"Burry cautioned that so-called hyperscalers, including Microsoft and Alphabet, are wasting huge sums on microchips and data centers that will quickly become obsolete, to power AI tools such as chatbots that will become commoditized. He drew a parallel to a Baltimore department store briefly owned by Warren Buffett in the 1960s: Hochschild-Kohn. "When the department store across the street put an escalator in, he had to, too," Burry wrote. "In the end, neither benefited from that expensive project. No durable margin improvement or cost improvement, and both were in the same exact spot. That is how most AI implementation will play out.""
""When one of the local department stores upgraded its window displays or debuted a new cash-register system, "the others had to follow suit," author Alice Schroeder wrote in "The Snowball: Warren Buffett and the Business of Life." Buffett and his late business partner, Charlie Munger, compared the situation to "standing on tiptoe at a parade," she added. "Once anybody did it, everybody had to do it.""
Massive investments in microchips and data centers by hyperscalers risk becoming wasted as AI tools such as chatbots become commoditized and fail to generate durable margins. Trillions of dollars of spending lack a clear path to utilization by the real economy and create little sustainable competitive advantage because competitors often match similar investments. Large technology names and market darlings, including Nvidia and Palantir, face heightened scrutiny and vulnerability to a prolonged slump. The escalation-effect in corporate upgrades produces widespread imitation without improving relative positions, leaving firms in the same spot.
Read at Business Insider
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