When the Bubble Bursts | Shimmy Says Ep. 29

Hey, everyone. Happy Thursday. It's shimmy.

And you are looking at or watching another Shimmy says, you know, this, shimmy says, is called When the Bubble Bursts. And, um, I actually had AI write a little parody song for it. And it's set to the tune of a, a Led Zeppelin song when the levee breaks.

So when the Bubble Bursts Burst, when the Levee breaks, if you're not familiar with that tune, it's a great song by Zeppelin. It's on their fourth album, which is the Untitled album. But it had, you know, just a little break about Led Zeppelin.

A lot of people were never sure what to call that album. When I was younger, we used to call it the Stairway to Heaven album because Stairway to Heaven was on it. Other friends of mine called it the Zoso album because really, you know, it had the four symbols of the four, uh, members of Zeppelin and Zoso was the first one.

And so people called it Zoso. They didn't know other people called it the Man with the Straw on his back. Other people just called it Led Zeppelin Four, no matter what you called it, it's one of the greatest albums of all time.

And seeing Led Zeppelin and the song Remains the same tour in Madison Square Garden, I think in 1977, was probably the best concert I've ever been to, and I've been to a lot of concerts. But let's talk about when the bubble bursts. You know, I've been around a long time.

I went to see Zeppelin in 1977. What were you guys doing in 1977? I've been around a long time.

I've seen a lot of bubbles come and go. Um, and I've learned lessons about bubbles over those years. I've learned lessons that when, you know, everybody starts saying things like, it's a new paradigm, it's a new reality, it's different this time.

The usual rules don't apply, sell, sell, because that's when things are heading into the bubble. I'm a big fan of ai. I love ai.

I use AI a lot, and I encourage everyone here at Tech Trunk to use ai. And we do. But when we look at the numbers behind a, what I consider to be an AI bubble, right now, there's some startling numbers here that you gotta take into account.

You know, JP Morgan recently released a, a report that for the first half of the year, Almost one half, if not more than one half of the growth of the US GDP is directly related to build outs of data centers. AI factories, AI technology, half half of the U-S-G-D-P. That's a crazy amount.

As a matter of fact, historically, the U-S-G-D-P, about 70% of it is driven by consumer spending. We are a consumer led economy. 70% of our GDP consumer spending for like the first time in decades, something was bigger than consumer spending in the GDP AI and Data Center build out.

So what we have in the New York Times had an article about this as well. We have two different economies. We have the AI economy and the non-AI economy.

And if we didn't have this AI economy, the non-AI economy, I I, we'd be in a recession in a bad way, unfortunately. And there's, there's no if, ands or buts about that. It's, it's the truth.

Uh, you know, the rest of the economy is, you know, paling in comparison to what's going on in AI and, and data centers. And that's what's driving everything. Not a bad thing, but we're putting all of our eggs in that basket.

And if you believe AI is, is going to pan out in the timeframes that we're talking about, great. If you believe it's not gonna pan out within those timeframes, oh, we got a problem. Houston, you know, Charles Mann, the pretty well known folk on, uh, guy on on X put it this way.

When you look at the amount of money that's been invested in AI and data centers, it's roughly equivalent to the GDP of Singapore. Singapore's like a top 10, top 12 economy in the world, about $500 billion or something like that just this year. But when you look at the amount of revenue AI's generated, it's actually closer to Somalia, one of the poorest countries in the world.

So that's what we're talking about. We're talking about spending like your Singapore, but only recouping like your Somalia. That's, that's a big gap.

That's a wide, wide canyon. I don't know how you, you can justify continuing that spend without seeing these numbers catch up. Um, now again, I sold Led Zeppelin in 1977.

I'll come back to that. I've seen real estate booms. I've seen the savings and loan bubble burst.

I've seen the mortgage crisis. com era. We were a high flyer.

We did an IPO. I thought that was gonna be it for me. I was retiring, I was a very young age in 1999, 2000, and I saw that bubble burst.

We saw it with crypto, we saw it with NPR. We're seeing it with, we've seen it over and over again. And this has all the classic marks of a bubble.

And because we have so much put into it, half of the growth of the GDP here in the US when this bubble bears, it's gonna take a lot of folks down. You know, where'd the money for this bubble come from? Well, first and foremost, the mag seven, the big hyperscalers, these guys were sitting on hundreds of billions of dollars collectively, and they have gone all in, pledging it and spending it on AI and data centers.

And if they lose it all right, they lose their cushion. They lose their say, you know, their their rainy day money funds. But what we're seeing now is the next generation of these AI companies, neo clouds and so forth, and they're doing it the old fashioned way on debt and on VC money.

And when they don't succeed, or if this bubble bursts, that's gonna take a lot of stuff down. And when, when I say take it down, it's not just gonna be those companies. It's gonna be all the companies that were involved here.

What about all of the companies that are building out more, uh, power generation, cooling, air conditioning, building materials, everything that's going into all of this, it, it's all gonna be affected. Now, some people out here, and I get it, are saying, Nope, shimmy. You're an old man and you're crazy.

This is different this time. There's a new paradigm. The bubble's not gonna burst.

This is the greatest thing to ever happen to mankind. com bubble burst. And so you're not talking from real experiences, you're talking, right?

Every generation thinks theirs is the greatest and newest and latest. The bubble is going to burst. The laws of gravity cannot be ignored.

What goes up must come down. Now, when it does, I said, I think we're gonna have some real discomfort here, some real problems. That doesn't mean AI is a failure.

I think AI is widely successful and it's going to be wildly successful, and it continues to be widely successful. I think we've got out in front of our skis in terms of what our expectations of what AI can do and when, right? And it may wind up taking the next six, seven, or more years for AI's capabilities and AI's market penetration to catch up to the amount of money invested.

Money gets invested in search of profits. And so it's gonna take us a little bit to, to recoup those profits with that kind of, with that kind of investment. As I said, it'll go bad, but it'll be a healthy, I think it'll be healthy for the market because there's a lot of snake oil salespeople.

com bubble bursts, right? com went outta business. com bubble burst.

Quality will rise to the top, and I think that'll happen in our AI as well. So what can, what can you do? You know, first of all, I should mention, I put an article up on Textron ai today about this called When the Bubble Bursts.

You could go get the full article there, and I give some good advice, whether you're an individual, an entrepreneur, part of a team, about what you can do to insulate yourself as best you can from the bubble bursting while still taking advantage of everything AI has to offer. It doesn't have to be a, a hard landing. Let's hope it's a soft landing.

But make no mistake, as you know, as the song goes, the bubble will burst. And when it does and when it pops, we're all, we're all into it. It's not a eulogy.

This is not meant to be a eulogy. It's meant to be a reset. So until next time, this is shimmy for Shimmy says, stay ahead of the bubble, keep AIing and we'll see you soon on Textron.