Powell – unlike the dotcom boom, AI spending isn't a bubble

> Powell’s framing echoes that view: The AI race, while frothy at times, is being financed mainly through corporate cash flow rather than speculative debt.

I think this is the most important line. Even if these companies are overvalued, I don't think there will be a nasty pop (this could change if banks start getting more involved, but so far it's been mainly company reserves and VC funding).

> corporate cash flow rather than speculative debt.

except that this doesn't quite add up IMHO

1. we have the current _speculation_ on an explosive need of both more data centers and energy if AI has a break through. This investments are mostly not from the big tech but VC/higher risk investment soured.

2. VC isn't always just private equity, I have seen enough rent founds, banks and similar acting as VC investors. Sure mostly by proxy, but they are doing that anyway.

3. 1st point also involves a lot of loans handled and resold by banks...

4. even with out all this a lot of founds are based on S&P 100 and similar. If the AI bubble goes pop before it's filled with enough magnetizable value a lot of the companies in there will lose a non negligible amount of valuation, which will have shock waves across much more then just "big companies".

That’s starting to change though

https://www.bloomberg.com/news/articles/2025-10-31/meta-xai-...

(Archive link: https://archive.ph/NBNEu)

I thought I’ve been reading that more and more of the money financing the AI boom is debt. The numbers are big enough I’d expect Powell to know:

https://techstartups.com/2025/10/31/the-hidden-debt-behind-t...

https://www.bloomberg.com/news/newsletters/2025-10-06/big-de...

I think there’s any way we don’t see contagion. There’s too much money involved.

I'd say the lines just before that are more illustrative of _why_ this sentiment is even possible to express: Goldman team wrote. “AI investment as a share of U.S. GDP is smaller today (<1%) than in prior large technology cycles (2%–5%).” In other words, there’s still plenty of room to run.

However, someone has now uttered the four words we should all recognise. "This time it's different."

technically correct, but misleading

because they're doing deals to keep the debt off the balance sheet

the fact they are doing this says rather a lot

Hmm, interesting. I hadn't realized how much companies were starting to borrow.

The pop will be nasty for everyone that’s heavily exposed to the public players involved, which is a sizable amount of the public given their outsized impact on indices.

That said, it’s the sort of bubble pop that’s far more constrained than, say, the dotcom bubble (with tons of IPOs) or subprime mortgage bubble (when a variety of financial instruments and securities obfuscated risks to investors). It’ll hurt for the highly-paid folks working for the companies who suddenly have to downsize, and it’ll hurt for investors who are all-in on AI without diversification, but for everyone else? It’ll be a gloomy year, but nothing as spectacular as prior collapses.

Borrowing to fund AI datacenter spending: https://x.com/MikeZaccardi/status/1984036161426485358

First paragraph for those unsure whether they want to prove that they are human (and for non-humans of course):

"Just this month, Meta Platforms Inc. has secured about $60 billion in capital to build data centers, part of its spending to get ahead in the artificial intelligence race. Half of that won’t show up on the social media giant’s balance sheet as debt.…"

I feel proud that my 50 PRs are a part of that. Truly a worthy investment. Here's to the next 50 PRs.