Bubbles burst when supply for the previously hot commodity runs ahead of demand, whether those be tulips or internet bandwidth or derivatives based on subprime loans. We are not there yet when it comes to AI:

Google, Microsoft and Amazon, which are the three largest providers of cloud computing in the United States, said they did not have enough computing power to meet customer demand. That’s despite those three and Meta shelling out a combined $112 billion in just the last three months on capital expenditures, which included construction of data centers. Over the last 12 months, the four spent a total of than $360 billion in capital expenditures.

The world's largest technology companies--Google, Meta, Microsoft, and Amazon--are dramatically increasing their investments in artificial intelligence, signaling a renewed acceleration in spending on data centers and computing infrastructure. Over the past year, these four giants have collectively poured more than $360 billion into capital expenditures, with plans to spend even more in the coming months. Amazon alone intends to invest $125 billion this year, underscoring the scale of this expansion. This surge in spending is driven by soaring demand for AI-powered services and the need to build vast data centers capable of supporting these technologies.

Nevertheless, even companies that have been printing money can't din up the trillions they want to spend on AI Capex. It's got to be debt funded and even with the financial shenanigans where big Tech doesn't take these debts as liabilities on their books, it's someone's debt! The Bank of England has warned that as AI infrastructure projects increasingly rely on debt financing, the potential for financial instability could rise if AI fails to meet expectations or requires less computing power than anticipated.

But you can't make sense of this Capex bubble if you don't pay attention to the metaphysical/technical bubble around AGI and ASI. In the NYT article that I am linking to today, they talk about how Mark Zuckerberg is talking about the strategic importance of building AI infrastructure now, preparing for a future where "superintelligence" could transform industries.