Blain’s Morning Porridge Dec 2^nd 2025 – AI isn’t a bubble, it’s Tech evolution evolving

“The new, new thing will always be superseded by the next new, new thing…”

Michael Burry is not out. His Stuffed Turkey comments sound like a prophesy. AI is evolving fast and not necessarily in the direction the current market understands. Beware no-see-ums. What if the current tech is a dead end, and the financials collapse? A big shift may become clear in coming months… and where to invest next! And let’s talk about bit-flips!

LINK TO PODCAST

But first…. A couple of days ago I posited the shelf-life on the UK’s Office for Budget Responsibility looked close to its expiry date. When the organisation that is supposed to exude market stability becomes the cause of instability…. Then it’s time to move on. The resignation of Richard Hughes had an inevitability about it… The question for markets will be the independence of what follows…

Back in the real world… I’m trying to work out if there is still time for a major market shocker ahead of the holiday? Perhaps. Bitcon looks a complete flush – but if you’re a regular Porridge reader, you already knew that. The pressure on Govt bonds is relentless. Japan is…. interesting. Could it yet be AI?

The thing about investing in Technology is whatever you buy will eventually be obsolete. The cycle from new bright shiny new new thing to forgotten in a desk drawer is getting shorter and shorter. This morning its Nvidia. What will it be by lunchtime?

Last week I held the first of what I hope will become regular Friday lunches on what excites me about Global Markets. The first lunch was on AI – and we touched on multiple themes, talking about winners and losers, (most folk agreed Google – but at what price?) The China vs USA theme and the direction of new technology was discussed. The wide-ranging discussion left me convinced current AI is just another step in what promises to be an even more exciting era of computer evolution that’s going to happen much faster than we think – I’ll be putting something together on this in coming days in terms of what to watch for….

The idea of the Friday lunches will be to get an expert or two to set the discussion, and have a dozen or so invited investors, analysts, salesmen and traders throw in questions and observations. What I think I will do is have the (well lubricated) lunch, and record a Podcast around it. All projects for next year.

Friday’s lunch had Michael Power, my AI guru, lead the discussion – he’s spotted a whole raft of issues around the AI narrative, which we all tend to see from the USA perspective of MAG7/8 names. He believes the important real narrative is occurring elsewhere. Over lunch he explained there are two bubbles about to pop in AI: the financial one, and a “devasting” technical bubble! A complete branching between where NVIDIA seems to be driving the US market and how China is going down a different route is underway.

The financial issues facing AI are huge, and were neatly encapsulated last week in Michael Burry’s “stuffed turkey” analogy: the circularity of its deals with overpriced, underperforming names like OpenAI and CoreWeave,  the depreciation games being played around extended life chip valuations, and his comparison of Nvidia as the Cisco of the coming AI bust. (Cisco was the market’s darling ahead of the 2000 dot.com bust – it crashed 83% when that bubble popped.) Last week Burry tweeted: “Once again there is a Cisco at the centre of it all, with the picks and shovels for all and the expansive vision to go with it.. Its name is Nvidia.”

While NVIDIA is focused on its range of power small 4nm chips and relying on demand from the small number of hyperscalers via its bubblicious circular financing thang. That tech is hitting technological limits. Meanwhile, China is going down its own path using “3D hybrid bonding” printing and its own tech to create smarter architecture. Yahoo reports the AI accerlators using 14nm Logic chips and 18nm DRAMs could rival Nivida’s Blackwell state-of-the-art chips. The Chinese solution is “less small, but more smart” says Power.

Meanwhile.. just to remind ourselves of the importance of No-see-ums… I’ve been reading about Bit-Flips. Are you aware of them?

Last week it looked like the whole fleet of over 6000 Airbus single-aisle jets would be grounded – because of the effects of cosmic radiation on computer hardware. Fortunately for travellers, it proved an easy and swift software upgrade fix for most aircraft, although some 900 planes had to be fitted with replacement hardware.

These aircraft are all “fly-by-wire”, dependent on computers to run their control surfaces. When space radiation, in the form of subatomic “neutron flux”, hits the electronic systems it can create Bit-Flips where a digital 0 or 1 can be switched, potentially messing with the ailerons and flaps. Digital bits are the basis of current computing. I guess the same effect may happen with quantum Qubits.

The higher aircraft fly the more likely they are to suffer neutron flux – something we’ve been aware of for decades, which is why military and space-ships computer systems are hardened. In early November, the Earth was hit by one of the largest, most powerful solar flares in decades – triggering displays of the aurora borealis far south, and apparently tripping a number of flight systems.

A second factor that impacts how vulnerable systems are is chip technology – basically the smaller the chip, the more densely packed it is, and the more vulnerable to Bit-Flipping it becomes. As Nvidia builds small… China builds smarter…

Just saying….

This morning’s Porridge is a bit short because of although it’s only the second day of December and already I feel Christmas is going to take a massive toll.. A soft day is in prospect after a fantastic lunch with chums from the sailing world in the Garrick yesterday. Thorpey, The Admiral, Jephcott and Eddie (in recovery after watching his beloved Wales crash into the Boks), et al. Excellent wine and food… and I nearly missed my stop on the train home…

Out of time, and back to the day job…

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital

Special Advisor – Spitfire Strategic Capital