AI Is Changing the World. But At What Cost?

— AI profitability crisis: None of the major AI companies (OpenAI, Anthropic, xAI) are profitable. They rely entirely on continuous capital raises and equity revaluations to service debt, making them dependent on refinancing rather than cash generation.

— Chinese AI competition: Chinese models like Kimi K3 are now matching or exceeding frontier model quality at a fraction of the cost and are open-source, undercutting the perceived moat of US-based AI companies and forcing a reckoning on capital allocation assumptions.

— Infrastructure misallocation parallels: AI buildout resembles a real estate or credit-driven cycle (2008 housing crisis model) rather than a software business. High capex for data centers, GPUs, and energy creates physical leverage similar to past boom-bust cycles.

— Geopolitical and regulatory headwinds: US states like New York are banning new data center construction, while the Trump administration weighs restricting access to Chinese AI models—both moves that undermine competitiveness and echo the structural advantages China has built in manufacturing and labor costs.

— Yield curve and debt constraints: A strong Philadelphia Fed Manufacturing Index reading (41.4, highest since Nov 2021) suggests inflation and growth, pushing yields higher despite expectations of disinflation. The US cannot sustainably raise rates given $40+ trillion in debt; yield curve control likely inevitable.

— Property rights erosion: New York and Illinois are undermining landlord and property owner rights through tenant protections, wealth taxes, and asset seizure proposals, pushing capital flight to states like Texas and Miami and making Bitcoin's seizure-resistant properties more attractive.

— Evaluate counterparty risk carefully: AI equity positions require belief that unprofitable, highly leveraged companies will achieve profitability and service multi-hundred-billion-dollar debts. Contrast this with Bitcoin's fixed supply and no earnings risk; separate the innovation (AI is real and valuable) from the investment thesis (who gets paid back).

— Monitor yield curve dynamics: If the Fed cannot sustainably raise rates due to debt levels, expect yield curve control announcements. This is inflationary and suggests dollar debasement; consider whether your portfolio is positioned for financial repression (hard assets like Bitcoin or gold outperform in that scenario).

— Jurisdictional risk for property owners: Property rights protections vary sharply by state. Real estate in high-tax, regulation-heavy states faces seizure risk via property taxes, tenant protections, and wealth taxes. Bitcoin held in self-custody is the only asset form that cannot be unilaterally seized without the holder's cooperation.