Subject: Re: Valuation loop
> Is anyone else concerned about how much of Big Tech's recent "profit growth" is coming from AI investment revaluations rather than core operations?

> For example, when companies like Alphabet own stakes in AI startups such as Anthropic, new funding rounds at higher valuations can generate billions in accounting gains that flow through earnings even though no products were sold and no cash was received.

I will go a step further. This reevaluation is creating non-trivial money out of thin air, just like the reevaluation of in residential housing loans did 20 years ago. Mistakes in that reevaluation and leverage crashed the global economy, and it will again, and soon. SpaceX, Anthropic, and OpenAI aren't rushing to go public because because they are fools.

When you look at things like O'Leary's proposed UT datacenter, you can see speculative, low-information leveraged investors cashing in on this current valuation bubble. This is a symptom of a late stage bubble, which we've all been through twice in the last 30 years. What it has particularly in common with the dot-com bubble is the circular financing arrangements within tech. Space-X's IPO is only viable because of the rent from Anthropic, which is scrambling for compute because of an industry wide mandate to leverage LLMs, and funded out of corporate IT budgets that will demand ROI or funded out of VC backed (hundreds of billions of dollars) in firms building AI platforms or "ai-native" firms build on those platforms. Just like the internet, this has huge promise. Just like the internet, the investment in that promise has overshot in the short term.

Where it gets complicated is the global standing of the US, and prior routes of resolving this bubble when it collapses. The last two times the US leveraged its standing as the global reserve currency and good relations with allies to monetize the bad debt created in the bubbles. That might not be available this time, for broadly understood reasons that require no elaboration.

Where it comes back to BRK, for me at least, is 1) the cash balance and 2) areas of overlap in the portfolio and operating businesses. I think the cash balance is likely to be used well. I'm sure if I understand all this, as a random person on the internet, then Berkshire probably has a very strong view into this problem and is planning accordingly. I still worry about it, but it has not stopped me from accumulating under $480. The operating companies seem well positioned. The rubber hits the roads at the datacenters and the industry can turn off the capex / stop the buildout (impacting nvidia, prim/iesc/abb et al in the electric infra, micron/seagate/arista hardware vendors in the hyperscaler stacks, and so on). But the built out datacenters need power. If the industry hits the point of turning off the power and idling datacenters, it will be very bad and the cash pile will be valuable. If they leave them on, BHE will be valuable. And BHE's renewable generation capacity is something I expect to be valuable if the USD drops or at least drops relative to global hydrocarbon markets (if it becomes part of a basket of currencies ng and crude are priced in, for example).

To your specific question: Alphabet, 25 years ago, was just a superior search engine on the basis of Pagerank (insight into links based on linear algebra properties of link graphs expressed as matrices). For 10-15 years they have *always* been the dominant AI company.

Microsoft is screwing the pooch. They are dogfooding Copilot in the infrastructure products, and poorly. Azure is having reliability issues, and Copilot is poorly dependent upon Azure. They have created a dependency mess in their global software and hardware infrastructure. Their brand, at an enterprise level, is reliability and stability, and is moving their cheese to the *wrong place* in their ai strategy. I think they will course correct, but I see them executing a Boeing vis a vis the 737 Max currently.

I like Anthropic more than OpenAI. Deepseek, globally, is extremely strong but I cannot use it. Mistral is up an coming. Google, to my mind, is taking a wait-and-see position.

Apple is another company that has much greater capabilities than they tend to advertise, and I think they are also taking a smart and cautious stance.

I think BRK has chosen well long term if they're going to invest in this space by investing in good candidates to be long-term winners and having operating companies that will benefit from the deeper secular trends.