3-minute read
You know what’s nice?
What’s that?
The stock market doesn’t go down anymore. A lovely development.
I haven’t been paying close attention. Things looking good?
The S&P 500 is up over 15% on the year. It’s up 34% since the Liberation Day lows.[1]
Ah yes, Liberation Day. Seems like an eternity ago.
Here’s a friendly reminder:
Good Lord!
Within a span of two weeks in April we had 5 days where the market fell more than 1%. We’ve had 5 more since April ended.[2]
Are you complaining?
The stock market isn’t supposed to go up and up unabated. But it is right now.
Why do you think that’s the case?
For one, corporate profits are strong and exceeding analyst expectations. Secondly, there’s this thing called AI that you may have heard about.
If it’s not a commercial about sports gambling, it’s about some company’s AI.
Both require your fair share of hope.
Are you doing what I think you’re doing?
Which is…?
Are you saying AI is one big gamble? I thought you were above lazy scare tactics.
Listen, I think AI will produce real results, the true likes of which we can’t even fathom right now. However, there are headlines that bother me.
For example…?
Why does that bother you?
For one, OpenAI’s reported revenue for 2025 is $13 billion. Meaning, they owe Oracle 23 times their entire annual revenue over the life of the 5-year deal.[3]
I’m sure they’ll grow revenue though.
They better because the bills are piling up:[4]
This spending really has you freaked out.
Honestly, it’s mostly where the spending is going that is worrisome.
What’d you mean?
Imagine that I own a chocolate company, Johnson’s Chocolates, and I think the future of eating revolves around chocolate. I’m convinced chocolate will be a feature of every cuisine moving forward. Following me so far?
Yep.
Johnson’s Chocolates reaches out to Cleveland Cocoa for the foundational ingredient in chocolate. It turns out raw cocoa is quite bitter so we turn to USA Sugar for the addictive sweetness. Johnson’s Chocolates processes the ingredients into the final product and immediately ships it out.
Still following…
So far, people are enamored with Johnson’s Chocolates. The company is attracting several investors and the valuation of the company is skyrocketing. Same can be said for Cleveland Cocoa and USA Sugar whose stock prices are surging with these new orders from Johnson’s Chocolates. The whole flywheel looks like this:
Seems a bit incestual.
It seems that way because it is.
And what happens if people get sick of chocolate or don’t eat as much as we think?
You’re catching on.
So how do you want a guy like me to react to this? You want me to freak out and yell, “THERE’S AN AI BUBBLE”?
Frankly, if me and everyone else is yammering about an AI bubble, it likely won’t happen. But prepare yourself for fits and starts with AI. The stock market can’t rise on just the promise of AI forever. There will be ups, downs, and crazy cool s&*^ we can’t even imagine.
[1] S&P 500 returns through October 20, 2025. Liberation Day lows were April 8, 2025.
[2] Source: https://finance.yahoo.com/quote/%5EGSPC/history/
[3] Source: https://finance.yahoo.com/news/openai-cfo-we-will-more-than-triple-our-revenue-this-year-213816957.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAKjIRuAkdSVOkClalRObf_fEs6oXVs60OC9g-ZPah4Y8-DeZuIIO2EBhvZ5iMVch-za5k2gZv_Yor2knsq5NkQ6nK_2UFaSTbpFntUbivMejJoxZ1E-_lXiBXG3DJjETeEnFtqmjwsp_I0f7l2U1JDMywUGuzt7xFU4zsZhmHfIO