AI can displace and destroy longstanding business models by digitizing services and replacing analog processes, similar to how the Internet disrupted many industries. Heavy corporate and infrastructure spending on AI raises concerns about repeating past capital boom-and-bust cycles seen in telecom and dotcom eras. Historical examples of expensive infrastructure projects led to bankruptcies and market collapses when speculative investments outpaced sustainable demand. The risk of overinvestment and speculative frenzy around AI suggests investors and companies should be cautious to avoid creating stranded assets and repeating prior market failures.
More recently, I introduced the Enron documentary to my daughter, and I was shocked all over again by how much that company wooed Wall Street while pursuing wild, expensive infrastructure projects. These two threads just came together in the form of a fascinating interview I just spotted: The Institute for New Economic Thinking scored an interview with famed short seller Jim Chanos recently.
Chanos shut his hedge fund firm and converted his operation to a family office a few years ago. However, he's worth listening to, so check out the excerpts from his recent interview with INET below. (Via INET, I asked Chanos if he was shorting any of companies involved in this AI spending frenzy. Chanos said he didn't talk about any companies by name in the interview, so there was nothing to disclose specifically. Although, he did disclose that he's currently long Bitcoin and short certain Bitcoin treasury companies).
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