Hello and welcome to TechScape. I’m your host, Blake Montgomery. If you like reading our newsletter, forward this email to five friends asking them to sign up as if it were a chain letter warning of bad luck for five years. In the news this week, AI companies hit eye-popping financial milestones, including a $5 trillion valuation, a $100 billion quarter, and a series of deals worth nearly $600 billion.
The incomprehensibly huge numbers of the AI rise make it difficult to criticize it
Last week, chipmaker Nvidia reached a valuation of $5 trillion. Just three months earlier, it became the world’s first $4 trillion company. Microsoft reached a $4 trillion valuation last week, as did Apple. On a smaller scale, Meta, Microsoft, Amazon and Alphabet reported their quarterly earnings. The sums were enormous. Google’s parent company reaped its first quarter of $100 billion. Amazon reported stellar growth in its cloud computing unit and added 13% to its stock price. Meta faced an unexpected $16 billion tax bill. All the tech giants except Apple revised up their capital spending numbers and told investors they would spend billions more on the real-world infrastructure that underpins artificial intelligence. The revisions added tens of billions to a total that is already in the hundreds of billions. Alphabet alone estimated its capital spending between $91 billion and $93 billion for next year. That estimate is up from the original $75 billion statement in February and a revised $85 billion figure announced in July.
Not to be outdone by its publicly traded rivals, OpenAI, it recently became a for-profit company and considered an initial public offering at a valuation of $1 billion. The world’s most valuable startup has been on a deal spree, signing deals with Nvidia, which pledged to invest $100 billion in OpenAI in September; Microsoft, which signed a deal in early October for OpenAI to spend $250 billion on Azure cloud services; and Oracle, another cloud computing giant that OpenAI agreed to spend on in September, this time $300 billion. On Monday, the maker of ChatGPT announced a deal with Amazon Web Services for $38 billion. In total, OpenAI has promised to spend $588 billion over the next few years.
Nvidia’s valuation is now greater than Germany’s entire annual economic output in 2025 ($4.66 billion). Put another way, Nvidia’s market capitalization is two and a half times the market capitalization of all listed companies in Germany combined, approximately $2.04 trillion in 2024, according to the World Bank. How can a company be worth more than the third largest economy in the world, a nation of 83.5 million people, a country whose economy is the financial backbone of an entire continent?
Read more: Boom or bubble? Inside the $3 trillion AI data center spending wave | Artificial intelligence (AI) | the guardian
The difficulty in understanding the financial aspects of the AI rise makes it difficult to criticize clearly or forcefully. What could you say in the face of an avalanche? Even the most insightful analysis looks like it will be toppled and crushed under the weight of a billion-dollar data center. All these numbers contradict understanding. There is nothing in your individual human life that you can compare them to. How would you spend $91 billion? How could you make hundreds of billions of decisions? Thinking about them is strange. Describing Meta’s earnings as “mixed” is strange, even if they were, according to Wall Street experts’ estimates.
Multibillion-dollar circular deals among companies at the peak of the boom have raised fears of overinflated value and financial fragility. If one company fails, it seems that the others could follow suit and drag the US economy down with them. So far, they show no signs that they are going to stop their joint attack.
FILE PHOTO: An Nvidia Blackwell GPU is displayed at COMPUTEX in Taipei, Taiwan, June 4, 2024. REUTERS/Ann Wang/File Photo Photograph: Ann Wang/Reuters
On the more populist side of that criticism are reports that AI has yet to find an essential use case outside of cheating on tasks. You can’t adequately replace workers, no matter how many of them a CEO lays off. About 95% of AI pilots conducted in companies to date have failed. MIT researchers found in August.
The financial aspects of the AI boom are so enormous that they defy understanding; Its digital size is also immense. Large language models like ChatGPT, Claude Sonnet, and others work in part through parameters, variables that define how the model makes predictions about which word should appear next. These invisible buttons change the number of responses by hundreds of billions, and some reports indicate that GPT-5 could use a trillion of them.
AI’s physical footprint in the world matches the magnitude of the technology’s financial scale. Dara Kerr, one of the Guardian’s technology reporters, visited the Tahoe-Reno Industrial Center, home to the largest data center in the US and several of its smaller siblings, on a reporting trip last week. Here she describes its incredible scale:
The Tahoe-Reno Industrial Center stretches from Interstate 80 to the dry mountains of the Nevada desert. The complex spans tens of thousands of acres and is home to nearly 200 companies, including fulfillment, logistics operations, and technology data centers. That includes Google, Microsoft and Tesla. Some companies have multiple data centers, each with several football fields, winding through desert valleys. The landmass of the industrial center constitutes 65% of the county’s territory. It’s so big it’s almost hard to comprehend.
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You can bet on the US elections by giving money to the US president
Donald Trump’s Truth Social is partnering with Crypto.com on a feature to bet on the election results, the parent company announced in a Press release last week. The Trump Media and Technology group will introduce its “Truth Predict” feature, which will allow users to “exchange prediction contracts related to important events and milestones, such as political elections, changes in interest rates and inflation, commodity prices of gold and crude oil, events in major sports leagues, and more” using the new product, although it is unclear when it will be available.
Devin Nunes, director of TMTG, said of the article: “For too long, global elites have tightly controlled these markets; with Truth Predict, we are democratizing information and empowering ordinary Americans to tap into the wisdom of the crowd, turning free speech into actionable foresight.” In classic Trumpian style, Nunes hypocritically gnashes her teeth at the “global elites” from atop the nest of American power.
Something feels off about this arrangement, as if the boxer in the fight is also the bookie. Trump is the president of the United States and he is asking his voters to invest money in the outcome of the elections in which he will campaign. He is in control of the policies that can determine the rates at which users bet. Although he is approaching his two-term limit in the presidency, he has flirted with an unconstitutional third term. Would American citizens bet if he can pull it off?
Even creating the Truth Predict feature feels like it’s inside basketball (more on that sport in the next paragraph). Crypto.com has donated $11 million to Trump’s causes, the Financial times points out. The U.S. Securities and Exchange Commission closed an investigation during Trump’s term and the company applied for a banking charter with the regulator. The Trump Media and Technology group signed an agreement to buy Cronos, Crypto.com’s token, worth billions of dollars.
Gambling permeates American society more than ever. Trading election results was legalized only last year. According to another analysis by the Financial Times, betting volume on the Kalshi prediction market has reached $1 billion per week. The infection began with sports betting, which has reached a fever pitch. My colleague Bryan Armen Graham describes the implications of the scandal, dubbed Operation Nothing But Bet by FBI investigators, that rocked professional basketball the week before Halloween, with an NBA player, a head coach and 30 others arrested:
The NBA gambling scandal represents the culmination of a years-long embrace between professional leagues and the multibillion-dollar gaming industry that has now crossed the line from synergy to scandal. It’s the biggest corruption crisis to hit a major American league since betting was legalized in most U.S. states, and the most telling snapshot yet of how deeply the game has melded into the bloodstream of professional sports.
When will politics face its own version of Operation Nothing But Bet?
