AI Investments Are Not a Bubble
By Joel D. Joseph, economist
Forbes magazine recently warned, An AI boom is catapulting markets and raising fears a bubble is near. Gary Smith, an economics professor at Pomona College and author, has warned about an artificial intelligence bubble. These models are being hyped up, and we're investing more than we should, said Daron Acemoglu, an economist at MIT, who was awarded the 2024 Nobel Prize in Economic Sciences. He said there is a startling amount of capital pouring into a revolution that remains mostly speculative.
The AI boom is not a repeat of the dot-com bubble. In 2000, 135 dot-com firms went bankrupt or shut down operations, according to a "Dot-com Deathwatch" article published by Fortune magazine in early 2001. Across the country, 220 internet-related companies shut down in 2000. By mid-July 2001, an additional 330 companies had closed. One estimate found that four out of five dot-coms in the San Francisco Bay Area went out of business in 2000 and 2001.
The dot-com boom was a mad-dash to invest in high-tech start-ups. In contrast, the AI book is being invested by multi-trillion-dollar companies including Nvidia, Google, Microsoft, Meta and Oracle.
Nvidia invests heavily in AI infrastructure and startups to ensure demand for its computer chips. For example, Nvidia invested up to $10 billion in Anthropic, an AI company founded in 2021 by seven former employees of OpenAI, including siblings Daniela Amodei and Dario Amodei, the latter of whom was OpenAI's Vice President of Research. Nvidia plans to invest up to $100 billion in OpenAI, supplying it with data center chips. Nvidia is also part of an investor group acquiring Aligned Data Centers in a $40 billion deal. Nvidias total investment in AI is $150 billion or 3% of its market value.
Microsoft invested up $5 billion in Anthropic, which will commit $30 billion to using Microsoft's cloud services. Also, Microsoft has an ongoing partnership with OpenAI, even though OpenAI has also made deals with other cloud providers. These are relatively small investments compared to Microsofts $3.6 trillion market valuation.
Google focuses on its internal models (Gemini) and its Google Cloud platform, and is a pioneer in custom AI chips with its Tensor Processing Units (TPUs). In 2025, Google will spend around $75 billion in total capital expenditures in AI. Google announced a deal to supply up to one million of its AI chips to Anthropic.
In addition, Google also signed a cloud computing deal with Meta worth more than $10 billion. These investments represent only three percent of Googles total valuation.
Meta is building out its AI capacity to meet demand for new features and its own Llama AI models. Meta has projected capital expenditures of around $70-72 billion for AI 2025. In addition, Meta secured a $14 billion agreement with Core Weave for computing power. Meta also bought a 49% stake in Scale AI for about $14.3 billion. Metas total AI investments are approximately $100 billion, or about 7% of its market cap
The only company that may be overinvested in AI is Oracle. Oracle is worth $566 billion, but has invested $300 billion in AI, more than 50% of its market cap. To fund this expansion, Oracle has taken on substantial debt, including an $18 billion bond issuance in September 2025, which has raised investor concerns about its debt load and potential margins on AI contracts.
While Artificial Intelligence may be over-hyped and over invested in, there is no AI bubble that can burst. The biggest risk taker is Oracle, and even Oracle can probably survive even if its AI investments crumble.
In contrast, Bitcoin is an actual bubble that can burst. Bitcoin has no intrinsic value, but is supported by the bigger fool theory and illegal business transactions. The bigger fool theory is that you can always sell your Bitcoin to someone dumber than you. This theory boosted the price of tulip bulbs in the Netherlands in the seventeenth century when tulips became more valuable than a house. Within a few years, tulips crashed back down to their actual modest value as a flower. In contrast, Bitcoin can crash to zero. Dont worry about the AI bubblefocus on the coming Bitcoin collapse. The total value of all bitcoins is more than $1 trillion. When it crashes, there will be serious ripples in the economy.
GenZers, those born between 1997 and 2012, are heavily invested in Bitcoins. They wrongly believe that Bitcoins will be the way to save their generation. GenZers are most likely to be harmed when Bitcoin collapses, making it even harder for that generation to buy homes and pay off their college loans.
By Joel D. Joseph, economist
Forbes magazine recently warned, An AI boom is catapulting markets and raising fears a bubble is near. Gary Smith, an economics professor at Pomona College and author, has warned about an artificial intelligence bubble. These models are being hyped up, and we're investing more than we should, said Daron Acemoglu, an economist at MIT, who was awarded the 2024 Nobel Prize in Economic Sciences. He said there is a startling amount of capital pouring into a revolution that remains mostly speculative.
The AI boom is not a repeat of the dot-com bubble. In 2000, 135 dot-com firms went bankrupt or shut down operations, according to a "Dot-com Deathwatch" article published by Fortune magazine in early 2001. Across the country, 220 internet-related companies shut down in 2000. By mid-July 2001, an additional 330 companies had closed. One estimate found that four out of five dot-coms in the San Francisco Bay Area went out of business in 2000 and 2001.
The dot-com boom was a mad-dash to invest in high-tech start-ups. In contrast, the AI book is being invested by multi-trillion-dollar companies including Nvidia, Google, Microsoft, Meta and Oracle.
Nvidia invests heavily in AI infrastructure and startups to ensure demand for its computer chips. For example, Nvidia invested up to $10 billion in Anthropic, an AI company founded in 2021 by seven former employees of OpenAI, including siblings Daniela Amodei and Dario Amodei, the latter of whom was OpenAI's Vice President of Research. Nvidia plans to invest up to $100 billion in OpenAI, supplying it with data center chips. Nvidia is also part of an investor group acquiring Aligned Data Centers in a $40 billion deal. Nvidias total investment in AI is $150 billion or 3% of its market value.
Microsoft invested up $5 billion in Anthropic, which will commit $30 billion to using Microsoft's cloud services. Also, Microsoft has an ongoing partnership with OpenAI, even though OpenAI has also made deals with other cloud providers. These are relatively small investments compared to Microsofts $3.6 trillion market valuation.
Google focuses on its internal models (Gemini) and its Google Cloud platform, and is a pioneer in custom AI chips with its Tensor Processing Units (TPUs). In 2025, Google will spend around $75 billion in total capital expenditures in AI. Google announced a deal to supply up to one million of its AI chips to Anthropic.
In addition, Google also signed a cloud computing deal with Meta worth more than $10 billion. These investments represent only three percent of Googles total valuation.
Meta is building out its AI capacity to meet demand for new features and its own Llama AI models. Meta has projected capital expenditures of around $70-72 billion for AI 2025. In addition, Meta secured a $14 billion agreement with Core Weave for computing power. Meta also bought a 49% stake in Scale AI for about $14.3 billion. Metas total AI investments are approximately $100 billion, or about 7% of its market cap
The only company that may be overinvested in AI is Oracle. Oracle is worth $566 billion, but has invested $300 billion in AI, more than 50% of its market cap. To fund this expansion, Oracle has taken on substantial debt, including an $18 billion bond issuance in September 2025, which has raised investor concerns about its debt load and potential margins on AI contracts.
While Artificial Intelligence may be over-hyped and over invested in, there is no AI bubble that can burst. The biggest risk taker is Oracle, and even Oracle can probably survive even if its AI investments crumble.
In contrast, Bitcoin is an actual bubble that can burst. Bitcoin has no intrinsic value, but is supported by the bigger fool theory and illegal business transactions. The bigger fool theory is that you can always sell your Bitcoin to someone dumber than you. This theory boosted the price of tulip bulbs in the Netherlands in the seventeenth century when tulips became more valuable than a house. Within a few years, tulips crashed back down to their actual modest value as a flower. In contrast, Bitcoin can crash to zero. Dont worry about the AI bubblefocus on the coming Bitcoin collapse. The total value of all bitcoins is more than $1 trillion. When it crashes, there will be serious ripples in the economy.
GenZers, those born between 1997 and 2012, are heavily invested in Bitcoins. They wrongly believe that Bitcoins will be the way to save their generation. GenZers are most likely to be harmed when Bitcoin collapses, making it even harder for that generation to buy homes and pay off their college loans.
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