Hello. Welcome to TechScape. I’m your host, Blake Montgomery. If you want to read our newsletter, please forward this email to 5 friends and ask them to sign up, like a chain letter warning you of 5 years of bad luck. In the news this week, AI companies achieved mind-boggling financial milestones, including a $5 trillion valuation, a $100 billion quarter, and a series of deals worth nearly $600 billion.
The baffling sheer numbers of the AI boom make it difficult to criticize.
Last week, chipmaker Nvidia’s valuation reached $5 trillion. Just three months ago, the company became the world’s first $4 trillion company. Microsoft reached a $4 trillion valuation last week, as did Apple. On a smaller scale, Meta, Microsoft, Amazon, and Alphabet all reported quarterly earnings. The amount was huge. Google’s parent company made $100 billion in its first quarter. Amazon reported tremendous growth in its cloud computing division, pushing its stock price up 13%. Meta faced a surprise tax bill of $16 billion. All the tech giants except Apple have revised their capital spending upwards, telling investors they will spend billions more on the real-world infrastructure that supports artificial intelligence. The revisions add tens of billions of dollars to a total already in the hundreds of billions. Alphabet alone has estimated capital expenditures of $91 billion to $93 billion next year. This estimate is up from the $75 billion originally announced in February and the revised $85 billion announced in July.
Not to be outdone by publicly traded rival OpenAI, it recently transformed itself into a for-profit company and is considering an initial public offering at a valuation of $1 trillion. The world’s most valuable startups have been busy making deals, including signing a deal with Nvidia, which pledged to invest $100 billion in OpenAI in September. Microsoft signed a deal in early October for OpenAI to spend $250 billion on Azure cloud services. And it’s another cloud computing giant, Oracle, that OpenAI agreed to invest in in September, this time for $300 billion. On Monday, the ChatGPT maker announced a $38 billion deal with Amazon Web Services. OpenAI has pledged to spend a total of $588 billion over the next few years.
Nvidia’s valuation is now greater than Germany’s entire annual economic output in 2025 ($4.66 billion). Put another way, Nvidia’s market capitalization is 2.5 times the combined market capitalization of all German listed companies, which will amount to about $2.04 trillion in 2024, according to the World Bank. No one company can be worth more than the world’s third-largest economy, a country with a population of 83.5 million people whose economy forms the economic backstop for an entire continent.
read more: Boom or bubble? Inside $3 trillion in AI data center spending | Artificial Intelligence (AI) | Guardian
The economics of the AI boom are difficult to understand, making it difficult to criticize it clearly or forcefully. What should I say to Avalanche? Even the most insightful analysis can seem crushed under the weight of a billion-dollar data center. All these numbers defy understanding. There is nothing in your personal human life that can be compared to them. How would we spend $91 billion? How can we make hundreds of billions of choices? It feels weird to think about them. It’s odd to describe Meta’s earnings as “mixed,” but that’s what Wall Street experts estimate.
Multibillion-dollar circular transactions between the two companies at the height of the boom have raised concerns about overinflated values and financial vulnerabilities. If one company stalls, others could follow suit, and the U.S. economy could fall along with them. So far, they have shown no signs of stopping the communal rampage.
On the more populist side of this criticism, there are reports that AI has yet to find any significant use cases beyond cheating on homework. No matter how many employees a CEO fires, they cannot be adequately replaced. In August, researchers at the Massachusetts Institute of Technology (MIT) found that about 95% of AI tests ever conducted within companies fail.
The economic impact of the AI boom is incomprehensibly huge. Its digital size is equally huge. Large language models such as ChatGPT, Claude Sonnet, etc. work in part through parameters, which are variables that define how the model predicts which word will come next. These invisible knobs fine-tune the number of responses by the hundreds of billions, and some reports indicate that GPT-5 could tap into those numbers by the trillions.
The physical impact that AI will have on the world is matched by the sheer economic scale of the technology. Dara Kerr, one of the Guardian’s technology reporters, spent last week on a reporting trip to the Tahoe-Reno Industrial Center, home to the nation’s largest data center and its smaller counterparts. She explains its incredible scale:
The Tahoe-Reno Industrial Center stretches from Interstate 80 to the mountains of the arid Nevada desert. The complex spans tens of thousands of acres and is home to approximately 200 companies with both fulfillment, logistics operations and technology data centers. This includes Google, Microsoft, and Tesla. Some companies have multiple data centers several times the length of a football field snaking through desert valleys. The land area of this industrial center occupies 65% of the county territory. It’s so big that it’s almost hard to understand.
Should you buy that gadget?
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You can now bet on American elections by donating money to the American President
Donald Trump’s Truth Social is partnering with Crypto.com for the ability to bet on election results, the parent company announced in a press release last week. Trump Media and Technology Group plans to introduce a “Truth Prediction” feature that will allow users to “trade predictive contracts related to major events and milestones, including political elections, changes in interest rates and inflation, commodity prices for gold and oil, and events in all major sports leagues,” but it is unclear when it will be rolled out.
TMTG Director Devin Nunes said of the feature, “For too long, the world’s elites have tightly controlled these markets. With Truth Prediction, we are democratizing information, empowering ordinary Americans to tap into the wisdom of the crowd, and turning free speech into actionable foresight.” In classic Trumpian fashion, Nunes hypocritically gnashes her teeth against the “global elite” from the high watchdog post of US power.
There is something strange about this arrangement, as if the boxer in the match is also the bookmaker. Mr. Trump is the president of the United States and he is asking voters to put money into his campaign. Trump is leading policies that determine the interest rates users can bet on. He is toying with an unconstitutional third term, even as he nears the two-term presidential term limit. Will the American public bet on whether he can make it happen?
Even creating a truth prediction feature feels like inside basketball (more on this sport in the next paragraph). The Financial Times noted that Crypto.com has donated $11 million to Trump’s cause. The U.S. Securities and Exchange Commission concluded its investigation during President Trump’s term, and the company applied for banking authorization from regulators. Trump Media and Technology Group has signed a deal to buy billions of dollars worth of Kronos, the Crypto.com token.
Gambling is more pervasive in American society than ever before. Trading in election results was only legalized last year. According to a separate analysis by the Financial Times, the volume of bets on prediction market Karshi reaches $1 billion every week. The infection started with sports betting, and that gambling is at its peak. My colleague Brian Armen Graham describes the fallout from the scandal that rocked the professional basketball world the week before Halloween, dubbed Operation No Bet by FBI agents, and which resulted in the arrests of NBA players, head coaches, and 30 others.
The NBA gambling scandal represents the culmination of a years-long embrace between the professional leagues and the multibillion-dollar gambling industry, which has now crossed the line from synergy to scandal. This is the most serious corruption crisis to hit America’s Major League Baseball since gambling became legal in most American states, and the clearest example of how deeply ingrained gambling has become in the bloodstream of professional sports.
When will politics face its own “no-bets strategy”?
