The West’s breathless AI spending spree can end only one way

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But this time is different, right?

As every student of investment trends knows, any boom will ultimately culminate in a bust. Yet almost invariably this truism – repeatedly proven by historical experience – is forgotten in the excitement of the boom du jour; or, rather, investors come to believe that in their particular case, the boom is perfectly sustainable.

Equally invariably, belief in “this time is different” turns out to be flawed. As indeed it will be with the latest technological revolution to engulf the world of commerce: artificial intelligence.

I have to confess to being somewhat bewildered by the pace, scale and complexity of the change that AI is bringing about, and readily admit to lacking the expertise to fully understand both the technology and its path to monetisation. I should add that this is not for want of trying.

But I do know a bubble when I see one, and the current breathless pace of investment in AI is undoubtedly that. It’s happening far too fast for the capital markets and the public to accommodate without mishap.

Trump is clutching at straws and the world knows it

Ah, yes, but actually, say its cheerleaders, it is not nearly as big as some of those seen in the past; and unlike the dotcom boom of the late 1990s, or the British railway mania of the 1840s, it is substantially funded by the existing cash flows of the major tech giants.

Both these observations are supported by the facts. At its peak, annual capital spending on railways reached an astonishing 20 per cent of British GDP, and even the investment boom in broadband supporting infrastructure during the 1990s reached close to 2 per cent of US GDP.

Current data centre........

© Brisbane Times