AI Ponzi Flywheel about to crash 1leading to 15% layoffs

In the "AI Ponzi Flywheel" circulates money in a self-reinforcing loop which Cisco is a part of. This artificially inflates valuations without any broad external revenue

First, Nvidia and AMD inject low-cost financing directly into OpenAI (like Nvidia's $100 billion commitment and AMD's warrants for cheap stock)

this is for infrastructure purchases.

OpenAI then deploys these funds to acquire cloud compute from Oracle and CoreWeave (Nvidia-backed), along with networking equipment from Cisco via the Stargate UAE project.

Then, Oracle and CoreWeave reinvest OpenAI's payments to procure more Nvidia and AMD GPUs, expanding their capacity, while Microsoft amplifies the cycle through equity stakes and Azure integrations. Hype-fueled stock surges enable warrant exercises or stake sales, recycling profits back into further financing rounds. This internal churn sustains $20 trillion market caps and reported growth, like Nvidia's $300-500 billion projections and $64 billion cash flow, but hinges on perpetual inflows amid low data center utilization (60-90%) and ongoing losses ($10 billion annually for OpenAI)

This is a more fragile system than dot-com and the housing bubble combined. A single disruption could evaporate trillions in value.

the actual utility from AI is minimal. "agentic AI", "vibe coding" are losers and cause more problems than they solve.

AI is just a summarization machine that also makes it easy to pump out horrifcally tasteless videos for the masses

#AI #Speculation #Layoffs #Economy

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since this was posted, massive AI-related layoffs have begun.

Well, you lost all credibility when you called them "horrifcally tasteless videos for the masses"...because some of those videos are highly entertaining.

The world needs a new shiny thing to glom on to....flying cars, jet packs, pint-sized nuclear reactors, something else. AI & Quantum aren't cutting it.

seeing one cockroach is a strong indicator that more are present

Making $ on the way up. Making $ on the way down. Love it!

it's starting...
Amazon laying off 30,000

https://www.thelayoff.com/post/@OP+1k8m1mszc

This is a classic debt spiral.
The companies building the AI infrastructure are borrowing massive amounts to serve customers who are also borrowing massive amounts.
This circular flow echoes the 2000 dot-com bust, where Cisco held toxic debt as startups collapsed. (remember that these startups all were buying Cisco routers because "the internet" was a no lose investment...sound familiar?)
Valuation metrics are screaming - The Shiller PE hit 40.5, a 20 year high

Oracle, Meta and Google are piling on massive debt which has to be repaid at some point from the 'AI profits" (which will never come)

While AI has some truly useful applications and use cases (or future use cases), the hype has certainly exceeded the valuations. Further financial games such as the ones you described only serve to wind the spring tighter, so when these transactions unwind, a lot of people, companies, and portfolios are going to detonate.

Thread regarding Cisco Systems Inc. layoffs

AI Ponzi Flywheel about to crash 1leading to 15% layoffs

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