Almost three years after the launch of CHATGPT, AI hype is still fully powered as the biggest tech companies continue to fire billions to build AI infrastructure.
Meanwhile, Nvidia hit its all-time high this week, with some analysts piling up to push the best AI chip makers to a $6 trillion valuation.
But will investors see the billions of AI Capex pay off? Peter Berezin, chief global strategist at BCA Research, believes that is not the case.
“They're likely to lose money,” Berezin told Business Insider, referring to the large tech companies that spend a lot of money on technology.
It was difficult to bet on the biggest trade in the stock market and the promise of turbo-recharged economic productivity. Investors quickly rocked Deepshek's disruption and big tech companies earlier this year Plan to spend $300 billion Above AI Investment. Technology gatherings have been powered Nasdaq 100 Record highs this week.
Still, Berezin believes the market is missing out on the bigger picture. We consider AI technology to be extremely expensive and slim monetization opportunities. AI can certainly increase productivity, but that's not a guarantee that higher profits will continue.
Race to the bottom
Venture capitalist Peter Thiel famously said, “The competition is for the losers,” and Berezin agrees with this sentiment.
“You're not making money in a competitive market. You make money as an investor in a monopoly market. So far, AI is very competitive and that's a problem for investors in that field,” Berezin said.
“If anyone can do that, how do you charge money? Openai boasted a few months ago about how it's actually losing more money than you would expect with the latest model, which was good because people were using it so much.
“But why, if it's artificial, why are X's, Deepseek, and many other companies offering similar products like this?”
AI startups aren't the only ones involved in AI arm racing. Berezin points out the epic Sevens Cape Sand as another example of fierce competition that threatens profits.
He sees Big Tech's $1 billion check as a defensive investment to maintain market share. At best, Berezin believes these companies are investing in AI to maintain their current competitive position, but the real possibility is that they could lose their market advantage.
Undoubtedly, many Nvidia investors are already making a lot of money, but that's a testament to Chipmaker's near-monopoly on GPUs.
Unless there is more integration in other parts of the AI ecosystem, Berezin is not optimistic that AI trading will pay off.
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How about improving productivity?
Another important part of the AI Bull paper lies in the possibility that AI can unlock large-scale efficiency in every sector of the economy. Berezin does not deny this possibility, but this result may not be a boon for shareholders either.
According to Berezin, Big-Box retailers adopted IT technologies that led to increased productivity in the 1990s, but the widespread adoption of these technologies neutralized their competitive advantage and lowered consumer prices without paying off profit margins.
“You can increase productivity by using AI, but if everyone else is using AI to compete in the same market, it's ultimately a low price, but not a high margin,” says Berezin.
In his opinion, the AI industry may be on track. It could turn out to look like the aviation industry. It is capital-intensive and important to the economy, but it is a very low margin.
“I think the risk of AI is that the benefits of AI filter more to AI users than producers. This was not the case with most technological innovations,” Berezin said.
