A strange thing is happening in the markets right now.
Things that were supposed to rise with the rise of AI, like Bitcoin and software stocks, are falling hard. Even the stocks of the Cloud Czars are wobbly.
We first saw this in Oracle, down over 40% in the last six months. We saw it in cryptocurrencies, which weren’t real but were backed by AI geniuses who thought we shouldn’t trust government but should trust the Winkelvoss twins. Now, despite Goldman Sachs boosting them, the rot has spread to the Czars themselves. Microsoft stock is down 18% over the last month.
The entire software complex is being hit, not just the SaaS names you know, like Salesforce, ServiceNow, and Adobe. Contract software outfits are also getting hit, like IBM and the Indian companies. (Is there a difference? Not really.)
Results don’t matter. Palo Alto Networks is down 21% in the last month despite excellent results. Cloudflare lost 17% of its value in just five days, analysts making up reasons for it that made no sense.
Money is getting burned out by AI’s false promises. Generative AI is a scam. It’s not improving productivity. The Czars keep spending because they insist all their new capacity is spoken for.
Gary Marcus sums it up:
Although there are some practical use cases, such as coding, it is an inherently unreliable technology. It is ripping apart our educational system, our information ecosphere, and flooding the zone with nonconsensual deepfake porn. AI is threatening the environment with data centers built on too much speculation. It is leading some people into serious mental health issues. And it may lay waste to our economy, once banks and investors who bought the hype start to fall.
Burning It All Down
Anthropic is accusing rivals of copyright theft just as it’s shown to be guilty of copyright theft. (That’s the best Herbert Hoover I could get out of Gemini, and ChatGPT was a complete fail.) AI Gods are demanding workers sit at their desks for 72 hour weeks. The workers are fed up. But bosses figure they can always find more geniuses who will sell their souls for a paycheck. Why should they?
I have covered a lot of booms over my lifetime. The pattern was that when bosses needed something extra, they would bend over backwards to accommodate the staff. Not this time. Maybe it’s because they see their competition as Indian and Chinese companies that routinely engage in this intellectual slave-driving. Do they?
All this squeezing, of customers, of employees, even of governments, is happening in the name of cash flow. And all of that cash flow is now going into capital spending. That’s why these stocks are being crushed. What’s the point of operating cash flow if the investors don’t even get a taste?
Investors who think they’re smarter than you are now buying the “shovel makers.” Chip stocks like Nvidia and (the new hotness) Micron, the memory maker. Machines make chips, so infinite demand can be handled with more machines, they figure. Micron stock is up over 280% in the last six months alone. It’s now worth nearly $500 billion. Its Korean rival, SK Hynix, is doing just as well.
But, returning to Marcus’ point, here’s the problem. Something positive should be coming out of all this. Productivity, Profit. A better life for…someone.
None of that is happening.
The AI Gods keep insisting prosperity is just around the corner. Ask how that went for Herbert Hoover.
