What do you we think about Chris's analysis?

=======================
Tom Johnson
Inst. for Analytic Journalism
Santa Fe, New Mexico
505-577-6482
=======================

---------- Forwarded message ---------
From: Christopher J Feola from Perfecting Equilibrium <
[email protected]>
Date: Sun, Nov 16, 2025, 5:35 AM
Subject: The coming AI crash-worse than the Dot Com stock collapse?
To: <[email protected]>


AIs will be enormously important some day. Today is not that day.
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    ­͏     ­͏     ­͏     ­͏     ­͏     ­͏     ­͏     ­
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The coming AI crash-worse than the Dot Com stock collapse?
<https://substack.com/app-link/post?publication_id=830872&post_id=179029669&utm_source=post-email-title&utm_campaign=email-post-title&isFreemail=false&r=9x3n&token=eyJ1c2VyX2lkIjo0NjI4MDMsInBvc3RfaWQiOjE3OTAyOTY2OSwiaWF0IjoxNzYzMjk2NDk2LCJleHAiOjE3NjU4ODg0OTYsImlzcyI6InB1Yi04MzA4NzIiLCJzdWIiOiJwb3N0LXJlYWN0aW9uIn0.pwme8GZ1ptwbuz-0LaUTJChHv8aYhGY_maB0WOnE1cE>AIs
will be enormously important some day. Today is not that day.

Christopher J Feola <https://substack.com/@perfectingequilibrium>
Nov 16
<https://substack.com/@perfectingequilibrium>

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Perfecting Equilibrium Volume Four, Issue 23




*The word is about, there’s something evolving,Whatever may come, the world
keeps revolving...They say the next big thing is here,That the revolution’s
near,*




*But to me it seems quite clearThat’s it’s all just a little bit of history
repeating.The newspapers shout a new style is growing,But it don’t know if
it’s coming or going,*




*There is fashion, there is fadSome is good, some is badAnd the joke rather
sad,That it’s all just a little bit of History repeating.*




*And I’ve seen it beforeAnd I’ll see it againYes I’ve seen it beforeJust
little bits of history repeating
<https://substack.com/redirect/1f3f0fa9-aae4-44b5-a224-d2ee81b5e002?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>*
The Sunday Reader, Nov 16 2025

America Online was the most important company in the world for one brief,
shining moment.

The new millennium dawned on an unstoppable tech wave. The Y2K bug had
turned out to be a big nothing. And 10 days into the year 2000 AOL
announced the largest merger in US history, buying Time Warner to form a
$350 billion mega-corp, the media model for the 21st Century. For a moment
it was the third most valuable company in the world.

And then the bottom fell out.

The Dot Com boom turned into the Dot Bomb crash. AOL was able to buy Time
Warner because it had growth and enormous equity. After the Dot Bomb crash
it had neither. It was effectively absorbed by Time Warner, the company it
had planned to lead into the future.

And that was a better fate than many of the Dot Com boom companies, which
simply collapsed and disappeared.

And that crushed Sun Microsystems.

Sun had been riding high, powered by the enormous profits generated by
selling servers to Dot Com boom companies. Those startups kept growing, and
buying servers to host more web traffic, and growing, and buying more and
more servers to host more and more users.

And then the bottom fell out. And all the accounting tricks came scurrying
out.

The rise of Linux on cheap Intel boxes, it turned out, was a deadly threat
to Sun. Which Sun had countered by loaning money at below market rates to
startups to buy Sun equipment. And then booking the loans as assets.

Think about it: Sun would offer a below-market loan to
MyKewlWebStartup.com, which would then use the loan to buy servers from
Sun. Sun would book the sale as revenue, and keep the loan on its books as
an asset.

Cheap finance tricks like this produce great numbers as long as the market
keeps growing, and you can shuffle money fast enough from one pocket to
another. When the market resets…the whole thing comes crashing down. Sun
went from being the Dot in Dot Com to being sold off for parts.

But no one is stupid enough to do that again, right?

Right?

Buy Me a Cup of Coffee
<https://substack.com/redirect/a223694d-ddf9-4cb7-a347-8e3c849708e8?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>

Please meet Nvidia, the most valuable company in the world at $4.68
TRILLION. At a Price-to-Earnings ratio of 54.13. For comparison, those
pikers over at Apple are worth a paltry $4 trillion at a P/E of 36.49.

Nvidia’s market cap has grown 40 percent year-to-date. That’s four times
better than the Dow Jones Industrial Average, which is up 10 percent year
to date.

But Nvidia’s wild stock growth is justified, right? They have huge orders
for their industry-leading chips that power AI data centers, like the
announced $40 billion purchase by Oracle.

Which needs the chips to build data centers for the $300 billion deal to
supply computing power to OpenAI.

But where will OpenAI get that kind of money? Its current annual revenue is
only $12 billion.

Oh, here we go: Nvidia is investing $100 billion in OpenAI.

So Nvidia gives $100 billion to OpenAI, which gives it to Oracle, which
uses it to buy $40 billion in chips from…Nvidia.

How does Nvidia profit?

It makes it up on the volume.

If this all sounds familiar, it should. As Goldman Sachs told
investors: *NVIDIA’s
investments flow out as funding, returns are realised via GPU sales,
therefore inflating the reported growth. *It’s the same round-robin
accounting Sun was running during the Dot Com Boom.

It’s why Sun didn’t survive the Dot Bomb crash.

Please consider supporting Perfecting Equilibrium by becoming a subscriber.
Subscribed
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Now I know what you’re thinking, dear reader: Feola, who cares about the
stock market? And look at the huge layoffs taking place because of AI!
Doesn’t that mean we’re entering the Age of AI!?!

True, the stock market is at best amusing. And you should never, ever
invest based on what I write. I look at macro trends; think years, not
months, never mind day trading.

And there’s a reason a stock market crash is called a correction. All tech
waves follow the same pattern:


   -

   Some nerd comes up with some crazy thing. Everyone makes fun of the
   crazy nerd
   -

   The crazy thing starts to work; there are few spectacular breakthroughs
   -

   The hype wave launches! This new tech will change the world!
   -

   It’s the tech that launches a thousand startups
   -

   Those startups start running hard aground on reality. Infrastructure
   must be built. Annoying users won’t use the tech as predicted and insist on
   doing it their way
   -

   There’s a correction, and all those startup mistakes die
   -

   The survivors buy up the resources of the failures at pennies on the
   dollar, and the real growth phase begins

It’s happened several times during the last quarter-century. When was the
last time you Asked Jeeves? Looked things up on Yahoo! or Alta Vista?

How many of your friends are sporting Blackberries or Windows CE
smartphones?

The reason for accounting shenanigans is always the same: the growth isn’t
there. If there’s growth, there’s no need for Stupid Accountant Tricks.

And the reason the growth isn’t there is that AI Just. Doesn’t. Work.

*Despite $30–40 billion in enterprise investment into GenAI, this report
uncovers a surprising result in that 95% of organizations are getting zero
return. The outcomes are so starkly divided across both buyers
(enterprises, mid-market, SMBs) and builders (startups, vendors,
consultancies) that we call it the GenAI Divide. Just 5% of integrated AI
pilots are extracting millions in value, while the vast majority remain
stuck with no measurable P&L impact: MIT-
<https://substack.com/redirect/777df2aa-943e-48d7-ab1a-c844b6ca9289?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>*STATE
OF AI IN BUSINESS 2025
<https://substack.com/redirect/777df2aa-943e-48d7-ab1a-c844b6ca9289?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>

Well it’s early days; meanwhile AI is putting all sorts of creatives and
freelancers out of work, right?

Right?

Scale AI and the Center for AI Safety
<https://substack.com/redirect/b0f53de5-a05e-4d45-aa19-eedbacdfc54f?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>
ran hundreds of tasks through an array of AIs, then gave the resulting work
product to a panel of 40 judges.

Less than 3 percent were acceptable. Gemini couldn’t even hit 1 percent;
99.2 percent of its work was unacceptable.

Overall, 46 percent of the work was poor quality; 36 percent was
incomplete; 18 percent of the files were corrupted; and 15 percent had
inconsistencies.

We’ve been discussing why the current generation of Large Language Models –
so called AIs – are an evolutionary dead end.
AIs are doomed dinosaurs as we enter the Information Age
<https://substack.com/redirect/6b70ab18-082f-496c-8fec-8c8476ec8a88?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>

Christopher J Feola
<https://substack.com/profile/85705212-christopher-j-feola>
·
Sep 7
[image: AIs are doomed dinosaurs as we enter the Information Age]
<https://substack.com/redirect/6b70ab18-082f-496c-8fec-8c8476ec8a88?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>

Perfecting Equilibrium Volume Four, Issue 12

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Read full story
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So a correction is not only coming, it is necessary. Nature is red in tooth
and claw, and so is actual capitalism, which occurs during shifts like this
one. Big corporations spend enormous time and money capturing regulators
and politicians to stymie competition. Economic corrections wipe out all
the failed startup ideas, and fatally wound many of the big legacy
corporations.

So a correction is necessary, and healthy for the economy and society in
general.

If you’re the one being corrected, not so much. It’s no fun being Sun, or
Blackberry.

Or their employees. There’s no return on being the world’s best Blackberry
programmer when there are no more Blackberries.

If AIs are failing and AI companies are resorting to accounting tricks to
show growth, why is there such carnage in the labor market?

Last month was the worst October for layoffs since 2003, according to
Challenger, Gray & Christmas. Amazon is laying off 14,000. Microsoft has
cut 15,000. Intel plans to lay off 21,000 this year.

Outside of tech, UPS has cut 48,000, and Target is cutting 1,800 corporate
employees.

And everyone is blaming AI.

So if AI doesn’t work, what gives?

Simple. AI is a handy excuse that sounds way better to boards and investors
than *we screwed up and hired way too many people.*

Several forces are at work here. We’re transitioning from Industrial Age
companies with massive layers of middle management to the much flatter
corporate structures of the Information Age. And even though current AI
implementations are failing, companies are investing in AI looking for The
Next Big Thing. And that requires defunding old business lines.

And X, formerly know as Twitter, still exists, running just as well as it
did before Elon Musk bought it and laid off 80 percent of the staff. Which
left tech execs looking at their crowded offices and going Hmmmmmmmmmm…

There is a bright future awaiting us in the Information Age. And it will
include actual working AIs. (And yes, I’m hoping Data Object Language
Models will be in that mix.)
<https://substack.com/redirect/16c1a36c-f8df-4146-a660-94afcb66de51?j=eyJ1IjoiOXgzbiJ9.j2YJcg7r_Ks-v2w_82KwVnfJcIEQvzIifr8Nr2AEECg>

Alas, the road between here and there is treacherous, filled with layoffs,
unemployment, corporate collapses and the disappearance of entire classes
of jobs.

AIs will be an enormously important piece of the economy some day.

Today is not that day.

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