Yesterday Google’s earnings report was so good—well above expectations—but it still couldn’t save the stock price. The main reason is that AI spending is too high and cash flow has turned negative. Public companies have to be judged by ROI—return on investment—and the input-output ratio. At this stage, AI clearly isn’t generating additional revenue. If this round even MAG7 companies start tightening AI spending, then there’s a good chance this infrastructure semiconductor cycle will be coming to an end, and these semiconductor companies will return to normal valuations!
Of course, the process of bursting the bubble will be pushed further out. Maybe you can wait until AI becomes “more intelligent” through an emergent effect, leading to more AI applications that are more profitable—then the AI era will truly begin!
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