Trey on Nostr: AI can transform the economy while many AI investments still produce terrible ...

AI can transform the economy while many AI investments still produce terrible returns. Those two views fit together once you separate a useful technology from the price and financing of the companies building it.

Railroads changed where people lived, worked, and traded, but the 19th-century buildout also pushed construction ahead of demand. When financing broke, companies failed and investors lost money even though the tracks remained useful. The next owners could buy productive infrastructure at lower prices.

AI has the same capital problem. Data centers require chips, power, land, cooling, networking equipment, and debt before anyone knows how quickly revenue will catch up. Demand can keep growing while an overleveraged project fails or an excellent company delivers a poor return because its stock already priced in too much success.

Before redirecting FIRE capital toward the trade that has been winning, separate your confidence in AI from the case for the specific security. If you can't explain how its current price, future cash flows, and financing leave room for an attractive return, treat the position as speculation and size it so failure can't derail the plan. Believing in the technology is not the same as knowing where to put your next dollar.