The Math Of The AI Bubble Is Changing

Jack Bowman 10.23K Followers Follow Summary Anthropic reportedly reached positive adjusted operating income years before OpenAI expects to, challenging the assumption that leading AI models must remain money-losing loss leaders. Its $65 billion annualized revenue run rate suggests businesses will pay for model quality, weakening the race-to-the-bottom thesis behind much of the AI bear case. Profitability makes hyperscalers’ data-center investments and AI-linked debt look more defensible, especially for Amazon, Alphabet, Microsoft, and NVIDIA. Anthropic’s success supports the AI “virtuous cycle”: better models drive usage, revenue, greater compute demand, and eventually real returns on infrastructure spending. The caveat is substantial: Anthropic is private, its margins remain undisclosed, and adjusted operating income may present a rosier picture than the underlying economics. Michael M. Santiago/Getty Images News In a recent article I wrote about the semiconductor index, I inserted this chart, which shows the margins at which different parts of the AI supply chain operate at; semiconductors at 41%, model and app providers at -59%. Yes, negative. Model and This article was written by Jack Bowman 10.23K Followers Follow Jack Bowman is a financial columnist and independent analyst, ranked in the top 5% of experts on TipRanks. He writes The Macro Obsession, a Sunday newsletter on finance, technology, and the real economy. It's chart- and narrative-driven. Jack unfiltered, with no editors and no guardrails. On Seeking Alpha, Jack is best known for macro commentary and ETF coverage, though he also writes on technology, materials, and retail equities; most frequently on securities he holds or is weighing for his own portfolio. He invests across asset classes with a core focus on ETFs. Jack spent five years in investment advisory, running Bowman Capital Management, and contracting for independent RIAs, with work largely centered on portfolio management. He passed the Series 65 (the Uniform Investment Adviser Law Examination) and was registered as an investment adviser representative starting in 2021. Before that, Jack was classically trained as a social science educator. He holds a BA in history with a public-history concentration and a master of education in pedagogy. He taught senior-level economics, civics, history, psychology, and journalism at a public high school for four years. Jack was a teacher for six years total, with his earlier two years spent at a public middle school teaching social sciences to academically gifted students. "Successful investing requires holding uncomfortably idiosyncratic positions." — Howard Marks, paraphrasing David Swensen Analyst’s Disclosure: I/we have a beneficial long position in the shares of S&P 500, MSFT, GOOGL, NVDA, AMZN, AGIX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that do include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.