JPMorgan Chase (JPM) projects the global AI ecosystem needs $650B in annual revenue for a 10% return over five years.
JPMorgan argues corporations will shoulder most AI costs through productivity gains rather than passing fees to consumers.
Michael Burry just closed his Scion Asset Management fund after struggling to grasp AI-driven valuations in the current market.
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Michael Burry first grabbed headlines for his bold short against the U.S. housing market in the mid-2000s, predicting its collapse and profiting massively when the subprime mortgage crisis hit in 2008. That trade — immortalized in the book and movie “The Big Short” — turned him into a Wall Street legend.
But Burry had been a sharp investor long before, starting as a value-oriented trader in the 1990s through his Scion Capital hedge fund, where he focused on undervalued stocks and contrarian bets. His medical background as a neurologist added an analytical edge to his market views. Recently, Burry shocked investors by placing large bearish bets against Nvidia (NASDAQ:NVDA) and Palantir Technologies (NYSE:PLTR), buying put options that signaled his skepticism toward the artificial intelligence (AI) boom. These moves suggested he sees overvaluation in AI stocks amid hype.
Yet, analysts at JPMorgan Chase (NYSE:JPM) have pushed back, arguing Burry is dead wrong about AI’s potential.
JPMorgan’s recent report dives into the economics of the AI infrastructure build-out, painting a picture of sustained expansion rather than a bubble ready to burst. While the bank didn’t name Burry directly, its optimistic outlook counters his bearish stance on AI-related stocks. The analysis focuses on the capital expenditures needed for AI and the returns they could generate.
At the core is a sensitivity analysis showing the revenue required to achieve various hurdle rates on AI investments over the next five years. For a 10% return, the global AI ecosystem would need about $650 billion in annual revenue, equating to roughly 0.58% of global GDP.
To put this in perspective, that’s like every iPhone user from Apple (NASDAQ:AAPL) paying $35 per month or every Netflix (NASDAQ:NFLX) subscriber shelling out $180 monthly — figures that sound steep at first glance.
But JPMorgan emphasizes that consumers won’t foot the entire bill. Instead, corporations and institutions, as key beneficiaries of AI-driven productivity gains, will shoulder most of the costs. The report notes that AI is already delivering value beyond these hypothetical fees through efficiency improvements in sectors like healthcare, finance, and manufacturing. For instance, businesses are using AI for automation, data analysis, and decision-making, which could boost output without proportional cost increases.
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