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Reader Response to "AI Overinvestment"

A couple of days ago, I wrote a piece titled “What if there’s an overinvestment in AI?” I received some thoughtful emails in response to that piece. One reader named Craig Melillo took the time to share a more detailed thoughts which he granted me the permission to share

I think the four incumbent hyperscale spenders (AMZN, META, GOOG, MSFT) are in somewhat of a “tails I win, heads you lose” situation given their AI spend to date is discretionary and it is not damaging the balance sheet. Scaling laws asymptote and there’s a realization that digital God isn’t around the corner which removes the biggest totem that public markets and CEO’s both have in terms of giving permission to chase the dream. We want to applaud Oracle as “the winner” but they’re winning because MSFT is allowing it, and because OpenAI doesn’t have an existing business that prints $100B+ of operating cash flow per year to fund the spend.

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