The AI Bubble Isn't Where You Think It Is

The perceived AI bubble is not a systemic stock market risk but a localized phenomenon concentrated in private startup valuations. While public semiconductor and big tech companies have seen their earnings multiples contract—indicating that investors have already priced in risks like rising infrastructure costs and falling token prices—private entities like OpenAI and Anthropic maintain astronomical valuations that defy public market logic. These "NeoCloud" and AI lab valuations, often set by venture capitalists prioritizing vision over margins, face a harsh reality check as they prepare for public debuts. Anthropic’s reported "adjusted profitability" conveniently excludes massive training expenses, a practice that will likely result in significant valuation haircuts once subjected to Wall Street’s focus on GAAP earnings and sustainable cash flows. The impending Anthropic IPO serves as a critical test for whether these private market premiums can survive the transition to a more skeptical public investment environment.