The Ai Capex Boom Is Increasingly A Bet On Agi, Not Current Economics

I think analysts are missing something big by considering AI frontier labs as though they were normal companies making big investments and expecting realistic business outcomes. I want to posit that the AI bubble differs from earlier bubbles because the spending is being justified by quasi-religious beliefs about what AI might eventually become. After reading Adam Becker's More Everything Forever, I’ve started to see the frontier AI race as a billionaire-funded cargo cult: the belief that if enough GPUs, power, data centers, researchers, and capital are accumulated, something qualitatively new will emerge, an AGI or superintelligence that equates to a machine god.

It's basically a science-fiction investment thesis. It sounds crazy, but there's a literal network of rationalist, effective-altruist, and existential-risk thinkers who've spent years treating AGI as a civilization-altering event long before ChatGPT arrived, and those ideas have shaped many of the companies, investors, and researchers now driving the industry. You can verify this. If AGI is truly only a few years away, almost any level of spending can seem rational: frontier labs do not need sustainable business models today because losing billions is preferable to slowing down and letting a competitor reach the prize first.

AI is not fake or useless. LLMs can write code, summarize documents, automate office work, and support research, even if the economics are shaky on some of it. The problem is the belief that models will turn into superintelligent 'beings' if we just pour enough resources into them. I suspect some big players know this: NVIDIA is happy to profit by selling the infrastructure even if Jensen knows its bullshit, Microsoft through Mustafa Suleyman has basically called BS on a lot of this, Google falls somewhere in the middle, and Meta is trying to turn it into a useful consumer product (which I also don't think will work, but that's another issue). In the end, most customers will care less about AGI than whether AI saves enough money to justify the bill.

The bubble bursting will still hurt these companies, but in the end I think may come out okay in the end, but there may be pain along the way. OpenAI and Anthropic are a lot shakier, and I'm curious to see how long they can drag this out: it could be a while. Look how long Elon has been pumping pipe dreams that never happen.

Disclosures: I own MSFT and NVDA.