So Sam Altman just casually dropped some bombs last Thursday that basically sum up the entire AI investing dilemma in one neat little package. And honestly? It’s kind of hilarious how perfectly he captured the madness.
First, he’s out there saying OpenAI is going to spend trillions on data centers. Trillions! With a T! Like, “Hey economists, we know you think we’re crazy, but whatever, let us do our thing.” Classic tech bro energy right there.
But then – and this is where it gets spicy – he basically admits we’re in a bubble. He’s comparing the current AI frenzy to the dot-com boom, saying investors are “overexcited” and some startup valuations are straight-up “insane.” His exact words: “Someone’s gonna get burned there.”
So which is it, Sam? Are we about to make it rain money or are we all about to get torched?
The Bull Case: The AI Money Printer Goes Brrrr
Here’s the thing – the spending is absolutely bonkers. Microsoft went from $15 billion in annual capex before COVID to $90 billion now. Meta jumped from $20 billion to $90 billion. These aren’t rounding errors; these are “buy a small country” numbers.
The top five U.S. tech giants are set to blow $400 billion in the next year alone. Before ChatGPT? They were spending less than $150 billion combined. By 2030, we’re looking at $1 trillion annually. That’s not a typo.
Every new AI model needs more compute, more storage, more everything. It’s a compounding growth flywheel that’s basically printing money for anyone selling the picks and shovels.
The Bear Case: When Great Companies Meet Terrible Prices
But here’s where it gets tricky. Nvidia’s market cap is $4.23 trillion – bigger than most countries’ entire economies. It’s trading at 56 times earnings, which is basically double what you’d normally pay for a “reasonable” stock.
The problem isn’t that these are bad companies. They’re incredible companies! But incredible companies can still be terrible investments if you’re paying champagne prices for beer profits.
The Smart Play: Thread the Needle
Here’s the beautiful part – both sides can be right. The AI spending tsunami is real and massive. But the mega-caps writing the checks are priced like they’ve already won the next decade.
The smart money? Get exposure to the companies receiving all those billions without standing directly in front of the valuation cannon. Think the semiconductor equipment makers, the power companies building AI-ready grids, the cooling system providers, the data center operators.
Companies like MP Materials (rare earths), Vertiv (cooling solutions), and Constellation Energy (power generation) are riding the wave without the nosebleed valuations.
The Bottom Line
Altman basically gave us the roadmap: Follow the money, but heed the warning. The AI revolution is real, the spending is astronomical, but some prices have gotten absolutely ridiculous.
History shows that valuation eventually matters. So be smart about where you place your bets. Own the reasonably-valued beneficiaries of the AI boom while being careful about the darlings everyone’s already crowding into.
Because as Sam so eloquently put it – someone’s gonna get burned. Just make sure it’s not you.