Can AI Profits Ever Catch Up to the Price Tag?

Big tech companies have been spending unprecedented amounts of money, borrowed and equity, on AI and data centers. Tech leaders say that they expect large demand for AI services into the future.

AI is propping up the economy. AI accounts for half of the rise in the stock markets this year, according to Adam Turnquist, Chief Technical Strategist for LPL Financial.  Tech companies have been spending big on construction, electrical, and electronic components.   Tech leaders say they will have large demand for AI services into the future.

The administration wants American AI to keep ahead of China.  They have funded and taken positions in companies, saying that the future bonanza of earnings will benefit the American people.

There is a place for the United States to take an interest in companies, but it’s not here. US ought to routinely take interests in government loan backed companies. SBA-backed loans are a prime example.  Supporting small businesses makes sense; they are the heart of our economy.  Many SBA-backed companies do fail, but a few are big hits. Why shouldn’t the US recover its losses from those that succeed?

When the US needs to bail out a vital industry, such as banking or steel, the country ought to get a piece of any upside.

Picking winners and losers in AI is going to be hard. There will be a tendency to support the AI firms that the government backs over others, which is not free enterprise.

My son Brad is a professor at Ecole Polytechnique, a French institute of technology.  He may have a different view of what’s happening than those of us in the United States.  He says that Chinese AI is making great strides. It’s not as good as the US AI, but he says it is good.

Those of us old enough, recall that before China took the role, Japan was good at copying stuff made in the US and selling it for less.  The Chinese are great at manufacturing and selling to the world.  With this history in mind, the Chinese will be offering AI services that may not be quite as good as the US, but good enough, and they will be a lot less expensive.  This is a winning formula for earning business.

Once a user gets started with an AI system, there’s inertia at work not to change, so beginnings are important.  As with manufactured goods, Chinese are marketing worldwide.

Brett Winton, Chief Futurist with ARK invest, sees steep AI cost declines ahead, and studied whether there will be too much AI capacity. His conclusion is no, that there will continue to be demand. I suspect that going forward, falling prices and competition will make the huge investments not as profitable for the big Tech companies as they’re expecting.

I have been around to see a lot of endings. If I were a tech executive, I would be big into AI, but I would be sure that if the bonanza doesn’t occur, it wouldn’t sink the company. Balance is the key to staying on the tightrope.

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My brother and I are interested in garage space for our antique 1947 boat. The boat is 20’ long. We keep it on a trailer, and the current space will probably only be available for another couple of months. Here’s a photo of it:

If you know of a garage within a 5-mile radius of Haverford that we might rent or buy I would appreciate it if you could let me know.  To accommodate the boat and trailer, we’d need a garage that is at least 25’ long. It would need to have an electrical outlet. Heat is preferred but optional.

Thanks,

Lee