The Worst Mistake You Can Make When Investing in AI
Contributed Opinion

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Why are so many seasoned investors suddenly stepping forward to slap a "bubble" label on artificial intelligence (AI)?

In just the past seven days, I tallied three of them:

You'd almost think keeping your place at the smart-money table now hinges on forecasting a crash that's right around the corner.

The pitch nearly always opens the same way: AI shares have run up an enormous amount.

And they have. But the error these so-called "experts" keep making is overlooking the reason those prices climbed — the fundamentals holding them up.

Treating AI as a bubble can drain your account. This is plainly the defining trend of the decade. Bail out too soon, and you forfeit years of gains.

Today, I want to take apart the six biggest worries about AI being a bubble…

Worry #1: Where's the money coming in?

Doubters insist this is a rerun of the dot-com era, when firms with thin or nonexistent sales rocketed to absurd heights.

Just look at Anthropic, the company behind Claude.

It collected its first dollar three years ago. By the end of 2024, its annual recurring revenue had reached $1 billion. Come April of this year, that figure had ballooned to roughly $34 billion. A month later, in May, it hit $45 billion.

Let me frame just how staggering that growth is.

Palantir Technologies Inc. (PLTR:NASDAQ), Snowflake (SNOW:NYSE), and Databricks each took about a decade to build what they are.

Anthropic tacked on as much revenue as all three combined — in a single month.

Worry #2: Nobody actually uses it.

Dark fiber, round two — right?

During the internet boom, telecom firms poured fortunes into burying fiber. After the crash, an estimated 95% of it reportedly sat idle for years.

So perhaps today's companies are stuffing data centers with chips that nobody wants. The trouble with that analogy: there are no dark GPUs.

Nvidia Corp. (NVDA:NASDAQ) simply can't crank out chips fast enough to keep up with demand.

Alphabet Inc. Class A (GOOGL:NASDAQ) reports that some of its TPUs, seven and eight years old, are still running flat out at full capacity. And speaking of how nobody uses this stuff… ChatGPT reaches more than 900 million people every week.

No consumer technology in history has ever been adopted this fast.

Worry #3: These chips will be obsolete within two years.

Companies are pouring billions into Nvidia hardware. Yet fresh models arrive every year.

So today's gear will soon fall behind, trapping firms in a never-ending upgrade treadmill. That would gut the economics of AI.

Well… the reverse is unfolding.

Aging GPUs are actually gaining value, because the planet is still starved for computing power.

Nvidia's A100 debuted in 2020. Six years on, it still fetches almost the same price it did at launch. Microsoft (MSFT) kept running cloud servers built on Nvidia's V100 right up to September 2025 — a chip that first appeared in 2017.

A dated chip still beats no chip at all.

Worry #4: Spending like this can't keep going.

Big tech is set to pour $750 billion into AI infrastructure this year alone.

Critics argue the surge echoes the reckless excess of the dot-com years.

But take a closer look at who's signing the checks.

Back in the dot-com boom, Global Crossing never posted a single profitable year. WorldCom buckled under $30 billion in debt and an $11 billion accounting fraud. Plenty of telecoms took on huge loans to lay fiber before they had reliable customers or cash flow.

Today's heaviest AI spenders are Microsoft Corp. (MSFT:NASDAQ), Alphabet, Amazon.com Inc. (AMZN:NASDAQ)), and Meta Platforms Inc. (META:NASDAQ).

They're the wealthiest, most profitable businesses ever created. And they're funding most of the AI buildout straight out of their own pockets.

Worry #5: The valuations are insane.

AI infrastructure names have topped the charts for three straight years. Plenty have already handed investors four-figure percentage gains.

Surely the valuations must be unhinged? Nope.

Take Nvidia, the face of the whole AI surge. If the speculation had truly broken free of fundamentals, Nvidia would be carrying one of the steepest valuations in its history.

Across 2021 and 2022, Nvidia changed hands nearly 70 times based on forward earnings. Today, its P/E sits in the low 20s.

A stock can rise 1,000% and grow cheaper when profits compound even faster. Price tells you how far the shares have traveled. Valuation tells you what you're handing over for the earnings beneath them. And the valuations aren't unhinged.

Worry #6: We're overbuilding.

Every major technology wave eventually produces a glut.

Railroad firms laid down too much track. Telecom firms buried too much fiber. The surplus pushed prices lower and helped set off the bust.

AI will probably go through its own stretch of overbuilding and digestion. But today's constraints make reaching that point hard anytime soon.

The world is running short on two crucial ingredients: watts and wafers.

In Northern Virginia, data-center developers can sit waiting years just for a grid hookup. Big transformers carry lead times of 80 to 210 weeks. Gas turbines are fully booked deep into 2028 and 2029.

Some firms are already holding GPUs they can't even switch on, because there's no electricity to spare.

Then come the wafers. Taiwan Semiconductor (TSM) makes the bulk of cutting-edge AI chips and has no appetite for drowning the market in surplus supply.

Power scarcity drags out data-center construction. Chip scarcity caps what can go inside. Together, these constraints stretch the cycle and force demand to sit around waiting on supply.

An overbuild would require companies to build faster than customers can soak up the capacity. For the next two or three years at least, the physical chokepoints stay simply too tight.

Jot down these six words…

"Pessimists sound smart. Optimists make money."

It's a line I live by and invest in.

Every megatrend draws its skeptics. They brand it overhyped. Overpriced. A bubble waiting to pop.

And every so often, they're right.

But fortunes get built by people who can spot what might go right. The optimists who hold the course are always the ones who walk away with the most.

My research points to an AI boom with years still left to run. And we're investing to match. To follow along as I break down how to play the next phase of the AI boom, sign up for my free investing letter, The Jolt, here.