A Bubble is Coming

The Biggest thing Driving the Stock Market

Author

Michael Batnick
June 11, 2025

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Okay. I’m convinced. A bubble is coming for artificial intelligence, if it isn’t here already. I came to this conclusion after going through 340 slides in Mary Meeker’s Trends in Artificial Intelligence.

This is not my world, inference, training, and whatnot, so apologies to readers for whom this is all very obvious. You’ll have to forgive my friend, he’s a little slow.

This part hit me over the head and made me go, “Oh.”

The broader dynamic is clear: lower per-unit costs are fueling higher overall spend.
As inference becomes cheaper, AI gets used more.
And as AI gets used more, total infrastructure and compute demand rises - dragging costs up again.
The result is a flywheel of growth that puts pressure on cloud providers, chipmakers, and enterprise IT budgets alike.
The economics of AI are evolving quickly -
but for now, they remain driven by heavy capital intensity, large-scale infrastructure,
and a race to serve exponentially expanding usage.

The clear winner in all of this has been Nvidia (I own the stock). The big six tech stocks (mag 7 minus Tesla) now spend $500 billion a year on CapEx and R&D, which is 15% of their revenue!

I don’t know a lot about how these models work, but I know that every industrial revolution has ballooned into a bubble before it burst.

Now, you can say, “Michael, what do you mean a bubble is coming?" It’s here.” Nvidia has the largest market cap in the world at $3.5 trillion. CoreWeave came public at a $20 billion market cap just two months ago and is now worth $70 billion. Palantir has a larger market cap than Coca-Cola, trading at 110x sales! To which I would say, fair enough. But I think it’s possible that we can just be getting started.

Ben and I discussed this and much more on the most recent episode of Animal Spirits.