Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 667

Have AI’s four horsemen arrived?

The four horsemen of the Apocalypse are Conquest, War, Famine, and Death. Artificial intelligence (AI) has ‘Conquered’; in the Middle East, ‘War’ is underway and could take years to resolve, and changes afoot in enterprise-level AI spending would be akin to ‘Famine’ for AI hyperscalers that have spent trillions on scaling out the technology. All that awaits is the ‘Death’ of the AI bubble.

Consider these four observations:

  • 23 May 2026, Rapid Response Podcast: Uber COO, Andrew Macdonald, says spending Uber’s entire AI budget in the first four months of the year, primarily on Claude Code, has not produced “more useful consumer features”. In other words, drawing a link between spend and revenue “is not there yet.” Meanwhile, Uber CEO, Dara Khosrowshahi said AI “Token Maxxing” has no connection to delivering genuinely valuable products.
  • 29 May 2026, Axios reports that an AI consultant revealed that a client company had forgotten to set a usage cap on employee licenses for Claude, resulting in a US$500 million expenditure in just one month. As AI costs surge, businesses are feeling financial pressure, and senior execs are publicly questioning the yield from AI spend.
  • Ask a Large Language Model (LLM) to answer a question, and about 100 tokens are used for every 75 words produced. But ask an AI agent to create a worker to follow a competitor’s announcements, to track property opportunities or to alert a fund manager to a new investment theme, and, according to analysis from U.S.-based SemiAnalysis, almost 100,000 tokens will be used even before an answer is generated.
  • As quickly as AI has emerged, customer AI experimentation (which has triggered massive revenue increases for the likes of Anthropic, largely from token-maxxing leaderboards at Meta and Amazon) is now giving way to budgeted and considered token usage. The dreamers and builders are moving out, and the accountants are moving in. Enterprises that earlier embraced AI at all costs are publicly adopting a return on investment (ROI) lens.

Worryingly, this shift is occurring just as stock markets have turned hyper-exponential, and Private Equity valuations also reflect maximum hype.

Figure 1. General purpose technology (GPT) booms and busts, Gartner’s hype cycle

Source: Gartner

According to reports, NVIDIA CEO Jensen Huang, speaking at a recent employee meeting, discussed staff concerns about ‘running AI intensively every day, merely wasting tokens on superficial efforts without boosting productivity.’ His response is perhaps telling; He noted that when people encounter any new technology or tool, the initial period of experimentation or “unfamiliarity” produces “imperfect usage”, adding, what matters is taking the first step to embrace new technologies – “It’s fine to waste a little money, but never waste time.”

Huang’s words reflect the certainty of AI’s adoption, which I don’t contest. But will enough revenue from AI customers be generated to provide a reasonable return on the investment made by hyperscalers and data centre developers?

It would be unusual if this time is different

It might be worth remembering the words of journo Derek Thompson, who wrote in his November 4 newsletter, AI Could Be the Railroad of the 21st Century. Brace Yourself, “Memories are short, and prudence and natural risk aversion are no match for the dream of getting rich on the back of a revolutionary technology that “everyone knows” will change the world.

The global railway mania of the 1800s bankrupted thousands of investors, wiped out hundreds of companies, but left nations with a rail network that powered a century of industrial dominance. Similarly, when the fibre-optics/internet/broadband boom of 1999 crashed in early 2000, it vaporised $US5 trillion in market value, but it also laid the wiring on which the Internet Age was built. Similar stores can be told about the electricity bubble, aviation, broadcast radio and automobiles.

Indeed, about three-quarters of General-Purpose-Technology (GPT) booms share a similar pattern of colossal over-investment, financial carnage through creative destruction, then lower prices and decades of productivity gains assembled on the residual infrastructure.

At the core of today’s AI boom is a GPT on the scale of electricity or the internet, and the infrastructure being built will support decades of economic activity. And unlike the Dot.Com bubble, the investment isn’t billions in speculative debt being loaned to ‘pre-revenue’ companies with no path to profitability. This time, the investment is coming (so far) mostly from companies with strong balance sheets. But beyond that core, the classic signs of every bubble are on display.

It would be unusual, given the great enthusiasm or hype, the high asset prices, the overbuilding, the uncertainty of future demand, indeed, the many elements that conform to past bubbles, if this boom doesn’t also conform to the pattern illustrated in Figure 1. it would indeed be a first.

 

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management, a leading Australian boutique investment manager, which offers investors access to high-quality investment strategies in Australian equities, private credit, and digital assets. Roger is widely regarded as one of Australia’s most insightful professional investors and thought leaders. He is the author of the best-selling investment guide Value.able and is a well-known media personality in Australia.

For more information, contact the Montgomery Team on (02) 8046 5000 or [email protected] or visit www.montinvest.com

Sign up for Roger’s insights at www.rogermontgomery.com

This article is for general information only and does not consider the circumstances of any individual.

 

  •   17 June 2026
  • 2
  •      
  •   

RELATED ARTICLES

War can’t be good, can it?

If people talk about a bubble, it’s unlikely to crash soon

The wisdom of buying absurdly expensive stocks (or not!)

banner

Most viewed in recent weeks

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

Division 296: the initial moves to make before the windows close

What if the best superannuation strategy isn't about earning more, but acting before your options disappear? Several overlooked planning windows are narrowing, with consequences that can last for decades.

The retirement scorecard: how many of these questions can you answer?

From the maths of retirement, estimating spending and picking the right asset allocation to survive a poor decade, here are the questions every retiree – current or future – should be able to answer for themselves.

Testamentary trusts: Treasury has picked the wrong reading

A decades-old estate planning tool has survived one tax crackdown only to be caught by another. The surprise isn't who the reform is targeting, but who could end up paying the price for drafting choices made years ago.

Higher yields are creating opportunities in global bonds

Bond markets are adjusting to a new reality, but not in the ways investors expect. With markets repricing and capital competing for attention, investors may need to rethink where resilience and opportunity lie. 

Avoid unnecessary CGT with this estate planning clause

A simple estate plan can create a ticking time bomb. One overlooked clause can pit spouses against children, delay inheritances, and potentially leave a family facing an unexpected tax bill worth hundreds of thousands of dollars.

Latest Updates

Superannuation

Superannuation’s structural failings

Politicians are fighting over access to super, but they may be arguing about the wrong thing. The system’s three fundamental flaws have been hiding in plain sight for decades, costing Australians far more than they realise.

Planning

The great wealth transfer myth

Why do some families preserve wealth for generations while others struggle to? As the great wealth transfer unfolds, the determining factor is often not the structure of the estate, but the preparation of those who will inherit it.

Investment strategies

What comes after bank hybrids?

For years, bank hybrids have been a cornerstone of portfolio income. With tens of billions of dollars now disappearing from the market, investors face a critical question: what comes next, and are the obvious replacements enough?

Investment insights from the US

What happens when knowledge becomes a commodity? The latest themes emerging from the US tech sector suggest AI could reshape company moats, disrupt incumbents and create winners and losers in unexpected places.

Investing

Can Berkshire thrive without Buffett?

Warren Buffett's departure marks the end of an era. But the more important question for investors is whether Berkshire's culture, discipline and capital allocation framework can survive without the man who built them.

Retirement

The Bengen 4% Rule: Lost in translation

For years, retirees have been told to focus on withdrawal rates. But the real question is far simpler: how many dollars can you safely spend? The answer may be very different from what conventional retirement wisdom suggests.

Interest rates

Super low interest rates came with side effects

For more than a decade, investors lived through an era of near-zero interest rates. With bond yields now surging, it's worth asking whether cheap money solved economic problems, or introduced a much larger set of risks.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.