Will AI Be Gone By Next Year? 🤖

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People believe that artificial intelligence is now just a permanent part of the landscape. But I have questions – and a fear it might come to a hastily end should the stock market have a melt down.

If you were to open the news reports or read the social media full of posts expressing opposition to the construction of the many proposed data centers, you would think the AI was inevitable – an only growing part of the landscape eating up more and more land on the outskirts of cities and consuming more and more electricity. But AI only grows where there is capital flowing into it. People only invest money into things that they believe there is a potential for return.

Inevitably, there is some areas where Artificial Intelligence will prove worthwhile. Paid AI, mostly by businesses and others wiling to subscribe, has a bright future – as it has a built in source of revenue. Businesses can benefit from coding assistance, data processing by machine learning and finding trends in data. But it’s not clear that free meme and text generators have a business model that will be worthwhile to continue to funding after the initial hype and excitement wear off. Cute cat pictures and generated texts are fun, but if it’s costing billions in electricity, who is going to pay? Maybe there are some people willing to subscribe to an AI service but it’s not an expense I’m interested in paying for at this point. AI is useful, but not that useful to give up my hard-earned cash.

And the thing about all things AI is it’s very temporary. The AI data centers only have a useful lifespan of a few years before the computing hardware is both worn out and obselete. They require intense amounts of expensive electricity to operate. And who is going to pay for it? The cheap and easy money that is allowing too many data centers to operate at a loss may be but a needle prick of a balloon from popping. Interest rates are increasing, and energy costs are soaring with the War with Iran. A mature melt down of the stock market might lead to most of cash drying up from AI data centers, except those most profitable. Without constant influence of cash, data centers can’t keep the lights on nor can they keep their hardware up-to-date and functional.

I would argue that Elon Musk’s SpaceX is likely the needle that might be the one that crashes the stock market and causes the recession fueled by high interest rates, excessive borrowing, high gas prices and inflation. SpaceX with the help of President Trump administration leaning on the indexes, is being advanced quickly into the portfolios of millions without being properly priced for a company with dubious underlying financials. While StarLink Satellite Internet and SpaceX Rockets are nothing short of amazing, and profitable businesses, the problem comes in how Musk has structured the businesses, sopping up the money losing Twitter and xAI businesses. It’s kind of ironic to think an artificial intelligence business could be the one that takes down AI.

I figure it’s best to play with services like Gemani, Meta AI and ChatGPT while they are still freely avaliable. But don’t become dependent on them, as while their bones might survive a major stock crash and slowing credit markets, don’t expect such free to use but energy and material-intensive services to be around much longer. Paid services yes, but the AI might become an elite service, something some people may pay for if it’s suits their business needs, but not an every day product.

The K Shaped Economy 💠

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A K-shaped economy describes an uneven recovery or growth period where different segments of the population or industries experience vastly divergent financial outcomes. While one group thrives and moves upward (the top arm of the “K”), another group struggles and falls behind (the bottom arm).

  • The Upper Arm: High-income earners and wealthier households have seen continued income growth, a strong accumulation of assets (like stocks and real estate), and surging wealth.
  • The Lower Arm: The bottom 80% of consumers—or those in lower- and middle-income brackets—face financial strain. This group has been disproportionately burdened by inflation, prohibitively high housing costs, and rising credit card debt. 

How this Impacts Consumer Spending and Retail 👟 💎

  • The Upper Arm: Luxury goods, premium travel experiences, and high-end services are seeing a boom. Major companies report that upper-income consumers continue to spend confidently. For instance, premium class ticket sales for airlines like Delta have surged, while main cabin sales have dropped.
  • The Lower Arm: Lower-income shoppers are forced to be hyper-budget-conscious. They are pulling back on discretionary spending, relying on credit, and searching for basic affordability rather than premium goods. 

Winners and Loosers 🥇 😩

  • The Upper Arm: Technology sectors (especially artificial intelligence) and companies catering to affluent clientele consistently post strong earnings.
  • The Lower Arm: Certain retail sectors, low-cost carriers, and budget-oriented businesses face tighter margins and lower revenues as their customer bases get squeezed.