>A potential way that this could be a bubble is if AI proves to be a fad. A lot of this rise in valuations has been because of increased demand for GPUs and data centre utilization, which is downstream of the demand for AI. We might imagine that the AI labs are propped up by an enormous amount of invested capital, and this capital ends up propping up the valuations for companies that make or rent out GPUs. However, this doesn't seem to be happening. Alphabet has a full-stack AI supply chain, where they create ASICs for AI, train their own AI, integrate AI into their products, and rent out compute to customers. Their prospectus helpfully divides their revenue streams into Google Cloud for their rented compute and Google Services, which makes it easy to tell if Alphabet's increased earnings are mostly because of their data centres. The answer is no. Google Cloud revenue is growing more in terms of percentage, but Google Services is growing far more in absolute terms. Specifically, Google Services revenue grew by 37.8 billion dollars for a 12% increase, while Google Cloud revenue grew by 15.5 billion dollars for a 36% increase. Alphabet is definitely benefiting from renting out their data centres, but it's not the main reason why their earnings have skyrocketed. Meta doesn't rent out their data centres at all, but their prospectus also records them having massive increases in their revenue, on the order of an extra 30 billion dollars from 2024 to 2025, and another extra 30 billion from 2023 to 2024. This isn't foolhardy investors throwing money at any company that makes AI, this is real profit from companies that have found ways to monetize AI. Anthropic also seems to be experiencing an exponential growth in their revenue as well, based on their S-1 filing. The only real unknown is OpenAI, which purchases an enormous amount of compute from other companies. It's possible that their finances are terrible, but even if they go under, I'm not convinced that this amounts to a bubble bursting. If anything, it seems more likely that their competitors will just consolidate and fight for more of a market share instead of the collapse triggering a chain reaction that takes the industry down with it.

No one should ever write paragraphs this long.

If you feel the need to write this much in a single paragraph, slap yourself and remember the goal of writing is to communicate!