The AI Bubble: A Comedy in Two Acts

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The whispers circulate, mes amis, of a veritable fever gripping the marketplace – a thirst for Artificial Intelligence! It seems every merchant, every speculator, believes this ‘AI’ to be the philosopher’s stone of our age, capable of turning base investment into glittering fortune. Statista, a most diligent accounting house, projects a growth rate of 37% per annum until 2031, reaching a sum that would make Croesus himself blush. Naturally, this has set the wolves of Wall Street a-howling. Two companies, in particular, have captured the public’s imagination – and, dare I say, inflated their valuations to a most precarious height. Let us examine these contenders, and discern, if we can, whether substance lies beneath the spectacle.

Act I: Advanced Micro Devices – The Aspiring Player

AMD, a company once content to dwell in the shadows of its larger rival, now fancies itself a leading man. Its data center chips, though still trailing Nvidia in the grand scheme, are experiencing a surge in demand. The third quarter, we are told, saw record sales of its EPYC processors, driven by the insatiable appetites of Google, Microsoft, and even Alibaba. A flattering report, certainly, but one must ask: is this genuine appreciation, or merely a temporary indulgence?

AMD boasts of securing contracts with OpenAI and Oracle, deploying its MI450 graphics processing units and Helios rack systems. These are impressive feats, to be sure, but one recalls the tale of the courtier who, having secured a fine coat, promptly declared himself a nobleman. The attire does not confer the title. Nevertheless, the company’s management, with a confidence bordering on audacity, proclaims rapid progress in development. A forward price-to-earnings multiple of 38, they assure us, is ‘attractive’ given projected earnings growth of 45%. One might suggest that a touch of modesty would serve them better.

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Act II: Alphabet (Google) – The Established Magician

Alphabet, or Google as it is more commonly known, presents a more seasoned performance. It possesses the advantage of an established cloud service, Google Cloud, which is experiencing robust demand and, crucially, profitability. The company, with a cunning worthy of a seasoned playwright, seeks to monetize its AI through this platform. Revenue from AI-powered products has doubled year over year, contributing to a 34% increase in segment revenue, now exceeding $60 billion. A most impressive conjuring trick, wouldn’t you agree?

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However, even Google is not immune to the temptations of excess. It is spending a staggering $77 billion – and climbing – on infrastructure, a sum that could fund a small kingdom. While this investment appears to be yielding a return – operating profits have increased by 85% – one wonders if it is not a case of throwing good money after great expectations.

Even after a recent rally, Google stock trades at 29 times 2026 earnings estimates. A ‘reasonable’ valuation, they claim, given expected earnings growth of 15%. One might suggest that a prudent investor would demand a greater margin of safety, lest they be caught in the inevitable deflation of this most fantastical bubble.

Thus concludes our brief examination of these two contenders. The stage is set, the players are in position, and the audience – that is, the investing public – awaits the final act. Whether this will be a tragedy or a comedy remains to be seen. But one thing is certain: the pursuit of fortune, like all human endeavors, is fraught with folly and illusion.

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2026-01-26 19:54