Here's How The AI Bubble Bursts — With Paul Kedrosky

The current AI infrastructure build-out represents an unprecedented historical moment, exceeding the scale of past capital-intensive projects like the interstate highway system and rural electrification. Investor and analyst Paul Kedrosky argues that this massive investment faces a potential collapse due to the rapid depreciation of data center hardware and the hyper-deflationary nature of AI tokens. Unlike commercial real estate, which generates stable, long-term cash flow, data centers require continuous, high-cost capital reinvestment to maintain relevance. While proponents justify this spending as a necessary call option on AGI, the underlying economics suggest that the market is driven by groupthink and the pressure for large funds to deploy massive capital rather than sustainable returns. Ultimately, AI will likely transition into a commoditized utility, leaving behind a landscape where the initial, high-stakes investment cycle fails to yield the anticipated financial rewards.