David Hoyt, AI is the Latest and Best-Financed Cult to Emerge from California, 3 Quarks Daily, Aug. 23, 2026.
The article begins by discussing the cultish behavior surrounding AI in Silicon Valley; I discussed similar material in a 3QD article from 2022, On the Cult of AI Doom. The article pivots toward finances with this paragraph:
What makes the cult of AI different in tone and in worldview is its origin within a tech industry which sits at an epicenter of unregulated flows of global capital, its profound, longstanding, and growing links to the US security state, and the certainty that on the basis of these pillars it can build the future it wants here on earth right now, and that no one should be able to stop them.
Then we have:
Two macroeconomic factors are at play in the breakneck speed with which AI infrastructure has been financed and built out since the release of Chat GPT in November of 2022. They have little to do with the intrinsic commercial potential of AI-related products or services, nor any particular innovation in computer engineering. The first, to put it simply, is the availability of lots of money. More than ever before, giant pots of money are sloshing around the planet, motivated by historically low interest rates over a relatively long period to search out the Next Big Thing. This money is mostly exempt from national regimes of control or taxation, is managed outside the traditional banking system, and is therefore more free to move around. The second is the chronic and by now widely acknowledged slow-down of economic growth in the advanced economies, dating back nearly half a century. What the hype typically fails to register is that investors don’t seek out technology and AI firms because they are the best bets on future returns – they seek them out because they are the only bets around.
To understand just why this is, Nick Srnicek provides a useful capsule history of the sequence of financial crises that have followed the liberalization of capital since the later 20th century. It is a story that leads with a crescendo to the current boom in AI development. In the mid 1990’s, the hottest global market was not centered in Silicon Valley, but in the small economies of East and Southeast Asia, the “Asian Tigers.” Only when these blew up beginning in 1997 did newly mobile capital, recently freed from decades of local restrictions on its movement in and out of national economies, begin to pour into Silicon Valley in what would become known as the dot-com bubble. When this blew up, as all bubbles do, it led to a decade of low interest rates dictated by the Federal Reserve. This, in turn, led global investors to flood the US housing market, inflating a nearly decade-long bubble in real estate prices. When this bubble blew up in 2008 with even more severity, followed almost immediately by the Greek/European debt crisis of 2009-2012, the solvency of major financial institutions in the US and Europe and of the entire economic order was threatened. Only massive intervention from the public sector avoided a meltdown. At the same time, the year 2012 marked the year that growth rates in the People’s Republic of China dropped under 10% annually for the first time in over a decade. This twin shock to the global economy, in combination with austerity measures put in place in the aftermath of the 2008 crisis, led to the unraveling of the global economic architecture put in place over the previous quarter century.
This is the context of chronic low growth in which money has been pouring into AI, either invested in privately held firms such as Anthropic or OpenAI, or publically held tech firms listed in the US such as Google and Microsoft, or in overseas firms such as semiconductor giant SK Hynix in South Korea. The search for returns continues to drive valuations of AI majors to astronomical heights, bringing significant portions of the market along with them. In May, 2026 Anthropic, which only recently turned a modest profit on sales of its AI assistant chatbot Claude, came close to breaking the valuation threshold of $1 trillion USD. (There is no standard, objective methodology for obtaining such valuations for private companies). According to the OECD, artificial intelligence firms captured 61% of global venture capital in 2025. A Stanford report puts global VC investment in Silicon Valley firms alone at 75% of the total. Overall capital spending on AI in the United States is at roughly 2% of GDP, and expected to reach 3-4% in 2027. This is equal to and slightly exceeding the US defense budget.
This is a lot of investment, but in what, precisely? As it stands right now, AI is an all-purpose everything enhancer, like the patent cure-all medicines of the nineteenth century.
There's more at the link, including thumbnail accounts of recent events on Wall Street and among VCs.
Think of it like this: The techno cult launched ChatGPT in late November of 2022. That's the fuse. That large pile of money that's been floating around looking for investment vehicles, that's the powder. When ChatGPT became a surprise hit, the fuse was lit and the powder exploded: BOOM! That's where we are now.
No comments:
Post a Comment