Asked whether AI is in a bubble, with circular financing as the usual warning sign, Lee argues that circular deals are normal when a new industry is being built.
…that long ago, and the internet bubble. And so I think there's a lot of pattern matching that people say, oh, well, we have another bubble in the making. This time it's AI. And a lot of people miss the AI trade. The ones who've missed it are the ones that are most declarative that this is a bubble.
…to be quite cautious, which is why we're seeing it reflected in the multiples and reflected in this correction right now. I mean, what do you make of the AI bubble at this point? Do you think that it is, do you think that it exists? If not, why not? And if so, what are the dynamics going into it?
I've witnessed several bubbles, you know, because I've been covering markets since the early 90s. And the two that people would describe as bona fide bubbles are the internet bubble and the housing bubble. I mean, those were genuine bubbles. And it's hard to compare the current cycle to either at this moment because, you know, the internet bubble was apparent because the type of innovation that was taking place was simply cost savings. The internet into 1999 was not a revenue story. It was a brick and mortar to e-tailer model. It was trying to basically say, this is a new way to do it, but you could save money. And the housing bubble, of course, brought leverage and capital into the hands of unqualified holders. So it was basically a bubble where money was, debt was given to people, and then a lot of people borrowed a lot of money. This AI story so far is one of pretty remarkable innovation taking place, like otherworldly innovation. And so I think as long as that pace of innovation is happening, and then we're seeing it as productivity for businesses because revenue per worker is going up, there was no productivity metric in the internet we could point to at all at any time into 99. I think AI becomes a bubble when we start making up use cases that don't actually…
In terms of the circular financing, I think one of the concerns, even if we would call it ecosystem development, is that it is implying that demand might be stronger than it would have been if the demand were organic. If you didn't have these circular relationships, then you wouldn't cease as large…
mean, I just want to point out as a practical matter, exponential growth industries don't have the same rate of change sequentially. Cisco, for instance, in 1997 had two quarters of 20% sequential growth and it went down to five. And in 1997, Cisco stock fell 50%. And the data networking analyst…
When you look at Anthropic's growth as an example, does that make you feel more bullish on the AI trade? I mean, it's grown dramatically over the past year. But one of the criticisms now that we have these Q3 numbers is that the growth has slowed quite significantly to around 47 to 50%, I believe.…