The AI Bubble Isn't Where You Think It Is

The AI bubble resides not in the public stock market, but within the private startup ecosystem. While public AI companies like Nvidia and Broadcom have seen their earnings multiples contract—indicating that market risks are already priced in—private AI labs such as OpenAI and Anthropic command astronomical valuations despite lacking sustainable business models or genuine profitability. These private valuations, driven by venture capital optimism, ignore the harsh financial realities of high training costs and declining token prices. As these companies prepare for public offerings, they face a collision between their inflated private market expectations and the rigorous scrutiny of public investors. This transition will likely force a significant correction, as the "adjusted" accounting metrics used to justify current valuations fail to withstand the scrutiny of the public coliseum.