The AI Trade Has An ROI Problem

Last week we asked a simple question:

The question is hard to answer, especially as we uncovered some of the financial shenanigans in NVIDIA, Google, Amazon and 50+ other companies.

Everyone knows about the circular financing issue, which wasn’t an issue when only a handful of companies were involved.

Michael Burry and Peter Thiel now estimate that number to be close to 100.

So in reality, no real value is being created even though trillions in revenues are being reported.

That’s the issue.

The conclusion isn’t that AI is fake, far from it.

The conclusion is that the market may be overestimating how much organic demand actually exists beneath the surface.

This week, we ask a far more dangerous question:

Companies like Microsoft, Uber, Meta, and others have slashed their AI spending budgets.

They didn’t ask: “Can we deploy AI?”
But rather: “Is it actually worth the cost?”

Here’s what happened:

Just this week, confirmation has been received on some of these misleading activities.

And let’s be honest, Microsoft isn’t even the one “cooking” the books.

They’re just the ones pushing back on AI spending, and the mob is punishing them for slowing the party early.

At the end of the day, these are the end users of AI.
If they’re cutting down spending and token usage, what happens down the chain?

That’s the “bullwhip effect” we’re getting into today, and how these revenue cuts have already affected:

Expectations were set too high, and the whip effect from slowing revenues/adoption will eventually whip everyone from hyperscalers to infrastructure players.

Let’s dive into it.

Nobody can argue AI isn’t attracting a flood of investments.

But,

What Happens When Tokenomics Change?