Latest / Elon Musk Podcast / AI Risk Is Off the Charts

Transcript

AI Risk Is Off the Charts · Elon Musk Podcast

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  Jenny Johnson runs Franklin Templeton, which manages about
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  $1.7 trillion. She compared the current AI
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  stock frenzy to the early days of the California Gold rush.
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  She said she doesn't care if it's a bubble.
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  That stopped me completely cold. This week at Abu Dhabi Finance
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  Week, some of the most powerful people in global finance
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  gathered to talk about AI, and they do not agree on what's
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  coming. Is AI the greatest technological
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  shift of our lifetime? Or is it a disruption that could
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  hurt the companies that are betting on it, like Google?
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  Johnson was not the only executive making bold statements
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  in Abu Dhabi. Steven Schwartzman from
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  Blackstone talked about doubling the electricity grid.
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  Chris Hohn, who runs a $60 billion hedge fund, said the
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  uncertainty is off the charts. We're going to walk through what
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  each of these investors actually said, where they see the risks
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  and what the infrastructure plays look like right now, and
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  we'll get right into that after the short break.
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  Now, the world's largest money manager spent this week in Abu
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  Dhabi debating whether AI stocks are worth their prices.
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  Alphabet, Meta and Oracle have all rushed to debt markets in
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  recent months to fund their AI. That spending spree is adding to
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  unease about possible AI bubble. The executives at this
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  conference had strong opinions and they split into mainly 2
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  camps. Jenny Johnson landed firmly in
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  the believer camp. She dismissed concerns about
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  high valuations to the scale of what's happening.
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  Her argument was simple. Only about 7 stocks are driving
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  the AI trade right now, but the tech itself could be one of the
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  greatest shifts of our generation.
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  Complaining about expensive valuations, he said, is like
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  complaining that picks and shovels got expensive during the
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  gold rush and misses the point. Franklin Templeton manages $1.7
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  trillion, so her read on this carries a lot of weight.
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  She also added that we have not begun to see the real impact of
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  AI yet. It will take years before the
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  tech shows up meaningfully in company earnings.
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  Policy makers and economists are still figuring out how AI
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  effects productivity and labor markets.
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  And here's the key point. Johnson is not saying buy
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  everything. She's saying the bubble question
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  is the wrong question. The right question is whether
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  the underlying technology will matter, and she thinks it will.
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  Now Steven Schwartzman runs Blackstone, a trillion dollar
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  alternative asset manager. He focused on infrastructure.
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  AI now touches almost every part of economic activity, he said,
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  and is creating massive capital expenditure demands.
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  The electricity piece is the one that got my attention.
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  Swartzman said the country would have to theoretically double the
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  size of the electricity grid to support all of the AI.
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  That's not a small thing that's going to cost trillions of
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  dollars. To create that much electricity,
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  a lot of other things have to happen across society.
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  New power plants, new transmission lines, new
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  regulatory approvals. And the AI build out is not just
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  a software story. It's about energy now.
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  Keep going with me here. Not everyone at the conference
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  was bullish about this. Chris Hoen runs TCIA $60 billion
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  hedge fund, and he offered a different view.
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  Hoen said certain AI companies and investments do not make any
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  sense at this stage. He didn't name any names, but
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  his reasoning was very clear. AI will be a force of
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  disruption, and disruption is not always a positive for the
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  companies in its path, said Forces of disruption are
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  increasing and the best universe of investments is limiting and
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  shrinking. His most striking line was about
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  risk. Uncertainty and risk factors, he
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  said, are off the charts. That puts pressure on everyone
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  trying to pick winners in this space.
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  So what do we know? Right now?
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  The divide is not about whether AI matters.
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  Everyone agrees that it does matter.
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  The divide is about timing evaluations.
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  Johnson says the tech is so significant that expensive
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  prices are beside the point to spend money on it.
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  Hohen says prices have disconnected from reality, and
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  the disruption could hurt more than it helps.
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  Both manage enormous sums of money.
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  Both are looking at the same data now.
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  Raj Agrawal runs the real assets division of KKR, which manages
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  $723 billion. He offered a middle path.
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  The best AI investment, he said, is in data centers.
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  That's the infrastructure layer, the physical buildings that
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  house the servers. But he added a warning.
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  You have to be cautious about paying big multiples that
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  require growth in a specific period to get your capital back.
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  That echoes what Oracle is experiencing.
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  The company is investing so heavily in AI data centers.
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  That is free. Cash flow will be negative for
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  years, according to recent data. Hold out of that detail,
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  Mubadala. The Abu Dhabi sovereign wealth
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  fund, said its approach to this is to stick to investment
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  principles and not chase aggressive growth.
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  That's a different posture than some of the American tech giants
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  are taking. And, you know, there's a Abu
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  Dhabi Investment Council as well, another sovereign wealth
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  fund they're still buying. They said that they like AI and
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  biotech because they have been big winners.
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  They they expect them to keep winning.
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  The industry, they said, is in the middle of its journey.
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  If you believe AI is in the middle of its growth curve,
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  current prices might be justified.
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  If you believe it's closer to the peak, the math changes a
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  lot. Now.
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  The conference in Abu Dhabi service to real tension.
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  The people managing the world's largest pools of capital see AI
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  as transformational. You also see valuations that
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  make them very nervous. The optimists are betting on
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  decades of growth. The skeptics are watching
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  companies borrow heavily and burned through their cash
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  reserves. Now the infrastructure investors
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  are looking for the safer way in buying the data centers and the
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  power plants instead of the actual AI models.
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  None of these views are wrong right now.
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  They just reflect different time horizons in different tolerances
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  for risk. Hey, thank you so much for
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  listening today. I really do appreciate your
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  support. If you could take a second and
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  please take care of yourselves and each other and I'll see you
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  tomorrow.