{"text":[[{"start":6.05,"text":"The legendary investment sage Benjamin Graham famously wrote that “in the short run, the market is a voting machine, but in the long run, it is a weighing machine”. When it comes to the current AI boom, the short run may be drawing to a close and the long run is approaching fast. "}],[{"start":23.55,"text":"Over the past few years, private market investors have been maniacally voting for OpenAI and Anthropic, bidding up the target valuations for their planned flotations to about $1tn apiece. The valuations of west coast start-ups are routinely and necessarily based on speculation, given their short history. So, the narrative goes: how can investors possibly miss out on these historic opportunities to achieve godlike superintelligence? "}],[{"start":49.75,"text":"Yet slightly less excitable east coast public market investors will eventually, and more prosaically, discount the hype and weigh these companies’ long-term abilities to generate hard cash (we hope). On that score, there are huge doubts about both companies. Their listing prospectuses will need to be unusually convincing. Great vibes will not automatically translate into sustainable valuations."}],[{"start":73.05,"text":"The AI labs’ investment bankers will surely point to the success of SpaceX, which floated last month at a blockbuster valuation of $1.8tn. Stock market investors snapped up the offering even though the valuation was about $1tn in excess of fair market worth, according to Morningstar. But SpaceX boasts two advantages over the pure AI start-ups. At its core is a highly defensible business in rocket launches and satellites. And the company’s founder Elon Musk enjoys a cult-like following among retail investors. "}],[{"start":108.1,"text":"Even so, a more sceptical market judgment has already been made about SpaceX’s subsequent $25bn debt offering. The credit rating agencies generously assigned the company’s bonds investment grade on launch. But they have since been trading in junk bond territory as investors weigh the company’s operational losses."}],[{"start":128.6,"text":"There are three interrelated reasons why OpenAI and Anthropic may face even stiffer headwinds. First, it is not yet clear that either of them has a sustainable business model. For sure, both have built astonishing AI models that have won ecstatic user acclaim and generated rocketing revenues. But the maths is daunting. The costs of remaining at the frontier of AI are punishing. The penalties for falling behind may be even worse. "}],[{"start":155.4,"text":"A new report from Exponential View calculated that the tech sector had generated actual revenues of $110bn from generative AI over the past year, a far faster rate of growth than in any previous tech cycle. But it estimated that foundation models only accounted for about 11 per cent of this revenue in the first quarter of 2026, with 82 per cent going to hosting services."}],[{"start":180.45000000000002,"text":"In November, JPMorgan forecast that $5tn would be spent on AI infrastructure over the next five years. As Matt Scherer, a fellow at the Open Markets Institute, notes, the generative AI industry is producing 11 digits of annual revenue to cover 13 digits of annual spending, which assumes an extraordinary rate of future growth. "}],[{"start":null,"text":"
"}],[{"start":201.9,"text":"Second, the big US tech companies that have heavily backed OpenAI and Anthropic, including Microsoft, Alphabet and Amazon, are increasingly evolving from collaborators into competitors. Alphabet is itself soaking up investor money by raising $80bn in fresh equity to help fund up to $190bn of capital expenditure this year. SpaceX is also expanding its own xAI business aggressively, spending $60bn on acquiring code-editing start-up Cursor in a direct challenge to Anthropic."}],[{"start":234.15,"text":"Third, AI models are becoming commoditised, which is likely to cap the margins of the frontier models. As many finance directors are discovering, it is all too easy for employees to rack up massive AI usage costs without generating a commensurate return on investment. Increasingly, companies are turning to cheaper and more adaptable open models, many of them Chinese, for routine tasks. "}],[{"start":258.5,"text":"Anthropic currently has the edge over OpenAI in targeting business customers, driving revenues and focusing on real-world applications in areas such as law and science. Then again, it will be hard for Anthropic to float while suing the US government over its designation as a “supply-chain risk” following a dispute with the Pentagon. By contrast, OpenAI is wooing the Trump administration by offering the government 5 per cent of its stock."}],[{"start":286.9,"text":"In the background, the stock market is growing increasingly jumpy about the AI industry’s colossal investment plans. Although semiconductor companies have surged ahead, the Magnificent Seven stocks have underperformed UK gilts over the first half of the year."}],[{"start":301.2,"text":"Overall, the US market is the most expensive it has ever been, says the veteran investor Jeremy Grantham. The Bank for International Settlements warns that current AI “exuberance” could lead to an “investment bust”."}],[{"start":null,"text":""}],[{"start":315.4,"text":"Many are comparing this AI boom with the run-up to the dotcom crash of 2000. This did not stop the emergence of internet giants such as Amazon and Google but the Nasdaq stock market still fell 77 per cent from peak to trough and 4,800 internet companies went bust by 2003. OpenAI and Anthropic must be praying they have their timing right."}],[{"start":344.04999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1783320150_9751.mp3"}