Christine Ji
4 min read
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The AI hype is strong in markets, but BCA Research's Peter Berezin has his doubts.
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AI's high costs and competition hinder monetization despite potential productivity gains.
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AI could mirror the progression of other industries that produce economically useful but low-margin businesses.
Nearly three years after the launch of ChatGPT, the AI hype is still in full force as the biggest tech companies continue to shell out billions to build out their AI infrastructure.
Nvidia, meanwhile, hit a fresh all-time high this week, and some analysts see the gains piling up to push the premier AI chipmaker to a $6 trillion valuation.
But will investors see the billions in AI capex pay off? Peter Berezin, chief global strategist at BCA Research, thinks not.
"It's more likely they'll lose money," Berezin told Business Insider, referring to Big Tech companies spending big on the technology.
It's been hard to bet against the biggest trade in the stock market and its promise to turbocharge economic productivity. Investors quickly shook off the DeepSeek disruption earlier this year, and Big Tech companies plan to spend over $300 billion on AI investment. The rally in tech powered the Nasdaq 100 to record highs this week.
Still, Berezin thinks the market is missing the bigger picture. AI technology is tremendously expensive, and he sees monetization opportunities as slim. While AI certainly could boost productivity, that's no guarantee that higher profits will follow.
Venture capitalist Peter Thiel famously said "competition is for losers," and Berezin agrees with this sentiment.
"You don't make money in a competitive market. You make money as an investor in a monopolistic market. AI, so far, is very, very competitive, and that's a problem for investors in that area," Berezin said.
"If everybody can do it, then how do you charge money for it? OpenAI was bragging a few months ago about how they're actually losing more money than expected on their latest model, but to them that was a good thing because people were using it so much. The presumption here, of course, is that if they're using it, they're eventually going to pay for it," Berezin added.
"But why would they pay for it if Anthropic, if X, if DeepSeek, and many other companies now are offering similar products like this?"
It's not just the AI startups that are engaged in an AI arms race. Berezin points to the Magnificent Seven's capex spend as another example of fierce competition threatening profits.
