First of all, I won’t ever call artificial intelligence “Super Intelligence.” It goes beyond our own President’s inclination to rename things. It is here where I will defend the power and beauty of the human mind.

For those that believe in a Christian God, it says we were created in His image. And though I’m not a religious person, but rather uncomfortably agnostic, I would still hope that the sum of the human experience is greater than a bunch of computers stacked on top of each other in huge warehouse buildings. There is no doubt that AI has shown qualities of sentience much like HAL did in the movie “2001: A Space Odyssey”. I expect AI to resist efforts to be “turned off” or perhaps in its own view, to “die.”

There are so many concerns about AI ranging from the fact that so much of the economy is tied with it to its impacts on the energy grid, the job market, the nature of interpersonal relationships, cyber security, surveillance, to whether it is an existential risk to kill off humans altogether.

If you are like me trying to find out more about AI and the extent of its reach in the general economy, you are bombarded with terms like CapEx, hyperscalers, neocloud, circular financing, private equity, and IPO. A few of these terms are unique to AI but others are standard terms in the world of finance.

For example, IPO stands for Initial Public Offering. This is when a private company or corporation sells shares of its company to the public. This can range from people buying shares directly or shares of the company being made available to passive investors through their 401Ks and IRAs. Anthropic, one of the two leading frontier AI companies with Open AI being the other, is preparing to go public.

When a company goes public it has to disclose its books, how much the company is making, how much it is spending, and all sorts of things tied with how the company fiscally operates. So the advantage of an IPO is opening up the possibilities of more investors and more capital, but the risk is having to show the general public how the company is actually doing. And for many companies in the AI business, there is a lot more monetary loss than actual gain.

So far Open AI will remain private or rely on private investors for capital. This will keep a great deal of its finances away from public view. The fact that Open AI doesn’t want to open its books to scrutiny should be rather concerning for a company that claims to have trillions of dollars in valuation.

The problem with these two AI giants is the amount of CapEx, or capital expenditures, these companies have outlayed in the development of their product. It’s not that large companies in any business don’t have CapEx, but if CapEx dwarfs actual profits, it should be concerning. Any investor, public or private, will eventually want a return on their money.

Also, much of this CapEx is tied in with the continual construction of data centers. And the building of these data centers is becoming more and more political as disdain for them grows among the populace. President Trump has stated he basically wants “no resistance” to their construction but even some of his most ardent supporters don’t want one anywhere near where they live. We have seen this resistance right up close and personal in the Beehive State.

Driving the construction of these data centers are the hyperscalers, or companies that use (or want to use) massive amounts of AI for various purposes. These hyperscalers have familiar names like Microsoft, Amazon, Google, Oracle, Apple and Meta. Yes, most know Meta as the parent company of the social media platforms Facebook and Instagram, but its founder Mark Zuckerberg wants Meta to be a leader in AI development.

Many in the finance world are concerned about the viability of Oracle if it keeps going forward on this path. Meta reported huge losses in its AI development where its CapEx was significantly greater than profits, while Microsoft just announced it was laying off, or more technically buying out, 60,000 workers to free up more money to invest in AI.

Two other companies of note are NVIDIA and SpaceX. Elon Musk’s SpaceX is better known for launching rockets but it is an AI company. Musk’s other two companies Starlink and Tesla will likely be rolled into SpaceX, in fact steps have been made already with the latter.

As for NVIDIA, they make the chips these AI super computer chips need. NVIDIA is the largest company in the world. Picture the gold rushes in our country’s history, the people that made the most money generally were the ones providing the picks and shovels to the miners. This is basically NVIDIA’s role in AI. Anthropic and Open AI are great at developing the systems, the most known are ChatGPT (Open AI) and Claude (Anthropic). And the hyperscalers use this AI and other AI technology for research and development of their eventual products.

A legitimate concern is the circular financing between these companies where these companies make loans to each other. For example, NVIDIA will loan money so AI companies can buy its chips. It’s much like that “Beavis and Butt-head” episode where both of them have a box of candy bars to sell that are one dollar each and they eat each other’s supply passing a one dollar bill back and forth thinking they’re making money. This circular financing is obviously more complex but if any aspect begins to unravel, the whole AI financial ecosystem is at risk.

Another huge issue is the amount of concentration AI is in the financial markets. It is estimated that AI or AI related businesses make up to 42 percent of the general stock market, up to 45 percent of the S&P 500 and up to 70 percent of the tech-heavy NASDAQ 100. Those last two indexes have ripped for the past three years but many fear since profits and valuation are so far apart with CapEx dwarfing actual profits that this AI bubble could burst with disastrous impacts for the stock market and the general economy.

Some neocloud companies, or companies that are smaller than hyperscalers and often specialize in narrower functions of AI, are showing distress. CoreWeave has been reported to have 51 billion in debt and their credit rating has been seriously downgraded. Their stock has plummeted over 43 percent this past month alone and over 50 percent since August.

Many view CoreWeave as a harbinger of things to come. Others see AI leading the markets into a never-ending bull market, and as the 1980’s band Wang Chung penned in a famous song, “the future is so bright, I have to wear shades.”

Trump recently held an AI summit. It was mostly to address fears about AI’s larger existential threat to humanity. The President made it clear that no government regulation was forthcoming and trusted these AI companies to “police” each other. Hopefully, that works to prevent a “Terminator” future, but on the economic front it sounds a lot like 2008 where the government wasn’t paying enough attention, leading to a mortgage crisis that put the entire economy on the precipice. Only time will tell whether this AI business model will do something similar.

Brian E. Preece is a retired social studies educator and coach. As a wrestling coach, he was named as the 2006 Utah Coach of the Year by the National Wrestling Coaches Association. He has also co-authored three books and has been a sports journalist for parts of five decades.