November 11, 2025 • 27 mins
Is the AI boom the next dot-com bust?
While billions pour into AI startups and tech giants race to dominate the space, troubling patterns are emerging that echo the late 1990s—circular funding loops, sky-high valuations with little revenue, and a dangerous concentration of capital in just a few players.
In this episode, we dig into the warning signs that separate a genuine technological revolution from a market bubble ready to pop. They examine OpenAI's alarming cash burn rate—massive sales but vanishing profitability—and why inflated AI valuations should concern anyone watching the market. Drawing direct parallels to the dot-com crash, they explore how low interest rates may be fueling reckless investment, why extreme market concentration in AI stocks poses systemic economic risks, and how the interconnectedness of global markets could amplify any downturn.
But here's where it gets interesting: what if the promise of AGI (Artificial General Intelligence) actually changes everything? The hosts dissect whether this technological leap could justify today's valuations or whether we're seeing the same old hype cycle dressed up in new algorithms.
Learn the specific red flags savvy investors watch for—from insider selling patterns to predatory financing terms—and why retail investor euphoria is often the canary in the coal mine. Whether you're investing in AI startups, building one, or just trying to separate signal from noise, this conversation reveals what history teaches us about boom-and-bust cycles.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Let's assume open AR, one of them is successful.
Yeah. OK.
So they figure this out like a GI, OK.
And they get to the goal. Yeah.
What happens to the chip companies then?
What happens to the picks and shovels then?
You know what I mean. What is the What is the road?
Map pessimist. I don't know, I'm just saying
you're always doom and gloom on them.
(00:21):
Just I've gotta be positive. Like what if they do it?
We jerk. It so we can't.
Go to the what? Food.
Let's get it rolling. Big ideas, Money, hustle, Smart
dream. So why turn that grinded through
a joy ride? Do you like money, Chris?
(00:45):
I do like today we're going to be talking about lots of money.
Yeah. And namely some kind of
interesting behavior. I wanted to take on the topic of
his Are we the AI stuff? Is this a boom situation and a
big bubble in danger of popping at some point in the near
future? Or is this kind of the real
deal? And I can see a couple different
(01:07):
sides to this. I wanted to start like I wanted
to run at this. We don't do many like investment
style pods, but this one will probably get into that a little
bit because there's been some interesting marketing.
Kind of like a self preservationinvestment pod.
And I think you and I were talking about if like anybody
that's holding stuff in the market now has probably seen
their portfolios go up significantly.
(01:29):
And so we're looking at the nicegreen number that's like.
Hey, you're you're purple. Yeah, you're portfolios worth X
percent more than you know, it'sabout cost and you're kind of
sitting there you're like wow, that's awesome.
Like, you know, and and you've asked me a bunch of times like
when do we sell? Yeah, OK.
And it's kind of like. Yeah, it's like like them, I
(01:50):
wanna second before the bubble pops exactly right.
Yeah. And I feel like everybody's kind
of like asking that question. So, you know, I, so I wanted to
kind of take the approach on this episode that hey, we're so
smart that why don't we go back and look historically, what the
(02:11):
indicators were that would lead to the of of a bust, a bubble
popping, OK, so that we can be the ones like a millisecond
before the bubble pops, we're out of the market.
Can I set the table cash? Can I set?
The table. So a couple of things.
I think it was the well, I thinkgrandma just falling out of the
(02:31):
chair. You alright back there, Graham?
He's alright. So I want to talk about the OK,
the first come in here is the circular investment piece.
So was so let's talk about the scale this morning.
So open AI is First off is leading a $1 trillion build out
of compute and data centre capacity.
Crazy. It's unfucking believable, OK,
(02:52):
they have deals with AMD, NVIDIA, Oracle and Core.
We've promised over 20 gigawattsof computing power about this is
about the comparison about 20 nuclear reactors worth 20
nuclear reactors. So was the nuclear reactor like
when I watched The Simpsons? Is one of those cooling towers?
(03:12):
Is that like 1 reactor? Because I think they had two.
Presumably yes for two Springfield.
So that's a lot. So so like 20?
Of those 4240 towers right now wow.
So the electricity alone could cost another one trillion over
the next decade. So holy shit so then after that,
so NVIDIA makes a big deal rightnow sorry.
(03:33):
So I guess the first part was like that's crazy the
requirements. The second part is like how
these guys, how the vendors all have a relationship with each
other that's mutually dependent.So NVIDIA, NVIDIA invested up to
100 billion in Open AI, and OpenAI then uses that $100 billion
to buy NVIDIA chips. AMD has a deal with Open AI,
(03:53):
where Open AI commits to buying the chips and receives a 10%
stake in AMD. And as AMD's value rises open, I
could then sell said chairs too buy more chips, right?
So so these structures inflate both sides as.
The value circular deals, right,Right.
Where they're kind of like inflating each other's
(04:13):
valuations. Yeah, right.
Absolutely. And so I guess this is like
there's a bunch of different things here and we can talk
about like open AI is burn rate and stuff like that in a second.
But I find it pretty disturbing because that to me, we also have
this on the backdrop that the growth of the of the stock
market in the United States, it's like 70 to 80% of the neck
(04:37):
of the market is, is basically. The number, yeah, mostly.
Mostly AI companies and that's, that's your, you know, like your
NVIDIA, for example, and, and all the other major players.
So it's like 7 stocks. It's like really, really tiny
that have been such huge winnershere.
So yeah. And then I think this kind of
(04:57):
comes back into your wheelhouse,whichisthe.com bubble and how
some of this behavior was kind of similar to that.
Exactly. So what I did was I did some
research trying to figure out, OK, what were the like leading
indicators that led to the.com bust?
And can we use those here for the AI boom bust, potential bust
(05:20):
to try and predict when that moment is that we should like
sell it. All right, yeah, yeah.
And get into the market, into cash, right.
So I, I've got a few of them. I, why don't I throw them out
there and get you to kind of like give us your comment on it.
So valuation, Patricks. OK.
So between 1995 and 2000, the NASDAQ rose 400%, reaching A
(05:43):
reaching PE ratio of 200, dwarfing the peak PE ratio of 80
for the Nikkei and other other markets.
So like the NASDAQ just went nuts during that that time
period. OK.
And then let me see here. Yeah, and it peaked on March
10th, 2000 and then fell by 77 percent by October 2002, right?
(06:10):
So like over a two year period it was a massive yeah bloodbath.
Wow, 70. 7%, yeah. So if you were in it, you were
invested at some point earlier on, your stocks went down by 77%
over. Like the right side presume you
had 100 bucks in there, you ended up with 33 bucks.
So that's a pretty painful lesson.
Yeah, right. So.
(06:31):
Wait 23 bucks? No Public math, 2377.
No public bathroom, public bath.The public bath.
Yeah, Alright. Yeah.
Wow. Yeah, that's way worse.
Yeah, yeah, yeah. Anyways, yeah, you're right.
So are we in that situation now?Are we seeing that rapid growth
(06:51):
of the market? I would I would say yes.
I would say so like if you were to look at the PE ratio, so
sorry, that's price to earnings ratio.
So just for folks, listen, you don't know about this kind of
stuff. It's like the price of the stock
versus the earnings of the of the money.
That the company is and. Yes it now the the weird thing
is like yes, it's so speculative.
(07:12):
I think AI is a fundamentally more transformational technology
yeah than the Internet, which sounds kind of crazy, but I
because like a lot of it's sort of built on top of the Internet,
right. But I feel like it's opportunity
is really, really great and that's obviously most of the
speculation there. But at the same time it's way
out of whack. It's enormously overvalued and
(07:34):
there's things too with like, OK, so let's look at a specific
stock. So like NVIDIA, yeah, it's worth
like 4-4 trillion dollars is like the market cap or the
valuation of that company. Yeah.
So if you're like, what's it gonna go to like 10 trillion
like 12 children, like what are we talking about?
And then it's kind of like, well, the fundamental assumption
there is that we need a whole ton of chips to do this So it's
(07:54):
like, well what if that what if it ends up like DeepSeek and we
can do it with a lot with many fewer chips?
Yeah right. That that, you know, proof all
of a sudden that's gone the. Picks and shovels companies,
right, Right. The gold rush, the people made
all the money were the ones thatwere selling the picks and
shovels to the people, right? Yeah, yeah, gold for sure.
So yeah, like same idea here. So the Invidia is in them are
probably loving it. They're selling chips like
(08:16):
crazy, data centres, nuclear reactors, whatever.
Like ARM in Great Britain and you know, like a lot like
there's a lot of like I'm sure SoftBank has made like so much
money because they are invested in a lot of these.
But I just kind of give my counterpoint to myself and you
did this in the last episode. I don't know why we do this, but
the counterpoint is there is like real stuff here about two.
(08:39):
There are huge data centres, yeah, they are putting, they are
building physical buildings. They have servers, they have
like there's infrastructure being invested in this.
Whereas when I think about the.com, you can correct me when
I think about the.com crash, a lot of it was like speculatory
on like Internet companies, you know like foosball tables and
like you know nothing really there no collateral.
(08:59):
Like like users but no revenue. Things like that exactly, yeah.
Kinda feels a little bit like the mobile app stuff.
Yeah, Mobile app still didn't have like a big.
Crash though, so this bullet point is valuations.
So price earnings ratio is really high, way out of whack.
So a little bit. Of.
This is getting getting hot in the kitchen.
Yeah, right. Alright, next one, cash burn
(09:19):
rate. OK, so just to go back to
the.com bust on March 20th, 2000, there's a cover article in
Barrons burning out. Fast warning Internet companies
are running out of cash fast which predicted him in a
bankruptcy and you know rememberwhen like everybody would talk
burn right yeah you know yeah now it's runway I think is what
(09:43):
they they. Use the term and stuff, yeah.
But you know, manyofthose.com companies were like, what's
their burn rate was, was their question.
And like, it was like, how long did they survive until they're
like out of cash and they're. Done.
That is runway because runway islike you're either going to take
off or go off the end of the runway and explode, right,
right, right. So.
(10:04):
So are we in that kind of situation?
Well, what do we know? What do we know about Open AI?
If I can find the data, but essentially oh you have it, go
ahead. 4.3 billion in in sales had 2.5 billion burn rate OK and
the same period. So it's kind of like it is
(10:24):
interesting because a lot what people don't really get, I think
is that like a lot of these, like a lot of the most popular
businesses like the Ubers, the sales forces, the whatever,
they're heavily subsidized by private equity or by the
markets, depending on the context.
And but they're not like profitable, like open AI is not
profitable, like not even close,right.
(10:44):
They're heavily subsidizing the token cost, yeah, so that they
can capture as. Much market and I'm sure they're
buying chips, they're nuclear reactors, they're looking at
their costs like how do we get these costs?
And and. So that we can we can get the
economics where they need to. Be so actually furthermore, like
think about this. So they do 4.3 billion in sales
like which is amazing, by the way.
Yeah, but their valuation is 500billion.
(11:06):
Yeah. So they're they're valued at 500
billion, but they're only doing like, that's a pretty fucking
awesome multiple. Yeah.
You really mean like if we go back to the PE ratio thing.
So like for me, that seems like a pretty big red flag.
It also kind of like, you see some of the different
investments that Airbnb or they're like, goodness, on
Wednesday, B&B Open AI is doing.And they're like, really huge.
(11:29):
They're like $100 billion commitments to stuff.
Yeah. And you're like, from where?
Like, where is this coming from?Like, and and they're like,
admittedly scrambling to find ways to, you know, generate new
sources of income, all this stuff.
Yeah. But it's also like, how do I
even, how are they in a positionto make these commitments?
Yeah. Like, these commitments seem
(11:50):
wildly outside the scope of whatthey could.
Afford, right? But then at the same time, like
if they were to go to any bank investment group, whatever, like
they can go to the soft banks ofthe world and and probably get
10s easily get 10s of billions of dollars.
Yeah, you've read the best. Now try the rest.
(12:11):
Wait, who wrote this? Check out Startup Different on
Amazon, Audible, and Kindle. O my next point on this is
ignoring fundamentalsokso.com bust.
So investors were willing to overlook the traditional metrics
like the PE ratio and base confidence on technological
(12:34):
advancements. Companies were valued based on
earnings and profits. That would not occur for many,
many years, right? So I think that's another one
that's happening right now. Everybody's enamored with the
tech and are kind of like, wow, look at what latest version of
GPT can do and look at, you know, Googles, you know, video
(12:56):
rendering video like. Or Sora the the opening.
I went to the I 1 is really impressive as well.
So, you know, people are lookingat that sort of stuff and kind
of just ignoring the economics of of the situation.
So kind of further to what what you were you were talking about
with, you know, chips and the cost to to run these these
tokens or to to sell these tokens.
(13:19):
So then the next one I have hereis market concentration.
OK. Yeah.
So when we look at it, yeah, it's those like 7 stocks that
are really driving the market valuation right now.
Yeah, which is which is really, really scary.
And so that was the same thing back in the.com I have.
Two thoughts on this. If Open AI fails to achieve its
(13:42):
goals, and I think that is a broad comment, it's somewhere
between not hitting financial targets and not getting to AGI.
I assume they would be first in my current feeling on who gets
to AGI first is probably Open AI.
Yeah, I think that's probably pretty well understood.
But let's say they just don't really get that.
They probably have what A5 to they've been talking some big
(14:04):
talks. So they got like a 5 to 10 year
period, which, you know, the money's not gonna go on forever.
So you have a 5 to 10 period, year period to figure this out
or get to a business model that is, you know, self-sustaining.
Yeah. And maybe that involves slowly
increasing the token prices. If they fail in doing that,
though, is that a single point of failure?
Does that indicate to the rest of the market that this isn't
(14:27):
legit that? And so then you see sort of the
cascading market crushing sort of effects on all these big
stocks on NVIDIA, on Microsoft, on, you know, probably like
Oracle on, you know it. Picks and shovels people get get
pulled down with. This just absolute vaporized
you, you, you would see maybe like a trillion dollars of
(14:48):
market cap like destroyed in a probably a pretty short on time.
Because as soon as that I think we're all believing in this AI
God idea in the market. Yeah.
And there's evidence to suggest they're doing it like they're
doing really well. But at the same time, I think
once we lose that faith, like the markets gonna bail fast
because it's so high. Everybody's gonna run.
Everybody's gonna be like, I want my money.
(15:10):
Yeah, right now. Yeah, right.
And it's. And so there's that second piece
and this is interesting our either of those seven companies
or, uh, open AI, maybe Anthropicor maybe like the the top three
horses of AI companies, are theytoo big to fail?
Yeah. Are we in the category now
(15:32):
where, where we actually have tobail out the market because it's
so hot? You remember, like, remember in
2008, right? Like those banks couldn't fail
because it would actually have been even more catastrophic for
the economy. Yeah, we're talking about deep,
deep. Deep SO.
Depression, yeah. Not recession.
That's a very interesting question.
So banks were bailed out, right?So now I think I'm in a
(15:55):
situation where we companies need to be bailed out because
they actually maybe the tech is so valuable they can't just
disappear. There's just, it's not even
about the tech, it's just so much moneys in it.
They can't have so many players fail, because if that many
players fail, everybody kind of fails.
And then the market factors thatinto their investments and
(16:16):
totally investments are worth way more because now you're too
big to. They're they're like government.
Backed. Yeah.
And the other thing too is, and kind of a semi related point is
a lot of there there's I was reading an article in the
Economist and there there's a lot, I mean, it's sooty, you
(16:37):
know, my brother as I was havingmy morning tea.
Yeah, OK. And there's a lot of
interdependency in in American securities right now because of
the AI boom. So like a lot of European
investors are invested heavily in the US to Canadian investors,
a lot of Japanese investors. Yeah, it's global.
(16:57):
So like, it's a global risk concentrated in like 7 stocks in
the US plus the private equity in AI.
And that's kind of terrifying. That's really high concentration
risk. Yeah.
So the other thing I wanna put out there is for my next point
that I want. To lose my money.
Man, yeah. So back in the.com bust, there
(17:17):
was a lot of easy money because interest rates were low.
OK, are we, I, I, I think the Fed is making an announcement
tomorrow, same with the Bank of Canada.
And I think interest rates are both in both countries are gonna
go down. So are we getting into a, a
period where the money is getting too easy as well for
these companies to finance them?So that you're just sort of like
(17:40):
encouraging this, this, you know, unbridled and investment
into these, these companies without actually looking at the
fundamentals because money is easy to get to.
Oh, yeah. I mean, like the if you make
money cheaper, then there'll be more money, right?
Like, like this is the point of that kind of economic lever.
We don't have our other brother here, but I'm pretty sure he
would be like, yeah, if I can speak for Mike.
(18:02):
Yeah. But I just think that that just
points to me to another risk at the same time, like I do think
low interest rates make sense for other economic reasons.
Yeah. But it is kind of like, yeah,
obviously that's gonna, that's like pouring gas on the fire,
right? It's just gonna intensify the
investment if you're a private equity.
I mean, I think one of the reasons we were made the offer,
we were made back in 20/20/21 really. 2018. 2022 is that money
(18:26):
was real cheap, you know, like during COVID, like there, like
money was incredibly cheap. Yeah.
And there was the, the, the, there was actually a lot of like
fledgling, like venture capital offerings, like private equity
groups are struggling to, to turn over some of their
investments because a lot of changes in the market since they
made the first investment. So they were looking for
opportunities and we happen to be high growth company and all
(18:46):
sorts of things. And it worked really well for
us. But that like to me, it was just
there was a ton of money flying around.
Like I remember some of the strategies in our market other
than the one that bought us thatwe're making like 6 or 7
acquisitions a year and during the peak COVID years.
Yeah, because money was so cheap, so easy for them to.
Do it Yeah. So I do think it is a big risk
(19:07):
there as well so I I don't know like this is starting to like
legitimately freak me out yeah the other thing like too, I just
want to get back to that concentration risk on like how a
lot of people are invested in U.S.
Securities. The other thing is like one of
like one of the good like portfolio theory things, right,
is like geographic diversification of assets, but
it's like, well, how am I like what does it matter like so I
buy a bunch of stocks in a European company.
(19:28):
All those European companies areinvested in the US market like
they're. I just, I kind of feel like the
the principles that make good investments are also at risk
because of the concentration risk in the United States.
It's like way beyond just like what an individual investor can
hedge against, except for maybe like being a silver stacker or
(19:49):
like buying gold. Yeah, maybe, yeah.
To preserve value but. Yeah, alright, so going back to
the.com bust, let me I've got, you know, hang.
On do you know what a silver stacker is?
No, that's interrupt you. What is that?
OK, so you know how like this isfun.
I don't know Graham knows this either.
So gold is like you want to makesure you actually buy.
Well, when you buy gold, if you go to a bank, you say I wanna
buy gold, they'll give you like they sell you like a share of a
(20:12):
like gold, but like lots of people on that gold, so they
resell the same. Thing Oh, they wait until you
actually say you want it when they then go and buy the.
Gold. Yeah, there's stuff like that.
Like you can. Actually, you don't like you
have like a promise. They will give you gold yes, so
you can go to the Canadian like mints or I'm sure there's
equivalent United States. You got like gold gold I'm
pretty sure anyway yeah, but theso here's the trick with silver.
The silver is the same idea. You're trying to preserve wealth
(20:34):
as well, but the silver stackersis my neighbor told me that this
was really deep. He's like, it's these guys who
just buy a ton of silver and they literally, because its
value is so much less than gold,they have a ton of it and they
have the actual gold. So they stack the silver.
They're silver. Stacking.
In their basement or something. So they just have like big piles
of silver and yeah, just have terrible, terrible thing.
(20:56):
But it's it's interesting. Anyway, so alright, so my last
two like, you know, predictive indicators for something for
their market going belly up is kind of the same.
So excessive hype retail investors.
And then I like an IPO mania type of situation.
So do you remember back in the the the housing crisis, remember
(21:20):
like random people were buying like 2 and three houses.
OK. Yeah, like.
Paying for the big shores that owned like 8 houses or
something. It was all on credit.
And like, yeah, exactly. So like that kind of stuff and
then the IPO mania pieces. So I have a question about this
because I should know the answerto this Russian, but is open AI
is not a public. No, no, they're not.
(21:41):
They're probably talked about this like, yeah, they're all
private, which I find really like weird, but it's because
they can get access to such capital privately.
They don't feel like they need IPO.
Right, right. So OK, so let's assume all those
indicators are that. Would be quite easy.
Going, yeah, this is scary. Like we're on the verge of a
bust. OK.
But is this time different? Like we asked this sometimes
(22:03):
with other things to do with AI,you know, is this different than
what we've seen in the past? And I kind of wonder if it sort
of is like, kind of like those counter indicators are, well, if
if open AI goes belly up, is it just all the investors that have
invested in the private equity that are going to lose their
money? It's still people that have
(22:23):
invested in it, But does it not affect the market at large?
Or does it? Because all the picks and shovel
companies are public and are selling chips and nuclear
reactors and all that sort of stuff to these AI companies that
are that market is now gone and then the market has a big
contraction because of that. Is that kind of the way you see
(22:45):
that playing it? Yeah.
Like I think the easiest answer is like, I don't know.
But Glass, that's great. I would have business answer.
It depends. I think that there I I kind of
think of it a little bit differently.
Let's let's assume like go with me here for a second.
Let's assume help open AR one ofthem is successful.
(23:05):
Yeah. OK, so they figure this out like
a GI. OK, they get to the goal.
What happens to the chip companies then what happens to
the picks and shovels then? You know what I mean?
What is the What is the road map?
To pessimist, I'm just saying you're always doom and gloom on
them. Just I've gotta be positive.
(23:25):
Like what if they do it we? Jerk.
It's No, we can't. Go to the what food we OK if
you. Have an AGI.
It's incredibly intelligent. You got all this horsepower
behind it. You have 20 nuclear reactors and
then you go, hey, how do I spendless money on chips?
Like I don't know, like isn't there some element of like if?
It's this all ohe. God, couldn't you go and be
(23:47):
like, how do I drive? Costumers quantum, yeah.
By the way, here we don't need any chips.
Yeah, this is the. They need one Q chip, you know
versus. Yeah.
Is this the this time is different argument?
Is that the where we're getting to with this is that we can't
necessarily use the indicators of previous, you know,
(24:07):
recessions, things like that in this scenario because of AI and
is just such an unknown. It is a singularity.
We don't know what's past that moment, you know, is that, is
that where we're at? I, I think it has, it's a
function of time. I think if they can reach
whatever their end goal is gonnabe profitability or AGI or both
(24:27):
or whatever and the next 5 to 10years, yeah, then this time is
different. If they don't reach it, I think
you see tremendous market collapse.
All right, so let's go right back to the original question,
which was when did we sell to get out because So what are the
things? I would say that the right time
(24:48):
to sell is alright folks. We'll see you next.
Week that there get on there I got I got a couple red flags I
wanna put out there that I thinkthat.
I would have loved. To have cut right the music that
not yet, not yet, not yet, not yet.
OK alright so here are Chris's red flags on when to sell all
(25:09):
your investments. OK, OK.
Watch for the first major AI company to miss their
commitments or default or like say said they were going to get
something. From the market will tell you.
That's one. That's one.
OK, alright, insider selling executive for cashing out.
OK, track that stuff really carefully.
I don't know how you do that if they're private, but anyways,
(25:34):
monitor the financing terms as they get more like desperate as
they get more, uh, we need that.Cash see them IP.
Gonna give better. Term cash, yeah, because
everybody will want to invest inthem.
Yeah, and then I I think there'sgoing to be a trend of we're
going to start to see the news stories of hey, open IAI like
(25:54):
missed this, you know, anthropicmissed this that sort of stuff.
Those like that barrens moment that agreed that we we we on the
past. So like those are kind of like
the the when my Spidey senses start tingling is when I start
hearing some of those. Things I think when you have
whistle right now, whistleblowers are talking about
(26:14):
this thing is the real deal and it we're concerned that they're
not taking safety seriously, that when the whistle blower is
changed to this is a hoax is probably when you can start
considering selling off or pruning that pruning the garden
a little bit and maybe getting alittle take of of the high end
of the market. Keep a little bit in there and
and you see the shit starting tohit the fan.
(26:35):
Make sure you're at your computer or your phone and ready
to hit that cell button in a fucking hurry.
Yeah, with all this being said, maybe this time is different.
You shouldn't sell at all and just ride it.
I don't know, you've really solved some things here today,
haven't we? Started up Alright, I'll see you
next week folks. Bye bye. 2.
(26:59):
Start it up. Let's get it rolling.
Big ideas, Money folding. Hustle.
Smart dream. So why turn that grind into a
joy ride?
Let's assume open AR, one of them is successful.
Yeah. OK.
So they figure this out like a GI, OK.
And they get to the goal. Yeah.
What happens to the chip companies then?
What happens to the picks and shovels then?
You know what I mean. What is the What is the road?
Map pessimist. I don't know, I'm just saying
you're always doom and gloom on them.
(00:21):
Just I've gotta be positive. Like what if they do it?
We jerk. It so we can't.
Go to the what? Food.
Let's get it rolling. Big ideas, Money, hustle, Smart
dream. So why turn that grinded through
a joy ride? Do you like money, Chris?
(00:45):
I do like today we're going to be talking about lots of money.
Yeah. And namely some kind of
interesting behavior. I wanted to take on the topic of
his Are we the AI stuff? Is this a boom situation and a
big bubble in danger of popping at some point in the near
future? Or is this kind of the real
deal? And I can see a couple different
(01:07):
sides to this. I wanted to start like I wanted
to run at this. We don't do many like investment
style pods, but this one will probably get into that a little
bit because there's been some interesting marketing.
Kind of like a self preservationinvestment pod.
And I think you and I were talking about if like anybody
that's holding stuff in the market now has probably seen
their portfolios go up significantly.
(01:29):
And so we're looking at the nicegreen number that's like.
Hey, you're you're purple. Yeah, you're portfolios worth X
percent more than you know, it'sabout cost and you're kind of
sitting there you're like wow, that's awesome.
Like, you know, and and you've asked me a bunch of times like
when do we sell? Yeah, OK.
And it's kind of like. Yeah, it's like like them, I
(01:50):
wanna second before the bubble pops exactly right.
Yeah. And I feel like everybody's kind
of like asking that question. So, you know, I, so I wanted to
kind of take the approach on this episode that hey, we're so
smart that why don't we go back and look historically, what the
(02:11):
indicators were that would lead to the of of a bust, a bubble
popping, OK, so that we can be the ones like a millisecond
before the bubble pops, we're out of the market.
Can I set the table cash? Can I set?
The table. So a couple of things.
I think it was the well, I thinkgrandma just falling out of the
(02:31):
chair. You alright back there, Graham?
He's alright. So I want to talk about the OK,
the first come in here is the circular investment piece.
So was so let's talk about the scale this morning.
So open AI is First off is leading a $1 trillion build out
of compute and data centre capacity.
Crazy. It's unfucking believable, OK,
(02:52):
they have deals with AMD, NVIDIA, Oracle and Core.
We've promised over 20 gigawattsof computing power about this is
about the comparison about 20 nuclear reactors worth 20
nuclear reactors. So was the nuclear reactor like
when I watched The Simpsons? Is one of those cooling towers?
(03:12):
Is that like 1 reactor? Because I think they had two.
Presumably yes for two Springfield.
So that's a lot. So so like 20?
Of those 4240 towers right now wow.
So the electricity alone could cost another one trillion over
the next decade. So holy shit so then after that,
so NVIDIA makes a big deal rightnow sorry.
(03:33):
So I guess the first part was like that's crazy the
requirements. The second part is like how
these guys, how the vendors all have a relationship with each
other that's mutually dependent.So NVIDIA, NVIDIA invested up to
100 billion in Open AI, and OpenAI then uses that $100 billion
to buy NVIDIA chips. AMD has a deal with Open AI,
(03:53):
where Open AI commits to buying the chips and receives a 10%
stake in AMD. And as AMD's value rises open, I
could then sell said chairs too buy more chips, right?
So so these structures inflate both sides as.
The value circular deals, right,Right.
Where they're kind of like inflating each other's
(04:13):
valuations. Yeah, right.
Absolutely. And so I guess this is like
there's a bunch of different things here and we can talk
about like open AI is burn rate and stuff like that in a second.
But I find it pretty disturbing because that to me, we also have
this on the backdrop that the growth of the of the stock
market in the United States, it's like 70 to 80% of the neck
(04:37):
of the market is, is basically. The number, yeah, mostly.
Mostly AI companies and that's, that's your, you know, like your
NVIDIA, for example, and, and all the other major players.
So it's like 7 stocks. It's like really, really tiny
that have been such huge winnershere.
So yeah. And then I think this kind of
(04:57):
comes back into your wheelhouse,whichisthe.com bubble and how
some of this behavior was kind of similar to that.
Exactly. So what I did was I did some
research trying to figure out, OK, what were the like leading
indicators that led to the.com bust?
And can we use those here for the AI boom bust, potential bust
(05:20):
to try and predict when that moment is that we should like
sell it. All right, yeah, yeah.
And get into the market, into cash, right.
So I, I've got a few of them. I, why don't I throw them out
there and get you to kind of like give us your comment on it.
So valuation, Patricks. OK.
So between 1995 and 2000, the NASDAQ rose 400%, reaching A
(05:43):
reaching PE ratio of 200, dwarfing the peak PE ratio of 80
for the Nikkei and other other markets.
So like the NASDAQ just went nuts during that that time
period. OK.
And then let me see here. Yeah, and it peaked on March
10th, 2000 and then fell by 77 percent by October 2002, right?
(06:10):
So like over a two year period it was a massive yeah bloodbath.
Wow, 70. 7%, yeah. So if you were in it, you were
invested at some point earlier on, your stocks went down by 77%
over. Like the right side presume you
had 100 bucks in there, you ended up with 33 bucks.
So that's a pretty painful lesson.
Yeah, right. So.
(06:31):
Wait 23 bucks? No Public math, 2377.
No public bathroom, public bath.The public bath.
Yeah, Alright. Yeah.
Wow. Yeah, that's way worse.
Yeah, yeah, yeah. Anyways, yeah, you're right.
So are we in that situation now?Are we seeing that rapid growth
(06:51):
of the market? I would I would say yes.
I would say so like if you were to look at the PE ratio, so
sorry, that's price to earnings ratio.
So just for folks, listen, you don't know about this kind of
stuff. It's like the price of the stock
versus the earnings of the of the money.
That the company is and. Yes it now the the weird thing
is like yes, it's so speculative.
(07:12):
I think AI is a fundamentally more transformational technology
yeah than the Internet, which sounds kind of crazy, but I
because like a lot of it's sort of built on top of the Internet,
right. But I feel like it's opportunity
is really, really great and that's obviously most of the
speculation there. But at the same time it's way
out of whack. It's enormously overvalued and
(07:34):
there's things too with like, OK, so let's look at a specific
stock. So like NVIDIA, yeah, it's worth
like 4-4 trillion dollars is like the market cap or the
valuation of that company. Yeah.
So if you're like, what's it gonna go to like 10 trillion
like 12 children, like what are we talking about?
And then it's kind of like, well, the fundamental assumption
there is that we need a whole ton of chips to do this So it's
(07:54):
like, well what if that what if it ends up like DeepSeek and we
can do it with a lot with many fewer chips?
Yeah right. That that, you know, proof all
of a sudden that's gone the. Picks and shovels companies,
right, Right. The gold rush, the people made
all the money were the ones thatwere selling the picks and
shovels to the people, right? Yeah, yeah, gold for sure.
So yeah, like same idea here. So the Invidia is in them are
probably loving it. They're selling chips like
(08:16):
crazy, data centres, nuclear reactors, whatever.
Like ARM in Great Britain and you know, like a lot like
there's a lot of like I'm sure SoftBank has made like so much
money because they are invested in a lot of these.
But I just kind of give my counterpoint to myself and you
did this in the last episode. I don't know why we do this, but
the counterpoint is there is like real stuff here about two.
(08:39):
There are huge data centres, yeah, they are putting, they are
building physical buildings. They have servers, they have
like there's infrastructure being invested in this.
Whereas when I think about the.com, you can correct me when
I think about the.com crash, a lot of it was like speculatory
on like Internet companies, you know like foosball tables and
like you know nothing really there no collateral.
(08:59):
Like like users but no revenue. Things like that exactly, yeah.
Kinda feels a little bit like the mobile app stuff.
Yeah, Mobile app still didn't have like a big.
Crash though, so this bullet point is valuations.
So price earnings ratio is really high, way out of whack.
So a little bit. Of.
This is getting getting hot in the kitchen.
Yeah, right. Alright, next one, cash burn
(09:19):
rate. OK, so just to go back to
the.com bust on March 20th, 2000, there's a cover article in
Barrons burning out. Fast warning Internet companies
are running out of cash fast which predicted him in a
bankruptcy and you know rememberwhen like everybody would talk
burn right yeah you know yeah now it's runway I think is what
(09:43):
they they. Use the term and stuff, yeah.
But you know, manyofthose.com companies were like, what's
their burn rate was, was their question.
And like, it was like, how long did they survive until they're
like out of cash and they're. Done.
That is runway because runway islike you're either going to take
off or go off the end of the runway and explode, right,
right, right. So.
(10:04):
So are we in that kind of situation?
Well, what do we know? What do we know about Open AI?
If I can find the data, but essentially oh you have it, go
ahead. 4.3 billion in in sales had 2.5 billion burn rate OK and
the same period. So it's kind of like it is
(10:24):
interesting because a lot what people don't really get, I think
is that like a lot of these, like a lot of the most popular
businesses like the Ubers, the sales forces, the whatever,
they're heavily subsidized by private equity or by the
markets, depending on the context.
And but they're not like profitable, like open AI is not
profitable, like not even close,right.
(10:44):
They're heavily subsidizing the token cost, yeah, so that they
can capture as. Much market and I'm sure they're
buying chips, they're nuclear reactors, they're looking at
their costs like how do we get these costs?
And and. So that we can we can get the
economics where they need to. Be so actually furthermore, like
think about this. So they do 4.3 billion in sales
like which is amazing, by the way.
Yeah, but their valuation is 500billion.
(11:06):
Yeah. So they're they're valued at 500
billion, but they're only doing like, that's a pretty fucking
awesome multiple. Yeah.
You really mean like if we go back to the PE ratio thing.
So like for me, that seems like a pretty big red flag.
It also kind of like, you see some of the different
investments that Airbnb or they're like, goodness, on
Wednesday, B&B Open AI is doing.And they're like, really huge.
(11:29):
They're like $100 billion commitments to stuff.
Yeah. And you're like, from where?
Like, where is this coming from?Like, and and they're like,
admittedly scrambling to find ways to, you know, generate new
sources of income, all this stuff.
Yeah. But it's also like, how do I
even, how are they in a positionto make these commitments?
Yeah. Like, these commitments seem
(11:50):
wildly outside the scope of whatthey could.
Afford, right? But then at the same time, like
if they were to go to any bank investment group, whatever, like
they can go to the soft banks ofthe world and and probably get
10s easily get 10s of billions of dollars.
Yeah, you've read the best. Now try the rest.
(12:11):
Wait, who wrote this? Check out Startup Different on
Amazon, Audible, and Kindle. O my next point on this is
ignoring fundamentalsokso.com bust.
So investors were willing to overlook the traditional metrics
like the PE ratio and base confidence on technological
(12:34):
advancements. Companies were valued based on
earnings and profits. That would not occur for many,
many years, right? So I think that's another one
that's happening right now. Everybody's enamored with the
tech and are kind of like, wow, look at what latest version of
GPT can do and look at, you know, Googles, you know, video
(12:56):
rendering video like. Or Sora the the opening.
I went to the I 1 is really impressive as well.
So, you know, people are lookingat that sort of stuff and kind
of just ignoring the economics of of the situation.
So kind of further to what what you were you were talking about
with, you know, chips and the cost to to run these these
tokens or to to sell these tokens.
(13:19):
So then the next one I have hereis market concentration.
OK. Yeah.
So when we look at it, yeah, it's those like 7 stocks that
are really driving the market valuation right now.
Yeah, which is which is really, really scary.
And so that was the same thing back in the.com I have.
Two thoughts on this. If Open AI fails to achieve its
(13:42):
goals, and I think that is a broad comment, it's somewhere
between not hitting financial targets and not getting to AGI.
I assume they would be first in my current feeling on who gets
to AGI first is probably Open AI.
Yeah, I think that's probably pretty well understood.
But let's say they just don't really get that.
They probably have what A5 to they've been talking some big
(14:04):
talks. So they got like a 5 to 10 year
period, which, you know, the money's not gonna go on forever.
So you have a 5 to 10 period, year period to figure this out
or get to a business model that is, you know, self-sustaining.
Yeah. And maybe that involves slowly
increasing the token prices. If they fail in doing that,
though, is that a single point of failure?
Does that indicate to the rest of the market that this isn't
(14:27):
legit that? And so then you see sort of the
cascading market crushing sort of effects on all these big
stocks on NVIDIA, on Microsoft, on, you know, probably like
Oracle on, you know it. Picks and shovels people get get
pulled down with. This just absolute vaporized
you, you, you would see maybe like a trillion dollars of
(14:48):
market cap like destroyed in a probably a pretty short on time.
Because as soon as that I think we're all believing in this AI
God idea in the market. Yeah.
And there's evidence to suggest they're doing it like they're
doing really well. But at the same time, I think
once we lose that faith, like the markets gonna bail fast
because it's so high. Everybody's gonna run.
Everybody's gonna be like, I want my money.
(15:10):
Yeah, right now. Yeah, right.
And it's. And so there's that second piece
and this is interesting our either of those seven companies
or, uh, open AI, maybe Anthropicor maybe like the the top three
horses of AI companies, are theytoo big to fail?
Yeah. Are we in the category now
(15:32):
where, where we actually have tobail out the market because it's
so hot? You remember, like, remember in
2008, right? Like those banks couldn't fail
because it would actually have been even more catastrophic for
the economy. Yeah, we're talking about deep,
deep. Deep SO.
Depression, yeah. Not recession.
That's a very interesting question.
So banks were bailed out, right?So now I think I'm in a
(15:55):
situation where we companies need to be bailed out because
they actually maybe the tech is so valuable they can't just
disappear. There's just, it's not even
about the tech, it's just so much moneys in it.
They can't have so many players fail, because if that many
players fail, everybody kind of fails.
And then the market factors thatinto their investments and
(16:16):
totally investments are worth way more because now you're too
big to. They're they're like government.
Backed. Yeah.
And the other thing too is, and kind of a semi related point is
a lot of there there's I was reading an article in the
Economist and there there's a lot, I mean, it's sooty, you
(16:37):
know, my brother as I was havingmy morning tea.
Yeah, OK. And there's a lot of
interdependency in in American securities right now because of
the AI boom. So like a lot of European
investors are invested heavily in the US to Canadian investors,
a lot of Japanese investors. Yeah, it's global.
(16:57):
So like, it's a global risk concentrated in like 7 stocks in
the US plus the private equity in AI.
And that's kind of terrifying. That's really high concentration
risk. Yeah.
So the other thing I wanna put out there is for my next point
that I want. To lose my money.
Man, yeah. So back in the.com bust, there
(17:17):
was a lot of easy money because interest rates were low.
OK, are we, I, I, I think the Fed is making an announcement
tomorrow, same with the Bank of Canada.
And I think interest rates are both in both countries are gonna
go down. So are we getting into a, a
period where the money is getting too easy as well for
these companies to finance them?So that you're just sort of like
(17:40):
encouraging this, this, you know, unbridled and investment
into these, these companies without actually looking at the
fundamentals because money is easy to get to.
Oh, yeah. I mean, like the if you make
money cheaper, then there'll be more money, right?
Like, like this is the point of that kind of economic lever.
We don't have our other brother here, but I'm pretty sure he
would be like, yeah, if I can speak for Mike.
(18:02):
Yeah. But I just think that that just
points to me to another risk at the same time, like I do think
low interest rates make sense for other economic reasons.
Yeah. But it is kind of like, yeah,
obviously that's gonna, that's like pouring gas on the fire,
right? It's just gonna intensify the
investment if you're a private equity.
I mean, I think one of the reasons we were made the offer,
we were made back in 20/20/21 really. 2018. 2022 is that money
(18:26):
was real cheap, you know, like during COVID, like there, like
money was incredibly cheap. Yeah.
And there was the, the, the, there was actually a lot of like
fledgling, like venture capital offerings, like private equity
groups are struggling to, to turn over some of their
investments because a lot of changes in the market since they
made the first investment. So they were looking for
opportunities and we happen to be high growth company and all
(18:46):
sorts of things. And it worked really well for
us. But that like to me, it was just
there was a ton of money flying around.
Like I remember some of the strategies in our market other
than the one that bought us thatwe're making like 6 or 7
acquisitions a year and during the peak COVID years.
Yeah, because money was so cheap, so easy for them to.
Do it Yeah. So I do think it is a big risk
(19:07):
there as well so I I don't know like this is starting to like
legitimately freak me out yeah the other thing like too, I just
want to get back to that concentration risk on like how a
lot of people are invested in U.S.
Securities. The other thing is like one of
like one of the good like portfolio theory things, right,
is like geographic diversification of assets, but
it's like, well, how am I like what does it matter like so I
buy a bunch of stocks in a European company.
(19:28):
All those European companies areinvested in the US market like
they're. I just, I kind of feel like the
the principles that make good investments are also at risk
because of the concentration risk in the United States.
It's like way beyond just like what an individual investor can
hedge against, except for maybe like being a silver stacker or
(19:49):
like buying gold. Yeah, maybe, yeah.
To preserve value but. Yeah, alright, so going back to
the.com bust, let me I've got, you know, hang.
On do you know what a silver stacker is?
No, that's interrupt you. What is that?
OK, so you know how like this isfun.
I don't know Graham knows this either.
So gold is like you want to makesure you actually buy.
Well, when you buy gold, if you go to a bank, you say I wanna
buy gold, they'll give you like they sell you like a share of a
(20:12):
like gold, but like lots of people on that gold, so they
resell the same. Thing Oh, they wait until you
actually say you want it when they then go and buy the.
Gold. Yeah, there's stuff like that.
Like you can. Actually, you don't like you
have like a promise. They will give you gold yes, so
you can go to the Canadian like mints or I'm sure there's
equivalent United States. You got like gold gold I'm
pretty sure anyway yeah, but theso here's the trick with silver.
The silver is the same idea. You're trying to preserve wealth
(20:34):
as well, but the silver stackersis my neighbor told me that this
was really deep. He's like, it's these guys who
just buy a ton of silver and they literally, because its
value is so much less than gold,they have a ton of it and they
have the actual gold. So they stack the silver.
They're silver. Stacking.
In their basement or something. So they just have like big piles
of silver and yeah, just have terrible, terrible thing.
(20:56):
But it's it's interesting. Anyway, so alright, so my last
two like, you know, predictive indicators for something for
their market going belly up is kind of the same.
So excessive hype retail investors.
And then I like an IPO mania type of situation.
So do you remember back in the the the housing crisis, remember
(21:20):
like random people were buying like 2 and three houses.
OK. Yeah, like.
Paying for the big shores that owned like 8 houses or
something. It was all on credit.
And like, yeah, exactly. So like that kind of stuff and
then the IPO mania pieces. So I have a question about this
because I should know the answerto this Russian, but is open AI
is not a public. No, no, they're not.
(21:41):
They're probably talked about this like, yeah, they're all
private, which I find really like weird, but it's because
they can get access to such capital privately.
They don't feel like they need IPO.
Right, right. So OK, so let's assume all those
indicators are that. Would be quite easy.
Going, yeah, this is scary. Like we're on the verge of a
bust. OK.
But is this time different? Like we asked this sometimes
(22:03):
with other things to do with AI,you know, is this different than
what we've seen in the past? And I kind of wonder if it sort
of is like, kind of like those counter indicators are, well, if
if open AI goes belly up, is it just all the investors that have
invested in the private equity that are going to lose their
money? It's still people that have
(22:23):
invested in it, But does it not affect the market at large?
Or does it? Because all the picks and shovel
companies are public and are selling chips and nuclear
reactors and all that sort of stuff to these AI companies that
are that market is now gone and then the market has a big
contraction because of that. Is that kind of the way you see
(22:45):
that playing it? Yeah.
Like I think the easiest answer is like, I don't know.
But Glass, that's great. I would have business answer.
It depends. I think that there I I kind of
think of it a little bit differently.
Let's let's assume like go with me here for a second.
Let's assume help open AR one ofthem is successful.
(23:05):
Yeah. OK, so they figure this out like
a GI. OK, they get to the goal.
What happens to the chip companies then what happens to
the picks and shovels then? You know what I mean?
What is the What is the road map?
To pessimist, I'm just saying you're always doom and gloom on
them. Just I've gotta be positive.
(23:25):
Like what if they do it we? Jerk.
It's No, we can't. Go to the what food we OK if
you. Have an AGI.
It's incredibly intelligent. You got all this horsepower
behind it. You have 20 nuclear reactors and
then you go, hey, how do I spendless money on chips?
Like I don't know, like isn't there some element of like if?
It's this all ohe. God, couldn't you go and be
(23:47):
like, how do I drive? Costumers quantum, yeah.
By the way, here we don't need any chips.
Yeah, this is the. They need one Q chip, you know
versus. Yeah.
Is this the this time is different argument?
Is that the where we're getting to with this is that we can't
necessarily use the indicators of previous, you know,
(24:07):
recessions, things like that in this scenario because of AI and
is just such an unknown. It is a singularity.
We don't know what's past that moment, you know, is that, is
that where we're at? I, I think it has, it's a
function of time. I think if they can reach
whatever their end goal is gonnabe profitability or AGI or both
(24:27):
or whatever and the next 5 to 10years, yeah, then this time is
different. If they don't reach it, I think
you see tremendous market collapse.
All right, so let's go right back to the original question,
which was when did we sell to get out because So what are the
things? I would say that the right time
(24:48):
to sell is alright folks. We'll see you next.
Week that there get on there I got I got a couple red flags I
wanna put out there that I thinkthat.
I would have loved. To have cut right the music that
not yet, not yet, not yet, not yet.
OK alright so here are Chris's red flags on when to sell all
(25:09):
your investments. OK, OK.
Watch for the first major AI company to miss their
commitments or default or like say said they were going to get
something. From the market will tell you.
That's one. That's one.
OK, alright, insider selling executive for cashing out.
OK, track that stuff really carefully.
I don't know how you do that if they're private, but anyways,
(25:34):
monitor the financing terms as they get more like desperate as
they get more, uh, we need that.Cash see them IP.
Gonna give better. Term cash, yeah, because
everybody will want to invest inthem.
Yeah, and then I I think there'sgoing to be a trend of we're
going to start to see the news stories of hey, open IAI like
(25:54):
missed this, you know, anthropicmissed this that sort of stuff.
Those like that barrens moment that agreed that we we we on the
past. So like those are kind of like
the the when my Spidey senses start tingling is when I start
hearing some of those. Things I think when you have
whistle right now, whistleblowers are talking about
(26:14):
this thing is the real deal and it we're concerned that they're
not taking safety seriously, that when the whistle blower is
changed to this is a hoax is probably when you can start
considering selling off or pruning that pruning the garden
a little bit and maybe getting alittle take of of the high end
of the market. Keep a little bit in there and
and you see the shit starting tohit the fan.
(26:35):
Make sure you're at your computer or your phone and ready
to hit that cell button in a fucking hurry.
Yeah, with all this being said, maybe this time is different.
You shouldn't sell at all and just ride it.
I don't know, you've really solved some things here today,
haven't we? Started up Alright, I'll see you
next week folks. Bye bye. 2.
(26:59):
Start it up. Let's get it rolling.
Big ideas, Money folding. Hustle.
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