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Scarcity of Capital or Scarcity of Demand Willing to Pay?
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.
Tech’s Capital Problem
As more and more funds are raised for the AI buidout, is there a scarcity of capital?