2026-01-10 What are the AI bulls saying?
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If you follow my Artificial Intelligence Bookmarks you know that I am
very critical of AI. But not everybody is.

I'm trying to understand why the fund managers aren't selling off the
Magnificent Seven. Apple, Nvidia, Microsoft, Amazon, Tesla, Alphabet,
and Meta Platforms make up about 35% of S&P 500. I guess the fund
managers are reading the kind of stuff iShares by Blackrock puts out,
like Are AI stocks in a bubble? Why this isn’t a dot-com redux from
early November 2025, by Kristy Akullian, CFA, Head of iShares
Investment Strategy for the Americas. The key takeaways at the top of
the article:

> Tech stocks have surged amid growing excitement over artificial
> intelligence, but valuations have remained well below dot-com bubble
> era levels.

Not sure what to make of that. I guess they think if some investors
feel the fear of a dot-com crash in their bones, then they're saying
it won't be as bad as that. OK, fair enough.

> Unlike the speculative excesses of the late 1990s, today’s AI
> spending has been largely funded by profits, grounded in real demand
> and supported by strong balance sheets from established tech
> leaders.

That I can't understand. Ed Zitron seems to be saying that it's
circular lending and this is the deadliest sin? They even mention
circular lending further down:

> Recent reports of deals where a supplier helps finance a customer
> who then spends money back with that supplier (either directly or
> via a partner) have raised concerns about the dot.com-era practice
> known as circular financing. Circular financing can be risky when it
> hides weak end‑demand. During the dot-com boom, equipment vendors
> boosted sales to mask a demand gap that later imploded. In our
> opinion, though, that’s not the case today. AI usage is already
> large and growing very quickly.

Uhm, well, I keep hearing about stupid uses of AI. Bosses who tell
their employees they must use AI for everything or get fired. Mind
blowing levels of misaligned incentives in middle management, I fear.
They end the section with an example from a company that hasn't made a
lot of positive news, at least as far as doors not falling off are
concerned:

> Notably, industries with big, long‑lived assets have tended to blend
> sales and financing. Boeing, for example, has long provided
> asset‑backed financing so airlines can take delivery of new planes.

Oh no. That is not a good argument to make.

But I guess it still means that this sort of circular investment is
common. That doesn't mean I must like it.

Anyway, back to the key takeaways at the top:

> We believe investors should stay selective but engaged in the AI
> theme — focusing on companies with durable cash flow, pricing power,
> and real user demand.

What does that even mean? Disregard all AI and just look at cash flow,
pricing power and real user demand? Because those Ed Zitron articles I
read seem to say that cash flow with regards to AI was bad, pricing
power was bad, and organic user demand was low. Plus all the other
problems. But I guess if the company is big like Microsoft, and AI is
just a small part of it … uh oh, but that they're eating their own dog
food so my trust is low.

Then again, didn't like Microsoft ever since Windows 3.11 that didn't
stop them from growing very, very big.

#Economics