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If the history of the capital cycle is any guide, the massive allocation into AI capex in recent years is very likely to lead to especially poor returns for investors in the years to come, writes Owen Lamont.
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Part of the issue is the fact that, in spite all of the increased spending, the performance of generative AI models has not improved much, notes Gary Marcus.
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Another part is the fact that the proliferation of capable models may represent the, “start of significant margin compression for AI model builders and the large AI enablers that supply them,” as Amr Awadallah tells CNBC.
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Furthermore, even the companies at the heart of the AI boom are starting to acknowledge the current iteration of AI products are simply not as transformative as investors may assume.
“The world has yet to turn any of today’s AI hype and spending into a meaningful lift in the actual economy, says Microsoft (NASDAQ:MSFT) CEO Satya Nadella,” reports Gizmodo.
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All of this could prove to be a real problem for markets that have been driven by the AI boom to valuations that cross well into, in the words of Jeremy Grantham, “super bubble” territory.