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Powell – unlike the dotcom boom, AI spending isn't a bubble
- embedding-shape 1y agoI tried submitting this but landed here. I think I managed to cobble together a better title though: "US Federal Reserve Chair says that, unlike the dotcom boom, AI isn't a bubble"
- wslh 1y agohttps://archive.is/Imalt https://archive.is/Imalt
- wslh 1y agoI don't buy Powell view from his comment: you can have revenue but not profits, and also the dotcom [bubble] at the end is what makes AI possible.
- rmah 1y agoWhile I agree with your general sentiment, in fairness, Powell didn't say "revenue", he said "earnings", which is near equivalent to profits in financial reporting lingo.
- wmf 1y agoBut the AI companies do not have profits. Even Google/MS/Meta are probably subsidizing AI with the profits from their non-AI businesses.
- wslh 1y agoI assume that in this context is basically about NVIDIA, and some other chip companies.
- dragonwriter 1y agoBut NVidia's AI related profits are driven by the AI-related speculative spending in the uncertain hope of future profits by firms in the AI gold rush, they are just the leading seller of shovels.
- emp17344 1y agoPowell is so influential as the Fed Chair that he’s constrained in what he can even say. If he outright says there’s a tech bubble, that statement alone could cause the bubble to pop. I’m not convinced these are his actual views - he’s saying what needs to be said to protect the economy.
- FrustratedMonky 1y agoThe problem is, that in past bubbles, there were also people saying 'This is not a bubble".
- NoOn3 1y agoAlan Grenspan also once said that he did not believe in the existence of a national housing bubble like the stock market bubble.
- jgalt212 1y agosays the man who printed $5T, $2T of which was printed after the economic effects of the pandemic were well in hand. https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
- ares623 1y agoPlease buy OpenAI IPO or we’re screwed.
- pac0 1y agoThis is the confirmation that AI is a bubble...
- sindriava 1y agoITT: Keyboard warriors with no background in economics deciding if multinational corporate deals are a bubble or not
- Esophagus4 1y ago[flagged]
- sindriava 1y agoPeople also think that two companies doing business with each other is somehow a "circlular dependency".
- stackskipton 1y agoITT: people believe that those in jobs with big educational backgrounds might have incentives to say something not 100% backed by evidence because it would impact their job.
- emp17344 1y agoA careless comment from the Fed Chair could quite literally destroy the economy. He’s constrained in what he can say - you almost never get to hear what Powell is really thinking.
- myhf 1y agosmh, keyboard warriors with no background in tailoring deciding whether the emperor has clothes or not
- smj-edison 1y ago> Powell’s framing echoes that view: The AI race, while frothy at times, is being financed mainly through corporate cash flow rather than speculative debt. I think this is the most important line. Even if these companies are overvalued, I don't think there will be a nasty pop (this could change if banks start getting more involved, but so far it's been mainly company reserves and VC funding).
- dathinab 1y ago> corporate cash flow rather than speculative debt. except that this doesn't quite add up IMHO 1. we have the current _speculation_ on an explosive need of both more data centers and energy if AI has a break through. This investments are mostly not from the big tech but VC/higher risk investment soured. 2. VC isn't always just private equity, I have seen enough rent founds, banks and similar acting as VC investors. Sure mostly by proxy, but they are doing that anyway. 3. 1st point also involves a lot of loans handled and resold by banks... 4. even with out all this a lot of founds are based on S&P 100 and similar. If the AI bubble goes pop before it's filled with enough magnetizable value a lot of the companies in there will lose a non negligible amount of valuation, which will have shock waves across much more then just "big companies".
- sseagull 1y agoThat’s starting to change though https://www.bloomberg.com/news/articles/2025-10-31/meta-xai-starting-trend-for-billions-in-off-balance-sheet-debt https://www.bloomberg.com/news/articles/2025-10-31/meta-xai-... (Archive link: https://archive.ph/NBNEu https://archive.ph/NBNEu)
- smj-edison 1y agoHmm, interesting. I hadn't realized how much companies were starting to borrow.
- jameslk 1y agoBorrowing to fund AI datacenter spending: https://x.com/MikeZaccardi/status/1984036161426485358 https://x.com/MikeZaccardi/status/1984036161426485358
- dathinab 1y ago> but they actually have earnings’ which doesn't mean it's not a bubble a bubble is a over valuation of a industry sector it isn't a "it has no use at all" it's a "the use as big as assumed", "the use isn't worth the money invested in it" etc. and so far that's the trend with AI, it has use, you can make money with it, but not _enough_ But there is just that much money you can get from people for the services OpenAI is currently usable/used for. Some (e.g. search, generating shopping lists, grammar correction) of which people expect to be cheap or even fully free and some (coding assistance) which involve other companies in the value chain. Add circular money deals to that. And it's very clearly a bubble. But if you can drag out a bubble long enough you might be able to largely fill it up before it pops. Through with how confidence in AI is moving + the general world economical situation I wouldn't bet on it.
- skywhopper 1y agoRemember when Alan Greenspan said the housing market needed to encourage more adjustable rate mortgages?
- Ekaros 1y agoWouldn't clear overvaluation fit to term of bubble? And well if these companies are simply burning chunk of their profits and nothing turns out, wouldn't that affect their valuations? Like wouldn't any traditional company that just wasted good chunk of profits it made be valued at lower market price at somepoint? And then you get to Nvidia. Which to me looks like clear case where price must correct if their profit drop due to demand dropping. So even if there is no "pop", there will likely be a deflation and at these valuations even that will have impacts.
- jameslk 1y agoWhen your Federal Reserve Chairman starts giving you stock tips, the market top is near
- resoluteteeth 1y agoThis. When he has to specifically tell people "it's not a bubble" that is not at all a good sign in my opinion.
- JKCalhoun 1y ago"I won’t go into particular names, but they actually have earnings." Why not go into particular names? Without doing so the second half of your sentence is worthless. Meta? Of course they have earnings. Not AI earnings. Alphabet? Apple? We kind of need particular names.
- stego-tech 1y agoI think I get what Powell’s laying down, here, from an economics perspective. His data shows that a non-zero number of major players in the AI space are posting earnings, not just revenue, and that this is a sign of healthy economic activity. He’s also saying that while CAPEX investment today is coming primarily from corporate books (and not major banks), he’s also stressing that these investments have a long, uncertain tail - and that at present, between lofty promises from AI companies and executives eager to hoard capital, that the job market is seeing significant negative impacts that have zeroed out job growth while capital growth remains on a rocket ship to the stratosphere. As someone who follows the man’s speeches and comments, I’ve always found that the real message is between the lines of what he says, especially for things he cannot say explicitly. So reading his comments here, my takeaways are: * Zero job growth is a serious concern, especially as companies and business elites continue to demand a return to ZIRP * Inflation also remains a concern in that same context, as it continues to skyrocket for essential goods * Even if this AI investment is highly speculative and collapses, its “blowback” is broadly contained vis a vis the AI “sphere” being a handful of companies in circular investment schemes, not mass public buy-in like prior bubbles * His immediate concern remains trying to figure out how to address rising inflation, stagnant wages, and negative/zero job growth in the face of a red hot securities market and continued trade uncertainties. The only levers left to pull will disproportionately hurt the working class even further, and he seems to continue suggesting that this isn’t an issue the Fed can solve absent Congressional intervention (which, let’s face it, ain’t happening) That’s my takeaway from his comments this year, and it fits my own perspectives on the AI Bubble (in that yes it’s a bubble, but it’s a highly concentrated bubble that’s painting over broader harms and misleading public officials about the state of the economy). Being head of the Fed, he can’t come right out on either side of the fence and call AI a bubble or a real boost, hence why he’s couching comments deeply within economic terms alone. Just my two cents, anyway.
- PorterBHall 1y agoI think your take makes sense. Thanks for laying it out. I worry about the containment aspects of this. Sure, the capex for this is coming off corporate balance sheets, but a bad event could wipe away a lot of stock market value, which would trigger a deep recession given that AI spending is really the only thing keeping our economy afloat at the moment. It feels like we’re in a doomed if we do, doomed if we don’t moment. I see breadlines in our future whether or not we achieve AGI. The only question is whether or not we’ll have to deal with some added existential risk.
- sema4hacker 1y ago"Here's How the AI Crash Happens:" https://finance.yahoo.com/news/ai-crash-happens-215009627.html https://finance.yahoo.com/news/ai-crash-happens-215009627.ht...
- JKCalhoun 1y ago"The amount of energy and money being poured into AI is breathtaking. Global spending on the technology is projected to hit $375 billion by the end of the year and half a trillion dollars in 2026." When you think what we could have done with that money instead… I'm not as cynical about the state of the world as others but from time to time I have to shake my head when I consider how much better we could have it. That to me is the real tragedy.
- yummypaint 1y agoVaguely projecting forward the relationship between total cumulative funding and experimentally achieved q value, it's not unreasonable to think that this money could have brought us to commercially viable fusion power if spent judiciously over a longer period of time. It's pretty typical that we collectively spent the money on an orgy of waste instead.
- latchkey 1y agoDDTL is the new subprime.
- throwaway984393 1y ago[dead]
- yahoozoo 1y agoWhat would actually cause the bubble to pop?
- wmf 1y agoThe bubble will pop if/when credit markets stop providing new money. They would do that if they just run out of money to lend or they decide that AGI is impossible.
- amypetrik8 1y agoinvestors dry up, prompted by a scandal (or not) or someone figures out how to do AI at 1/100000th the CPU/memory on the edge a company or two collapses all the other companies now back way off now the bubble is popped AI returns 5-15 year later
- naveen99 1y agoWhat timeframe ? You get bubbles and pops on the minute candle chart daily.
- deleted 1y ago[deleted]
- dragonwriter 1y agoWhat a bizarre statement if taken at face value as a description and not just as talking up the economy, even if the explicit premise is true; there were plenty of firms in the dotcom bubble that actually had real earnings and sustainable business models (they are, in some cases, still tech giants today); it was still a bubble; the contrast drawn requires false assumptions about what happened in the dotcom boom.
- keernan 1y agoI would be shocked if the Fed Chairman intended his comments as advice regarding the relative valuation of the price of the SP500. In 1999 people correctly understood that this thing called the internet was going to transform life like nothing before it had ever done. And they were correct. But that has very little to do about investing in stocks. Just because you have an insight into a fantastic technology doesn't mean the price being asked to purchase stock will earn a profit. And there is no way Powell would opine on whether now is a good time to buy, sell, or hold stocks. My reading of Powell's comments is they were directed upon the stratospheric dollar amounts being spent creating AI data centers and what that means for the economy. There is just no way he is providing advice about the price of stocks.
- Marshferm 1y agoPowell’s Greenspan moment.