Regulators must blow the whistle before the hysteria over AI floats ends in tears, says ALEX BRUMMER
The excitement generated by the listing of SpaceX and those to follow from Anthropic and OpenAI is palpable. Equity markets are not required to absorb $200billion of new paper very often.The willingness of investors to ignore SpaceX chief Elon Musk’s raft of broken promises, as he pledges to dominate the $28 trillion artificial intelligence (AI) market, is beyond comprehension.After all, this is the same Musk who vowed to triple Twitter (X) advertising in five years and promised his Boring Company would build a hyperloop, which would cut travel time from New York to Washington to 29 minutes.Air shuttle and Amtrak train travellers are still waiting. Among the fears is that the scale of the three big initial public offerings will distort the indexes, drive down value for many equity investors and pose an existential risk.The reality is that the debutants are a drop in the ocean when it comes to the $65 trillion valuation of the S&P 500 index.Even so, there is cause for concern that with all attention on AI, Britain’s FTSE 100 is being denuded before our eyes. Irish-based energy firm DCC is the latest, succumbing to a £5.7billion bid led by private equity ghouls KKR. Broken promises: Elon Musk vowed to triple Twitter advertising in five years and promised his Boring Company would build a hyperloop from New York to Washington If anyone dares to say money pouring into AI is not a bubble, pause for a moment. Borrowing being done to build out systems and data centres is mind-boggling.AI developers Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle have issued $159billion of bonds this year. Google has chipped in with £63.5billion.The expected spend of $670billion in 2026 on data centres far exceeds America’s investment in the railways in the mid-19th century. Private equity-capital giants Apollo and Blackstone are in on the act, raising £26billion of debt to support Anthropic plans.In the spring Google owner Alphabet issued a rare, 100-year, £1billion sterling bond.Investors who snapped it up were betting that a company, with a 30-year lifespan so far, will still be with us in the second quarter of the 22nd century.The exponential speed at which tech and AI advances make it a huge gamble.Bond funds, family offices and pension buyout firms cannot get enough of AI debt which sells on yields below the stock of established blue-chip firms.Even newcomers to the sector, such as bitcoin miner-turned-AI cloud computing whizz CoreWeave, can borrow.It is a madness that retail investors and fund managers are falling over each other to get their hands on stocks and shares stamped AI.Yet the authorities show no sign of blowing the whistle.Corporate vandalismLabour ministers and backbenchers are so busy saving their own jobs, with a futile leadership election, that they have ceased to worry about the work crisis for young people and a vanishing corporate base.Energy group DCC is just the latest to fall into the hands of foreign ownership and private equity. This year has now seen the demise of a raft of FTSE 350 firms including some great old names such as blue-blooded fund managers Schroders and sweeteners group Tate & Lyle.William Hill owner Evoke is out the door and budget airline Easyjet is under siege.Few of these, except for Intertek and Senior, might be candidates for detailed scrutiny under the terms of the National Security and Investment Act.Deals to buy assets such as insurance broker Beazley and Schroders diminish UK control over a vital financial sector.The pattern followed when the plunderers move is the same old same old. Pile on the debt, close headquarters, slash the workforce, axe the pension fund, and ransack the intellectual property.And no one in Government cares.Dismal scienceEconomists are notorious for batting away difficult issues with the phrase ‘on the one hand... on the other hand’.So, how useful it is that economics is now among the top five ‘A’ level subjects is an open question.Thank goodness that it trails maths as a core skill. No one, hopefully, will be asking how to do percentages.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
