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Deutsche Bank on ‘the summer AI turned ugly’: ‘more sober’ than the dotcom bubble, with som troubling data-center math

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Deutsche Bank analysts have been watching Amazon Prime, it seems. Specifically, the “breakout” show of the summer, “The Summer I Turned Pretty.” In the AI sphere, analysts Adrian Cox and Stefan Abrudan wrote, it was the summer AI “turned ugly,” with several emerging themes that will set the course for the final quarter of the year. Paramount among them: The rising fear over whether AI has driven Big Tech stocks into the kind of frothy territory that precedes a sharp drop.

The AI news cycle of the summer captured themes including the challenge of starting a career, the importance of technology in the China/U.S. trade war, and mounting anxiety about the impact of the technology. But in terms of finance and investing, Deutsche Bank sees markets “on edge” and hoping for a soft landing amid bubble fears. In part, it blames tech CEOs for egging on the market with overpromises, leading to inflated hopes and dreams, many spurred on by tech leaders’ overpromises. It also sees a major impact from the venture capital space, boosting startups’ valuations, and from the lawyers who are very busy filing lawsuits for all kinds of AI players. It’s ugly out there. But the market is actually “more sober” in many ways than the situation from the late 1990s, the German bank argues.

Still, Wall Street is not Main Street, and Deutsche Bank notes troubling math about the data centers sprouting up on the outskirts of your town. Specifically, the bank flags a back-of-the-envelope analysis from hedge fund Praetorian Capital that suggests hyperscalers’ massive data center investments could be setting up the market for negative returns, echoing past cycles of “capital destruction.”

AI hype and market volatility

AI has captured the market’s imagination, with Cox and Abrudan noting, “it’s clear there is a lot of hype.” Web searches for AI are 10 times as high as they ever were for crypto, the bank said, citing Google Trends data, while it also finds that S&P 500 companies mentioned “AI” over 3,300 times in their earnings calls this past quarter.

Stock valuations overall have soared alongside the “Magnificent Seven” tech firms, which collectively comprise a third of the S&P 500’s market cap. (The most magnificent: Nvidia, now the world’s most valuable company at a market cap exceeding $4 trillion.) Yet Deutsche Bank points out that today’s top tech players have healthier balance sheets and more resilient business models than the high flyers of the dotcom era.

By most ratios, the bank said, valuations “still look more sober than those for hot stocks at the height of the dot-com bubble,” when the Nasdaq more than tripled in less than 18 months to March 2000, then lost 75% of its value by late 2002. By price-to-earnings ratio, Alphabet and Meta are in the mid-20x range, while Amazon and Microsoft trade in the mid-30x range. By comparison, Cisco surpassed 200x during the dotcom bubble, and even Microsoft reached 80x. Nvidia is “only” 50x, Deutsche Bank noted.

Those data centers, though

Despite the relative restraint in share prices, AI’s real risk may be lurking away from its stock-market valuations, in the economics of its infrastructure. Deutsche Bank cites a blog post by Praetorian Capital “that has been doing the rounds.” The post in “Kuppy’s Korner,” named for the fund’s CEO Harris “Kuppy” Kupperman, estimates that hyperscalers’ total data-center spending for 2025 could hit $400 billion, and the bank notes that is roughly the size of the GDP of Malaysia or Egypt. The problem, according to the hedge fund, is that the data centers will depreciate by roughly $40 billion per year, while they currently generate no more than $20 billion of annual revenue. How is that supposed to work?

“Now, remember, revenue today is running at $15 to $20 billion,” the blog post says, explaining that revenue needs to grow at least tenfold just to cover the depreciation. Even assuming future margins rise to 25%, the blog post estimates that the sector would require a stunning $160 billion in annual revenue from the AI powered by those data centers just to break even on depreciation—and nearly $480 billion to deliver a modest 20% return on invested capital. For context, even giants like Netflix and Microsoft Office 365 at their peaks brought in less than a fraction of that figure. Even at that level, “you’d need $480 billion of AI revenue to hit your target return … $480 billion is a LOT of revenue for guys like me who don’t even pay a monthly fee today for the product.” Going from $20 billion to $480 billion could take a long time, if ever, is the implication, and sometime before the big AI platforms reach those levels, their earnings, and presumably their shares, could take a hit.

Deutsche Bank itself isn’t as pessimistic. The bank notes that the data-center buildout is producing a greatly reduced cost for each use of an AI model, as startups are reaching “meaningful scale in cloud consumption.” Also, consumer AI such as ChatGPT and Gemini is growing fast, with OpenAI saying in August that ChatGPT had over 700 million weekly users, plus 5 million paying business users, up from 3 million three months earlier. The cost to query an AI model (subsidized by the venture capital sector, to be sure) has fallen by around 99.7% in the two years since the launch of ChatGPT and is still headed downward.

Echoes of prior bubbles

Praetorian Capital draws two historical parallels to the current situation: the dotcom era’s fiber buildout, which led to the bankruptcy of Global Crossing, and the more recent capital bust of shale oil. In each case, the underlying technology is real and transformative—but overzealous spending with little regard for returns could leave investors holding the bag if progress stalls.

The “arms race” mentality now gripping the hyperscalers’ massive capex buildout mirrors the capital intensity of those past crises, and as Praetorian notes, “even the MAG7 will not be immune” if shareholder patience runs out. Per Kuppy’s Korner, “the megacap tech names are forced to lever up to keep buying chips, after having outrun their own cash flows; or they give up on the arms race, writing off the past few years of capex … Like many things in finance, it’s all pretty obvious where this will end up, it’s the timing that’s the hard part.”

This cycle, Deutsche Bank argues, is being sustained by robust earnings and more conservative valuations than the dotcom era, but “periodic corrections are welcome, releasing some steam from the system and guarding against complacency.” If revenue growth fails to keep up with depreciation and replacement needs, investors may force a harsh reckoning—one characterized not by spectacular innovation but by a slow realization of negative returns.

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The rise of on-demand leadership in the AI economy

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A quiet but consequential shift is underway in the executive labor market. Companies are rethinking how they access senior judgment in the AI era. 

Rather than defaulting to full-time executive roles that command lofty salaries and long-term overhead, companies are increasingly turning to experienced consultants, strategists, and advisors to provide leadership on a limited and targeted basis.

This is not a dilution of leadership, but a recalibration of where experience delivers the most value.

According to LinkedIn’s latest Jobs on the Rise report, the fastest-growing roles in the U.S. economy sit at the intersection of AI and strategy. AI engineers claimed the top spot, while AI consultants and strategists ranked No. 2 overall. Strategic advisors and consultants also placed in the top 10. Together, the data show that as execution becomes cheaper, human judgment becomes more valuable.

The underlying driver is the implementation gap. After years of AI experimentation, organizations are struggling to convert tools into returns. While they do not lack models or software, many lack orchestration. Companies are increasingly turning to AI consultants and strategists to align technology with business realities, governance, and incentives, work that requires credibility, cross-functional fluency, and the kind of judgment typically associated with senior leadership roles.

The labor market now reflects a clear division of labor. Demand is rising simultaneously for full-time technical AI talent and for senior professionals who can translate those capabilities into business outcomes. As companies scale internal AI teams, they are increasingly relying on external advisors and consultants to provide the judgment required to direct that work at critical moments.

The supply side of this shift is shaped by organizational reality. Executives continue to make daily decisions, but AI has concentrated risk into fewer, more complex, and higher-impact choices around operating models, capital allocation, and governance. Rather than expanding permanent headcount, companies are bringing in experienced external leaders to guide those decisions when the stakes are highest.

The economics reinforce the model. Although senior advisors and consultants often command higher hourly rates, their total annual cost is typically a fraction of a comparable full-time executive role because they are engaged for a limited scope and time. Just as important, this approach allows organizations to draw on multiple forms of expertise rather than binding themselves to a single permanent hire.

The talent profile filling these roles is equally telling. Many of these advisors are former founders, CEOs, and COOs. Experience functions as a filter. LinkedIn’s data shows that many of the fastest-growing strategic roles carry a median of eight or more years of experience. These are not entry-level positions, but mid- or second-act careers for professionals with deep industry context.

The rise of founders and independent consultants on the Jobs on the Rise list also signals that this shift is driven by talent behavior, not just employer demand. Senior professionals are increasingly opting for career paths that offer autonomy, variety, and the opportunity to leverage their skills rather than committing to a single organization in an uncertain environment.

As AI automates and cheapens execution, the market value of human judgment, strategy, and accountability rises. As a result, pricing power shifts from doing the work to deciding what work should be done and how it should scale.

In this environment, experience is the moat. What is often described as “fractional leadership” is better understood as the unbundling of executive judgment from full-time roles. Over time, this model is likely to become not a stopgap but a structural response to the redistribution of value, risk, and expertise in the AI economy.

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Trump finds a ‘solution’ to Greenland crisis, backs off on 10% tariff threats

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President Donald Trump seems to have found a “solution” to the Greenland crisis following talks with NATO leadership on Wednesday. He said he will back away from the threat to impose 10% tariffs on eight European allies — an announcement that had sparked a mass sell-off on Tuesday — that were set to take effect on Feb. 1.

The reversal came only hours after Trump walked back an earlier threat to use force to secure Greenland during his World Economic Forum speech in Davos, Switzerland.

“We have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region,” Trump wrote on Truth Social, adding that the plan would be “a great one for the United States of America, and all NATO Nations.” He said the tariffs would be shelved “based upon this understanding.”

The announcement followed a meeting with NATO Secretary General Mark Rutte, who has been seeking to defuse growing tensions between Washington and its European allies as Trump escalated rhetoric over Greenland’s strategic importance. Trump also said on Truth Social that additional discussions were underway concerning what he called the “Golden Dome” initiative related to Greenland, without providing details.

Markets reacted sharply to the apparent de-escalation. The S&P 500 rose 1.5% in afternoon trading, while long-term U.S. Treasury yields fell, signaling investor relief after days of volatility. Despite this pullback potentially confirming yet another instance of the “TACO trade,” or “Trump Always Chickens Out,” major questions remain over the substance of the framework. 

Trump has repeatedly said that anything less than controlling all of Greenland is “unacceptable.” It’s unclear, and seems unlikely, that the outline discussed with NATO leadership satisfies that particular condition, given that Denmark reiterated that it would not give up Greenland’s sovereignty after Trump’s speech on Wednesday. 

In his Truth Social post, Trump said Vice President JD Vance, Secretary of State Marco Rubio, and Special Envoy Steve Witkoff would lead negotiations going forward and report directly to him.The announcement also comes after the EU suspended trade negotiations with the U.S. and suspended the trade agreement they have had in place since August. CATO scholar Kyle Handley, in a statement provided to Fortune, wrote that the suspension should have never been seen as a “dramatic breakdown,” because “there was never a real deal to begin with.”

“What’s unraveling now was a fragile, politically convenient set of press releases that papered over fundamental disagreements and was always vulnerable to executive-level tariff threats.”



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Trump says Europe does one thing right: drug prices

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President Donald Trump told an audience of thousands of executives and global leaders at the World Economic Forum that European countries have taken a turn for the worse. Trump said his friends who visit the continent tell him they don’t recognize the region—and “not in a positive way.”

“I love Europe, and I want to see Europe go good,” Trump said on Wednesday at the Davos, Switzerland, meeting. “But it’s not heading in the right direction.”

But the president conceded that Europe is doing one thing better: keeping its drug prices low. 

“A pill that costs $10 in London costs $130. Think—it costs $10 in London, costs $130 in New York or in Los Angeles,” he said to murmurs from the crowd. 

Europe may not be recognizable to Trump’s friends, but Trump said he has other friends returning from London, remarking on the affordability of medication there. Indeed, a 2024 Rand study found that across all drugs, U.S. customers paid on average 2.78 times higher prices than in 33 other countries, including France, Germany, and the United Kingdom, in 2022.

The president has adopted a “most favored nation” policy meant to both lower drug costs for Americans while pushing other countries to pay more. Trump made a concerted effort in his second term to address astronomical drug costs, including minting a deal with 17 pharmaceutical companies to slash U.S. prices to match medication costs overseas. The move followed a sweeping executive order issued in May to introduce the most-favored-nation policy. On Wednesday, Trump alluded to an executive order he signed last week, pledging to lower drug prices by up to 90%.

Fallout with France

Trump said pharma companies did not initially believe countries would be willing to change prices. Trump noted in his remarks that he first approached French President Emmanuel Macron about increasing drug prices, but Macron refused.

“I said, ‘Emmanuel, you’re going to have to lift the price of that pill,” Trump said.

Trump said that threatening a 25% tariff on French goods, including wines and champagne, sealed the deal. Macron’s office disputed Trump’s assertion that he pressured the French president into lowering drug prices. 

“It’s being claimed that President @EmmanuelMacron increased the price of medicines. He does not set their prices. They are regulated by the social security system and have, in fact, remained stable,” Macron’s office said in an X post. “Anyone who has set foot in a French pharmacy knows this.”

Included in the post was a gif of Trump with animated “Fake news!” text overlaid on the image.

Health policy experts say drug prices in the U.S. are so high because of a system structured differently from other countries that allow companies to negotiate with individual insurance companies or pharmacy benefit managers, giving them more leverage to raise prices than in other countries’ systems, where there is one regulatory agency negotiating drug prices for a population.

Efficacy of Trump’s efforts to lower drug costs

Industry leaders think Trump’s efforts to lower drug costs could pay off. Vas Narasimhan, CEO of pharmaceutical giant Novartis, told Fortune’s Jeremy Kahn at a USA House session in Davos on Wednesday that Trump identified a valid issue in the high cost of U.S. drugs.

About two-thirds of new drugs on the market over the last decade have come from the U.S., a result of its highly developed research and development (R&D) infrastructure. Some argue that other countries benefit from U.S. innovation without paying their fair share to support the industry’s growth.

“When you look at what underpins R&D in our industry, it’s been primarily in the United States,” Narasimhan said. “The United States is the source of more than half the profits of the industry, and without the United States, you wouldn’t have all of these innovations, all these incredible medicines.”

Narasimham emphasized the need for a “more balanced approach” to funding R&D, implying that other countries should pay more for U.S.-produced pharmaceuticals. He pointed to Trump’s deal with the 17 drug companies as a “reasonable” solution.

Early signs, however, suggest drug prices have not come down. A January report from drug price research firm 46brooklyn found drug companies, including 16 firms with which Trump made deals since September, raised drug prices for at least some of their drugs in the first two weeks of 2026. The median increase of the 872 brand-name drugs with hiked prices was about 4%, the same rate as the year before.

Reuters similarly reported earlier this month, citing data from 3 Axis Advisors, that those 17 drug companies had raised the prices of 350 medications. Public health experts attributed the rise to the behind-the-scenes nature of the deals between drug companies and insurers.

“These deals are being announced as transformative when, in fact, they really just nibble around the margins in terms of what is really driving high prices for prescription drugs in the U.S.,” Dr. Benjamin Rome, a health policy researcher at Brigham and Women’s Hospital in Boston, told the outlet.

The Department of Health and Human Services did not immediately respond to Fortune’s request for comment.



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