Financial Commentary for Smart People
Blain’s Morning Porridge June 10th, 2026 – Where Is AI Going and What’s it Worth?
“You can’t eat a fishing rod, but you can feed a family from it.”
The AI revolution is very real, but the froth around its valuations is not. The real value of AI won’t be in how hyperscalers establish themselves to “rent” us AI services, but how the real economy reacts to the opportunity, and smart firms learn to innovate it to make their businesses better and more profitable. The real upside is immense.
LINK TO PODCAST
This morning my Twitter (X) feed is full of “noise” and animations illustrating SpaceX’s space-based datacentres, together with loads of analyst “puff” parroting Elon Musk’s comments identifying datacentres in space (free of regulation and energy constraints) as the largest “Total Addressable Market” in history. The IPO cites his imagined $28 trillion of demand for AI to drive the future path of commerce and industry – and that it’s all headed his way.
If I was a SEC regulator I might be wondering if its legal for Musk to be passing off his maybe’s on his social media as irrefutable facts the day before he launches the largest-ever IPO – the reality is Retail investors will form a significant part of the raise, and nothing drives retail like FOMO, and nothing whips up FOMO more than dreams of incredible riches.
The SpaceX IPO raises significant questions about what AI is really worth, and where it may head. Regular Morning Porridge readers will be surprised to know this gruff bond guy is positive in the long run.
One of the analysts I follow closely is Torsten Slok of Apollo. His tweet length soundbites cut to the heart of the matter of markets. Earlier this week he noted MAG 7 revenues are rising, but profits for the rest, the S&P 493, are falling. Fed hikes and rising bond yields are nipping credit fundamentals, and there are no signs of AI boosting revenues or profits outside the MAG 7. Yesterday Slok pointed out that US job openings are rising – counter to the expectation AI would trigger a jobs crisis.
The reality today is that its AI that’s driving the current market. The last few days of up/down action paints a picture of a toppy froth. The market (the weighted vote of every participant) is absorbing the stories, what-ifs and possibilities of what the AI revolution may create and trying to draw conclusions. It is a classic narrative driven market.
Forget what the narrative is trying to sell you – and think about the likely outcomes.
There are multiple strands as to how transformational AI might or might not become to the global economy. The valuations ascribed to AI adjacent firms confirm very high hopes and expectations of AI as the new, new thing… Yet, the absence of the energy resources that will be required to drive AI (as it is currently envisaged) is a hard stop/constraint to what can be done – with the tech the MAG 7 want us to use.
Experience and a look at historical stock charts tells us anything new and exciting typically stages a hype cycle of boom/bust as it is adopted. Over the business cycle the upside expectations fade as the new sector matures, and the next new, new thing (like robots or quantum) emerges.
Technology is constantly evolving and creating new opportunities. The business cycle of companies rising then falling was once a reality – yesterday’s new, new, thing eventually became tomorrow’s smokestack as competition, utilisation, and eventually obsolescence take hold. AI does not represent the end of technological development – just another step forward leading to the next leap forward.
History shows firms that lead major technological revolutions are like very hot stars – they burn ever so bright but fade fast. The oldest firms among stock market winners tend to be in resources (oil companies), utilities, banks, or successful producers of consumable goods – firms that become dull, boring and predictable. Firms that lead a technological revolution – tend to be the ones that garner excessive value, top the markets, and tumble as they mature and fail to product the stellar results they alluded to.
What is interesting today is how the current MAG 7 Tech Giants appear to have dodged the rule that each major paradigm shift replaces the stock market leaders. They still remain at the top of the tech stack. That suggests the computer age revolution – that spawned the internet, home and mobile computing, and now AI – is all one connected wave. The big firms are successfully riding it. (Tesla remains in the pack because the fabulosity of Elon Musk’s eternally undelivered promises still attracts FOMO investors!)
How that tech wave is monetised is also evolving. The MAG7 names are successfully evolving from firms that created real value from new markets to becoming rent farmers, charging for the services they seek to control. A key quote from Tim Wu’s excellent book, The Age of Extraction, illustrates the point: “the most profitable position in capitalism is often not producing something, but controlling the gateway through which everyone else must pass.”
This new AI revolution looks likely to increasingly tie the world into new AI ecosystems which will be dominated by the MAG 7 firms which will own the infrastructure of the coming AI Age and monopolise the supply of chips and other resources. The AI developers will be either embedded or customers of the big firms.
AI is a paradigm gearshift in the computing wave – it is genuinely deep and may transform the planet and everything we do. It has spawned a whole slew of AI shysters (often ex-crypto types) promising to guide firms into the AI future of business. Yet surveys show people are only now working out how to use the new capabilities AI might offer. It may not spell the end of professional work – just make it better!
That’s a key issue for AI firms – the AI narrative promises much, but what will actually emerge from it? That raises a risk – if the AI ecosystem does not emerge as MAG 7 would prefer (i.e. a world where they control the gateways) who will profit?
How do we determine what is hype and what is not? Many sceptical analysts have raised the threat of the AI everything boom bursting like the Dot.com era or the Railway Manias off the 19th Century – but both these “bubbles” fundamentally opened-up new economic growth by changing how the economy works.
Railways, cars, aviation, computers, and the internet wouldn’t have achieved anything unless people and businesses found ways to innovate them – that’s what gives technology value. Not necessarily to the first movers.
There is plenty of anecdotal evidence to suggest AI adoption is happening the wrong way around in the current AI boom. Firms and markets are bought into the hype and are desperate to be seen embracing it – because their shareholders expected and demanded it! Yet, when firms embrace AI, they discover it doesn’t replace jobs or save money. (The next shocked discovery will be to discover AI can actually make their businesses better! It’s not just about cutting jobs to improve the bottom line.)
AI is changing the ways we operate. Given time firms and governments will learn how to use AI effectively, changing the service sector completely – likely for the better by creating more well-paid hands-on roles and diminishing the vast internal bureaucracies that currently populate service industries. Imagine a world where a phone call seeking help is immediately connected to a helpful human-being who can use and navigate their internal AI to sort out your problem. Would that not be a joy indeed?
Think about it like agriculture – in simple terms the invention of the plough freed up millions of workers who became the new professional classes (over time.) AI threatens to make us all peons, but what if it makes us all richer. That is for companies and governments to direct.
Yep, I’m a believer in AI to sort out the frictions that have “enshittified” everything in the modern world. As such, AI has enormous value. When technological revolutions occur, the businesses that thrive are those that innovate new ways to utilise the new technologies.
However, AI may well break the bank. At the moment there are latterly trillions of dollars about to be sucked up the multiple AI IPOs (SpaceX, Anthropic and OpenAI) and the energy/infrastructure build out. (Just a couple of months ago Google took $200bln out the market to fund datacentres.) There is a genuine risk that capital (like energy) to fund AI becomes scarce – triggering a crisis of correction.
That may not be a bad thing. Less is often more – and will create a pause to work out how to it better with less!
Who will the winners and loser be?
Apple is a stand-out firm of the computing age – but it’s the laggard in AI. This week’s App conference did little to relieve the markets concern about how it can evolve to integrate AI into its ecosystem. That is essentially the problem every single firm on the planet faces – how to integrate AI to make their businesses better in competitive markets.
Apple is good illustration of the problem. As a firm it’s become the pretender within MAG7. It’s essentially invented 0r innovated nothing new for decades but has dug itself a deep marketing moat as a life-style product while evolving to fit new mobile and computing technologies. For Apple addicts like me – it’s essentially a monopoly supplier of tech products I understand. I can’t imagine learning anything else.
Meanwhile other MAG7 firms have evolved. Amazon has grown from the internet shop of everything into a dominant web-services firm, as has Microsoft. Alphabet and Meta reinvented the internet to become dominant advertising platforms – which they seek to ringfence. Nvidia has established itself as the Go-To-Chip guys. They all want to become monopolies in the future of AI.
(Tesla? Grok is the 7th best AI in a 5-model market. Musk keeps promising he is what he is not – and enough people believe him to keep him there and make him the first dollar trillionaire. Smart. If he is right about space-based datacentres and can deliver them – then he gets richer. If not – his investors lose.)
Collectively the MAG7 Hyperscalers have learnt from the past. They will avoid being superseded by technological paradigm shifts by shifting from development to become rent-collectors on the infrastructure they control. They will seek to “extract” value by “renting” us the tech services they convince us we need.
I suspect that is not how it will play out.
AI and commerce will develop to work around the rent-players through competition and new approaches, like firms building their own open-source AI to protect and utilise their data. Ultimately the firms that succeed from AI may surprise us – perhaps service companies and utilities who learn how best to utilise AI to provide services people are pleased and happy to pay for.
But in the very near future we won’t be worrying about AI driving markets, it will be quantum, robotics, or whatever the next new, new thing is.
Out of time, back to the day job…
Bill Blain
Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital
Meanwhile, don’t forget about my new book:
The Battle For Hamble is a proper grown-up examination of how bureaucracy has failed: a tale of Greedy Corporates, Bad Planning and Economic Illiteracy. It explains how a wholly unnecessary Gravel Quarry will be dug in middle of a prosperous village – putting 6000 jobs at risk. The truth is no one wants gravel, and the quarry company understands it’s not what you dig out, but what you stuff back into a hole in the ground that matters. Gravel sells for £30 a tonne – Landfill earns £150 a tonne to bury. Go figure.
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The Morning Porridge is not investment advice. It is market commentary based on discussions and information gathered from multiple sources believed to be reliable. No guarantee is given for its accuracy or completeness. It is not an offer to buy, sell or solicit investments or securities. The author may have a position in companies or institutions discussed in this commentary.
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