Brace Yourself for the AI Bubble - What Happens Next!

0:00 What's up you guys?

0:00 It's Graham here and we got to talk about

0:02 this because this is just getting out of control.

0:05 Okay, everybody is talking about the AI bubble.

0:08 Are stock markets going out of control?

0:11 Is everything just getting way too expensive?

0:13 And that brings me to this video.

0:14 I just want to talk about it.

0:15 It's titled Brace Yourself for the AI bubble.

0:18 And the reason I want to talk about

0:20 this one specifically is because this is explained

0:22 in a way that I think is above and beyond any other video that I've seen.

0:26 So, with that said, make sure to hit the like button, subscribe.

0:28 Also, big thank you to Built for sponsoring this video.

0:31 But more on that later.

0:32 Let's begin.

0:33 Is the AI bubble about to pop?

0:36 Some financial analysts think so.

0:39 I think the AI bubble is a bubble and it will pop.

0:42 We are absolutely in an AI bubble now.

0:44 It is going to burst.

0:46 Here's the argument that a lot of people say.

0:48 They say, you know, we're not in an AI

0:50 bubble because people think it's a bubble.

0:52 It's only a bubble when people say, "Oh, no.

0:55 This time is different.

0:57 this time is going to be something magical.

0:59 You just don't understand.

1:02 That's when it's a bit worrying.

1:04 But when people think it's a bubble,

1:05 they almost act in such a way where it doesn't

1:08 become a bubble because the more people think it's a bubble,

1:10 the more they begin to diversify outside of it.

1:13 The more they begin to sell off, the more conservative they are

1:16 with their investment philosophies and approaches.

1:19 So, that is something to keep in mind

1:21 that when you don't hear something's in a bubble,

1:24 that's when you should start to worry.

1:26 Like NFTTS were a great example in 2021.

1:28 People were saying, "Oh, no.

1:30 This is the future.

1:30 You just don't understand." Uh, meanwhile,

1:33 it's a picture of a rock is selling for hundreds of thousands of dollars.

1:36 Come on.

1:37 It was an obvious bubble, right?

1:39 Obviously, it had no value with a dumb rock.

1:42 It's it's a JPEG basically.

1:44 And yes, I know some some NFTts I

1:46 could see having long-term value in the blockchain.

1:48 Okay, I'm not talking about that.

1:49 I'm talking about a JPEG rock sells for a hundred plus thousands.

1:53 And meanwhile, no one is saying, "Oh, that's a bubble." But it was okay.

1:57 And it so this one just going with a with a more open mind that hey,

2:02 maybe there could be something to this.

2:04 But let's continue.

2:05 But my immediate concern is how the flood of money into the opaque

2:10 AI industry has inflated the US stock market and indirectly the US economy.

2:16 What happens if the bubble bursts?

2:19 I'll tell you what happens if the bubble bursts.

2:21 It's going to be awful.

2:23 Oh my gosh.

2:24 I mean, you are going to see two things.

2:26 One, a lot of wealth destroyed,

2:28 and two, a lot of incredible buying opportunities.

2:31 Okay, here's how I think of it.

2:33 Overall, regardless of what happens in the market,

2:36 if we see a draw down in AI, a significant one,

2:40 the amount of wealth that you'd be able

2:42 to pick up for discounts over the long run,

2:45 oh man, I mean, these are the opportunities

2:47 that we should be begging for because

2:50 imagine being able to buy all these great companies for like 30 to 80% off, huh?

2:56 That would be incredible because long term AI is going nowhere.

3:01 Let's be real here.

3:02 This is the tip of the iceberg.

3:04 It's just whether or not valuations are trading at the levels

3:08 that are currently being priced in for what we currently have.

3:11 That's all it is.

3:12 I mean, ChatBT, Gemini, uh, Grock, all of these programs.

3:17 They're they're astounding.

3:18 I'm using them all the time to be

3:20 able to like help me pick out different thumbnails,

3:23 to enhance thumbnails, to uh better word certain things that I'm writing out.

3:28 I mean, my gosh, it goes through so many of my emails automatic.

3:31 It It's incredible.

3:33 So, you can't tell me that this isn't

3:34 going to completely disrupt the entire industry.

3:36 Like, even lawyers, my gosh,

3:38 I'm running contracts now through ChatGBT and it's saving

3:41 me like 300 bucks an hour for, you know, standard contract lawyer work.

3:46 It is insane.

3:48 So, it's whether or not the valuations that we're

3:51 seeing today match the expectations of what's happening right now.

3:56 An asset generates excitement among investors because its value starts rising.

4:00 As more and more investors borrow piles of cash

4:03 to get in on the action, the bubble grows.

4:06 But when [music] it becomes evident that way too much has

4:09 been invested relative to the potential for profits, the bubble bursts.

4:14 Yep.

4:15 And that's what we have to currently contend with.

4:17 And the thing with this market is that we

4:19 have no idea how big it's going to get, how long it's going to continue,

4:22 and even if it's a bubble, let's just say it is.

4:24 Okay.

4:25 Who's to say it's not going to triple from here and then crash 50%.

4:30 And the net is still going to be higher than where we are today.

4:33 Like even look at Michael Bur with the housing crisis.

4:36 He called it years before it actually popped.

4:40 Years.

4:40 And he had the potential to lose a ton of money.

4:43 Like imagine placing a a large short bet for the housing

4:46 market and then losing money and then losing money

4:48 and then losing money and then people calling you crazy

4:51 and you're losing more money and you think to yourself,

4:53 "Oh man, maybe I'm wrong." Imagine if he thought he was wrong, cut his losses,

4:58 just took a huge L on that and then the housing market crashed.

5:01 Like it's really difficult to uh figure out.

5:05 The only people that consistently made money in housing, by the way,

5:08 were just the people that bought and held and did nothing.

5:10 Even if you bought in 2006, in two in 2010, you would look like an idiot.

5:15 Oh my gosh, people would be laughing at you.

5:18 Why did you buy a house like that now?

5:20 The same houses are trading for, you know, 70% less.

5:23 Haha.

5:25 Today, on the other hand, had you just held and done nothing?

5:28 People would be looking and be like, "Oh man,

5:29 I wish could have bought a house in 2006.

5:33 Oh, now housing prices are 5x what they used to be back then." That's why I

5:38 tend to believe the best things for most

5:40 people to do just keep buying consistently and holding.

5:43 And if the price falls, buy even more.

5:46 And if it falls, buy even more.

5:47 And if it goes up in value, buy buy even more.

5:50 It's simple.

5:51 It's often the case that the biggest investors with inside

5:54 information notice the bubble and cash out before it bursts.

5:58 Everyone else is left with near worthless pieces of paper.

6:02 Now, here's what I've noticed.

6:03 Everyone these days is talking about the AI bubble.

6:06 you have these new companies, insane valuations,

6:08 and usually when we enter a time like this, it's

6:11 extremely important to be intentional about how you spend your money.

6:15 Like, I think the biggest mistake isn't missing out on the upside.

6:18 It's leaving money on the table when otherwise you could be getting something.

6:22 Like, just take a look at rent.

6:23 For most people, every single month you spend

6:25 the money and then poof, it's gone forever.

6:28 You have nothing to show for it.

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7:40 Just make sure to use the link down below in the description

7:42 or the QR code on the screen so that they know I sent you.

7:46 Thanks so much.

7:46 Enjoy.

7:47 And now, let's get back to the video.

7:48 If the entire economy is threatened,

7:50 governments have to bail out the remaining

7:53 players to avoid even more widespread destruction.

7:56 That's what a lot of people are batting on.

7:58 So, two things I want to mention with this to provide a little more context.

8:01 One, you have insiders selling tech at some

8:04 of the fastest levels that we have seen since 2021.

8:08 And what happened in 2021?

8:10 Yeah, the market hit a peak and then it

8:12 went down for the following year uh by about 30%,

8:16 sometimes 50 to 80%, depending on what you were invested in.

8:19 We're seeing the same conditions again today.

8:22 The other thing is that investors believe

8:24 that to a certain degree the market's going

8:26 to be backstopped by the Federal Reserve and that no matter how bad things get,

8:30 the Fed is just going to come in, print a whole bunch of money,

8:34 and then everyone's just going to get bailed out.

8:36 So, people have this attitude these days of like, hey,

8:39 it's it's never gonna get that bad because if it does,

8:42 they're just going to print money and we're going to be fine.

8:44 So, always buy the dip.

8:46 And I'm just going to tell you,

8:47 I I think that's going to remain true until the one time it doesn't.

8:50 And I don't know when that's going to be.

8:52 Uh could be a hundred years from now, could be next year.

8:54 I I don't know.

8:56 It's a dangerous precedent just to think that the Fed

8:58 is always going to bail you out no matter what.

9:00 Might happen though.

9:01 I don't know.

9:02 Major AI companies have been pumping up their own value

9:05 by doing trillions of dollars worth of deals with each other.

9:08 But according to an MIT report, 95% of companies that have adopted AI tools

9:14 aren't yet seeing any financial returns from them.

9:17 Yeah, that's an interesting point, but just keep in mind,

9:19 let let's talk about that circular nature of AI.

9:22 And a lot of people see this and they see, okay,

9:24 OpenAI's invested in this, investing in this, investing back into Open AI,

9:28 and and and Nvidia's in the middle of all of this.

9:32 There's two sides to this.

9:33 Their story is that, well, yeah, we're doing business with each other because

9:36 they're the only one supplying these components.

9:40 They're the only ones doing this thing.

9:41 And so, it makes sense that we're going to be doing business with each other.

9:45 It's like, you know,

9:46 Larry owns an auto mechanic shop and I have a car dealership.

9:49 And it's like, of course,

9:50 we're going to be working with each other and, you know,

9:53 I can invest in him, investing in me.

9:55 I think people have smartened up to the idea that, you know,

9:57 if I give him 20 bucks and he gives me $20, we could each show $20 of revenue.

10:02 But we know where it's coming from.

10:04 I do think it's it's worrying.

10:07 Uh, but only for the degree that people think, oh, uh,

10:10 Nvidia is doing business with Chat GBT and therefore just

10:14 just that business relationship alone is worth like 20 trillion.

10:17 That I don't agree with.

10:19 But as far as 95% of companies getting a 0% return,

10:23 it's hard to quantify some of these returns

10:24 because it could be a time-saving measure.

10:27 Like you're getting some sort of return.

10:29 It might not just be financially today.

10:31 Like imagine uh you have a job to do that takes you eight hours a day,

10:35 but with chat GBT or AI, you could do it in six hours.

10:40 Well, you're not making more money from that, but you are saving time.

10:43 I'll tell you from uh from my perspective because I use AI,

10:47 we use it on the podcast.

10:48 Uh we uh enhance audio all the time.

10:52 We run it through, you know, AI software.

10:54 Sometimes uh uh camera angles out of focus and we

10:57 could enhance it with AI and make it look 4K.

11:00 It's incredible.

11:01 Do those things make us more money?

11:02 No.

11:03 We don't see a return on that.

11:04 But the quality is a lot better.

11:06 And so just by pushing out more quality

11:09 and by having a better product and by saving our time,

11:13 we're able to use those resources elsewhere.

11:15 So that's my take on this is that it might not be a dollar to dollar thing,

11:20 but it could save you in other ways.

11:22 Even Jeff Bezos admits there's a lot of hot air when people

11:25 get very excited as they are today about artificial intelligence, for example.

11:29 Every experiment gets funded.

11:32 Every company gets funded.

11:34 investors have a hard time in the middle of this excitement

11:38 distinguishing between the good ideas and the bad ideas.

11:41 That I would agree with.

11:42 But just losing money on its own,

11:44 I don't think tells the full picture because Chad GBT

11:46 could easily make so much money if they just put ads.

11:49 Imagine this.

11:50 You search like, "Hey,

11:51 where's the best place to go eat tonight?" And like a business

11:54 could pay a little extra money to be the first suggestion.

11:57 Like they have so many ways to make money from this.

11:59 Some of them don't.

12:00 Okay, so that's the distinction.

12:02 Some of them don't, but losing money on its own, not a terrible red flag.

12:07 All of this growth has of course minted

12:09 new billionaires and made other tech titans even wealthier.

12:13 But what about everybody else?

12:15 One way or another, you and I are

12:18 footing some of the bills surrounding AI development.

12:20 Anyone else?

12:21 I mean, anyone invested in the stock market has seen benefits of this.

12:24 I mean, we would be in quite the recession if it were not for AI.

12:28 I think AI completely saved the stock market.

12:31 So, in terms of the benefit for everybody, if you look at the S&P 500,

12:34 if you have a pension, if you have a 401k,

12:36 if you have a taxable brokerage account, if you have anything,

12:39 you have seen the benefits of AI in your own portfolio.

12:43 Everyone has gotten wealthier from this.

12:45 If you have money invested,

12:46 if you don't have money invested that then yeah, you got pretty screwed.

12:53 Electricity bills are rising to power AI.

12:55 Communities are seeing their water sources depleted.

12:59 Data centers do create some jobs,

13:02 but many are temporary and [music] don't amount to nearly

13:05 as many jobs as the ones that could be lost.

13:08 Here's going to be the big one, though, is energy costs.

13:11 Energy prices are expected to soar through the roof.

13:13 That's how you're going to be paying for it.

13:15 You know what?

13:16 Because they're pulling so much from the grid, and we are so far behind.

13:19 This is one of those, in my opinion,

13:21 a ticking time bomb that energy usage is expanding so

13:25 quickly and we just don't have the capability to satisfy

13:29 that without prices skyrocketing and it takes such a long

13:33 time to set up energy infrastructure to power all this.

13:36 So, all of a sudden,

13:37 there's going to be an intersection there where we're not able to supply enough

13:41 electricity to meet all the demand and that uh that's going to be a doozy.

13:46 So, that's how it's going to affect everyone.

13:47 On top of that, as far as taking jobs, yes,

13:50 most likely some industries are going to be completely annihilated.

13:55 I I I think it's going to weed out the bottom 20%.

13:58 So, I would say if the bottom 20% of any industry,

14:02 if that's you, unfortunately, that's something to be made aware of now.

14:07 Like, it's good now to be able to get ahead of it, but yeah,

14:10 I think the bottom 20% across the board

14:12 probably able to eliminate to some degree with AI.

14:15 And oddly enough, I think a lot of the like skilled labor

14:18 jobs are going to be some of the last things to go away.

14:21 I think uh a lot of home construction, plumbers, electricians,

14:24 things like this are going to be probably some

14:26 of the last things that will be replaced by AI.

14:28 I worry about the people who are barely scraping by as AI

14:33 hype masks an economy that's really only working for the super rich.

14:38 I worry about all of the people who could

14:41 lose their jobs and savings if the AI bubble bursts.

14:45 Yes, you know, I'd have the same concern as this, but you also have

14:50 to think of the other industries that will come up as a result of this.

14:54 And uh you know who put it perfectly was Chris Camilo.

14:57 I was talking to him the other day about AI taking

15:00 jobs and whether or not it's going to wipe out the entire

15:02 workforce and if uh you know UBI is going to have

15:06 to be a thing just to support the the working class.

15:09 He said this.

15:10 He said you know what uh when the internet came up

15:13 and started taking jobs away from TV and radio and all

15:17 these things you would think that oh my gosh all these industries

15:21 every camera person every person on set would lose their jobs.

15:24 What are they gonna do?

15:26 But now look at how many people made a career online.

15:30 I'm a result of that.

15:31 Just some dude making videos on YouTube.

15:34 This 30 years ago never would have been possible.

15:37 Just the fact that I could sit here and talk to you

15:40 and and you're listening to me right now on a device like this is astounding.

15:45 Whereas before you would have to get on a TV network.

15:48 They only had so much time.

15:49 No one would watch me.

15:51 even on your phone.

15:52 Think of all the new possibilities that this phone

15:55 unlocked for everybody who wants to market to people,

15:58 to grow a a following online, to uh create Shopify stores.

16:03 I mean, my gosh.

16:04 So, that's why I think it's so

16:05 important right now to start polishing your skills,

16:08 figuring out what you're good at, how you could stand out above everyone else,

16:12 and find ways to double down on your strengths.

16:15 That's that's the only way to work yourself out of this.

16:18 The future of AI is not inevitable.

16:20 We still have time to shape it.

16:22 We can let big tech innovate,

16:24 but we can't let it dictate the future or put our entire economy in jeopardy.

16:29 And if the AI bubble bursts,

16:32 we simply cannot bail out big tech and keep inflating its [music] bottom line.

16:37 Yeah.

16:37 So, overall, a bit fear-mongery, but at the end of the day,

16:40 I mean, he does raise some points to be made aware of.

16:44 Are valuations right now getting ahead of ourselves?

16:48 I tend to think we're we're going in that direction.

16:50 Does that mean that it's going to crash tomorrow?

16:53 Probably not.

16:54 It could continue for many many many more years or this could be something

16:57 that you don't really see a crash because

16:59 all of a sudden the government gets involved.

17:01 They want to beat the first ones to reach general

17:04 artificial intelligence and they're pumping a lot of money in this.

17:08 I mean, the government could just print as much money as they want to.

17:10 It's meaningless at this point.

17:12 So, with that said, I think the best things you could do,

17:14 one is you got to be irreplaceable at your job.

17:16 You got to be really good at what you do.

17:18 If you're not good at it, you got to find something that you're good at.

17:21 Uh something that you could work

17:22 on that uh will bring in some consistent income.

17:26 Beyond that though, you got to be invested.

17:27 Even if the market falls, great time to keep buying.

17:30 You buy and hold.

17:31 That's it.

17:32 Preferably broad index funds that don't track like one specific thing.

17:36 You want to be diversified uh across preferably

17:38 the entire world market while you keep that income.

17:41 And that's about it.

17:42 That's about all you could do.

17:43 Everything else beyond that is outside of your control.

17:46 Uh the other thing in your control by the way is whether or not

17:48 you hit the like button and subscribe if you haven't done that already.

17:51 Uh because that you can do and uh by doing

17:54 that you get more videos like this and it makes uh

17:56 me really happy to look at the like ratio

17:58 on the video and be like oh great people enjoy that video.

18:00 They're commenting and I could respond to those comments and uh hey

18:04 you know also make sure to check out our sponsor Built down below

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18:11 So enjoy.

18:12 Thank you so much and until next