AI Jenga, How This Can All Come Crashing Down | Shimmy Says Ep. 34

You know, I love fooling around with Sora. I hope you like that little video I created. It just me, you know, playing.

But I'm shimmy and welcome to this week's Shimmy says, that video though, I think is really indicative of what I want to talk about today. I call it AI Jenga. And you know, I, I wrote, I wrote an article, it's up on Textron AI about this.

And then actually last night I got home from another week of traveling. And in the New York Times, sure enough, there was an op-ed very much similar to my piece on AI Jenga. Um, and it, it good, it kind of reinforced what I'm thinking and what I I'm saying, you know, everybody's been talking about a potential AI bubble and what's gonna happen when the bubble bursts.

And you know, it's, it's funny. It's, it's, when everyone's talking about it, it won't happen. It's when no one's talking about it, it will happen.

That's how bubbles work. You know, it's kinda, I I've said it before. Bobby Bakala from the Sopranos said, Tony, you probably don't even hear it when it happens.

Right? And that's how bubbles are just when you at least expect them. Um, and then, you know, yesterday we had this like momentary reprieve Wednesday, actually, Jensen Wong and the good folks at Nvidia reported another stellar quarter of numbers of earnings, a more importantly, a bullish outlook going forward and said they don't see any bubble on the horizon from their view.

And, um, you know what, Thursday we saw a big rally in the stock market, at least for a couple hours. Uh, the, you know, people bought into, well, maybe it's not gonna be a bubble, maybe, or if it is, it's not bursting soon. And, and we source the, the market rally.

But by lunch or shortly after lunch, yeah, that rally kind of fizzled out and we were back in the hole, and I think it ended in the red. Clearly the street and the market is expecting some sort of correction with AI and, and probably rightfully so, but you know, this is a different market than markets we've seen in the past, right? The stock market used to be a rich man's game.

It was ruled by very rich people or by institutions, but today, 40% of the market's retail. So the little guys, you know, have their say. The problem is the little guys can be herded around like sheep or cattle and, and they tend to move more in that flock, if you will.

Um, and so clearly the entire market is moving towards this idea of a bubble. Of course, the guy who called the real estate bubble or the mortgage bubble is, is, uh, came out last week, uh, about it. People believe it's gonna happen.

And I've been saying and talking about it here for weeks, if not months, on Shimmy says on Textron Gang and everything else we do. But here's, I do think there's a bubble. I think there's a financial bubble, not a technology bubble.

I do think AI is gonna disrupt everything. It's going to be huge. I just don't know the timelines for it.

And if the current and the current financial situation lends itself to this. And let me tell you why. I think there's one Jenga block that when it gets pulled, if it gets pulled out of the stack, brings this whole thing crashing down.

Like you saw in the video I did. And that block is open ai, I think the, this whole bubble comes down to open ai, right? Hey, you know what?

Open AI for many of us invented this AI madness, right? When they put out chat GPT and everyone started using it about two years ago, maybe it was three years ago now, um, it changed, it changed everything. All of a sudden, AI was real, and, and people were marveled at the auto magical nature of it.

You know, Sam Altman is the great pipe piper of ai, even more than Jensen won. He's the closest thing I probably have seen is Steve Jobs in our, in our horizon since Steve, Steve Jobs himself passed on. Um, but, but here's the facts.

OpenAI will do maybe 20 million, $20 billion this year. Not a trivial sum. $20 billion is $20 billion.

However, if you believe the valuations and what's been bandied about the company's valued at $500 billion. Now, a company with 20 billion in revenue, do the math, right? That's, uh, 20 times, right?

Five to a hundred times 5 25 times revenue. So clearly it's a strategic valuation built on their future promise aren't their, their existing revenue run rate. 4.

4 trillion? So one could say, okay, OpenAI is not gonna make those numbers and things will need to be adjusted. Well, what are the repercussions of that?

You know, Oracle stock had their moment in the sun. Oracle Cloud had its moment in the sun couple of weeks ago when AI open AI pledged $300 billion in Oracle Cloud usage, GPU in cloud at Oracle, that $300 billion represents something like 66% of, or all of Oracle's business revenue on the books forward revenue. What's gonna happen to Oracle stock if that 66% gets cut in half or worse, their revenue outlook gets cut by 50%.

What does that do to Oracle? By the way, the Oracle stocks already come back down from that high, but what's gonna happen if they lose 50%, 60% of their revenue projection and they're not alone. Look at Microsoft, even Microsoft as big as it is, the numbers, you know, that are attributed to open AI using Azure Resources is, is a really high number of Microsoft's projected revenues.

Um, and it's not just it, it goes to Google, it goes to AWS, then it goes to the chip makers. Look at Broadcom. They've contracted to buy something like $350 billion in Broadcom gear year.

Broadcom, the entire company, I think does, I think it was 60 billion or something, or maybe it was less. I'm, I'm not remembering right now, but the amount of money contracted for Broadcom is exponentially bigger than all of Broadcom's existing revenue. If open AI doesn't make that broad come by, what happens to Broadcom stock that's based on this open AI revenue?

Even smaller companies Core Weave, yeah, they made a little bet with Core Weave. If that doesn't come out, core Weave is cratered. So pulling that open AI Jenga block out of this Jenga Tower of AI can really bring this whole thing crashing down, crashing down.

Now again, you gotta give credit to Sam Altman, he's out here. Pipe piping, right? And getting people to believe in O Open ai.

And you also gotta love the circular nature of these deals. A lot of these deals is, look, I'll buy $300 billion worth of your stuff, but you are either gonna invest some amount of money into open AI or agree to buy an equal amount or some amount of services from open ai. So, and that's, that's the circular nature of this very small incestuous group, right?

So I'm, I'm, you know, in addition to me giving me money to, or in addition to OpenAI giving money to Oracle, Oracle is handing something back to OpenAI. It's the same thing with Microsoft. It's the same thing with Google.

You know, there's all these little deals here where, again, money's not necessarily necessarily changing hands, it's just, you know, going on a spreadsheet from one column to the next and back again. But what, you know, what could go wrong? So many things could go wrong.

AI doesn't make the advances that we thought we, it would. The broader economy slows down and causes delays there. Uh, geopolitical implications come into effect.

Inflation. So many, so many things can happen here that just bring this thing crashing down. So again, I'm not saying AI is not gonna live up to the hype.

I think it may even exceed it. What I'm saying though is that our entire Jenga tower here can come crashing down if just open ai, the open AI piece gets pulled out. And I'm not hoping it does, and I wish them well.

I'm a customer and user. But those are the facts. And we've gotta realize that when we talk about risk and the AI bubble bursting, that's where the AI bubble will burst right there.

That's the weak point. You could say you heard it here first from Shimmy until next week though, that's all Shimmy has to say. Shimmy says, shimmy says shimmy.

Shimmy says, I.