The Globe and Mail wonders in its Tuesday edition whether the artificial intelligence bubble is about to burst. The Globe's guest columnist George Athanassakos writes that the debt-driven, interconnected sector is displaying cracks, increasing the risk of a crash. A potential catalyst for the reckoning could be the Democratic Party's recent electoral win, which threatens the AI datacentre boom by delaying projects and increasing costs for companies racing to expand computing capacity.
Before the midterm elections, the tech sector faced challenges: Intel dropped 29 per cent on Oct. 30 after missing earnings estimates, and Amazon and Alphabet reported lower than expected growth. Microsoft-backed OpenAI and Palantir also cut their revenue projections. By the end of October, the Nasdaq was already 10 per cent below its peak.
OpenAI and Anthropic are the most financially fragile companies: single-product companies selling a commoditizing product into a market with free open-source models, financed by recurring capital needs that assume a profitability they have not yet shown. These are the most likely companies to go to zero, and they are the ones lining up for the exits. Mr. Athanassakos believes an AI reckoning is nigh.
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