave is already down sort of forty to fifty
percent since you and I last spoke about this. Either
and the in particular around those two companies, investors that
are buying the debt of these companies because it's not
all equity under these companies in a lot of debt
to fund this, they started requiring a higher return on
their money given the risk that's building, given those risks
we talked about, so it's more expensive for those companies

(02:10):
to raise money. So generally speaking, people are still excited
about AI, but they're becoming a little bit more discerning.

Speaker 1 (02:15):
And so where do you think we go to from here?

Speaker 2 (02:18):
I think the technology still has years to run. Hard
to not be quite bullish on the ability of AI
to drive productivity growth. But every time we see this
with a game changing technology, it does attract these pockets
of animal spirits and hype. So I think we'll go
through this sort of hype cycle a few more times.

Speaker 1 (02:34):
Yet, what do you reckon this means for investors, Sam.

Speaker 2 (02:38):
I think it's really good to see these healthy corrections.
I think it means that people are becoming more discerning.
It's not just anything with AI and the title you
buy it. I think debt investors in particular in particular
always keep equity investors on us. So I think we've
got some good risk pricing stepping into the sector. So
that's really good news for longer term discerning investors.

Speaker 1 (02:58):
Sam good to talk to you as a mate. Talk
to you soon, Sam Dicky Fisher funds.

Speaker 2 (03:02):
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