In today’s Market Recon, Tech’s Capital Problem, Sarge shared the following quote from Nvidia’s ($NVDA) Jensen Huang:
“If you look at the fundamentals, the demand for the neoclouds is off the charts.” Huang paused and then he added, “What is missing in the middle is the working capital to fuel that growth… because there’s just so much demand across so many sectors of AI, there’s a scarcity of capital.”
Then he said: “The demand of the capital is much greater than the availability of the capital.”
This got me thinking. Yeah, I understand that early-stage ideas need capital to grow. But a business needs customers that are willing to pay a fair market price for the thing they’re buying.
In the case of AI, the demand is there, but paying customers are not. Or, at least, customers willing to pay what the product is believed to be worth.
Yes, these companies are growing fast. But when will people be willing to pay what the services are “worth”?
When the demand comes from investors and not customers, is that the sign of a healthy product? Or has AI gotten ahead of itself?
There are lots of good businesses that would make the world a better place that failed for a lack of “capital.” Or was it a lack of paying customers?
I’m not saying AI will fail. On the contrary. It will succeed because the people with the money will make sure that we can’t live a modern life without it. I guess that’s when we’ll all start paying a fair market value for it.
Jason Meshnick, CMT, is the CEO of TheStreet Pro. Jason also started TheStreet's Filthy Rich Animal newsletter for newer investors. If you're not on the list, you can click here to subscribe.
Jason has over 30 years of industry experience across Wall Street, Fintech, university-level teaching, and financial journalism.
20 Years in Fintech
Before joining TheStreet, Jason spent nearly 20 years in FinTech, developing dynamically generated AI investment analyses. His work was available at Schwab, TD Ameritrade, Fidelity, ETrade, and nearly every major online broker in the US and Canada. However, his real passion arose when he was asked to write a weekly educational investing newsletter for his coworkers. Topics included why vampires are so rich and what car racing can teach you about investing. These have been republished in Filthy Rich Animal. Learning about investing should be fun!
Jason created the Fear & Greed Index for CNN Business. Although he jokes that it's his claim to no fame (it's famous, he's not), the model for understanding investor behavior has become incredibly popular and is used by everyone from hedge funds to individual investors.
Lecturing at the University Level
Teaching his coworkers led to a role at CU Boulder, where Jason taught classes in Investments and Corporate Finance. He's no longer teaching full-semester classes but continues to lecture on technical analysis and other investing topics.
10 Years of Wall Street Trading Experience
Jason spent a decade working on Wall Street as a trader and market maker, where he learned all about market microstructure and investor psychology. During his first five years on the Street, he traded mostly closed-end funds and utility stocks. Later, as a market maker, he managed large caps like ExxonMobil, Texas Instruments, Disney, American Express, and Wells Fargo.
When Not Thinking About Markets
Jason’s other passion is cars. He earned the distinction of being the slowest SCCA road racing champion in recent history when he won his region's Spec Miata class despite having never led a race. Jason knows more about old sports cars than anybody has any right to and is always energized by a drive in his classic Porsche 911.
He is Editor-at-Large for Autoblog, and his writing on cars can be found here.
Jason is also a passionate skier. He taught skiing at Vermont's Mount Snow for six seasons when he was younger. While Jason lives in Colorado he prefers Utah's fluffier snow.
Jason spends his spare time with his wife in Boulder, Colorado, and frequently visits his kids in college.
