Is the AI Bubble About to Be Tested?

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• Patrick Boyle argues that the AI boom is exhibiting bubble-like characteristics, with companies like Anthropic seeking unprecedented valuations ($2 trillion) based on speculative “new math” (TAM) rather than traditional financial metrics, contrasting with the relatively “cheap” valuation of the actual “shovel seller,” Nvidia.
• Traditional valuation methods (DCF) are strained by rapidly growing, unproven AI revenues, and rising interest rates act as a “double whammy,” reducing the value of future profits and increasing borrowing costs; this echoes Scott McNeely’s post-dot-com crash warning about the absurdity of high revenue multiples, with Anthropic seeking 31x revenue.
• Valuations are increasingly justified by rapidly inflating “Total Addressable Market” (TAM) figures (e.g., Anthropic’s market growing by $37 trillion in 4 months), alongside a “circular funding” ecosystem where major tech players invest in, guarantee debt for, and lease from each other, marking up valuations for unbuilt infrastructure like SB Energy’s data centers (valued like “a 30-year mortgage on an iPhone”).
• Investors should exercise extreme caution, as a great technology can still be a terrible investment if the price is too high, especially when valuations rely on unrealistic growth assumptions and a lack of tangible assets, ignoring traditional financial prudence and the “Iron Law of Mega Projects.”