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The AI Bubble Isn't Where You Think It Is

October 24, 2026

AI Summary

5 min read

The AI Bubble Isn't Where You Think It Is

Earlier this month, CoreWeave—one of the hottest AI data center providers—saw the yield on its unsecured notes explode to 15%, and its credit default swaps implied a 62% probability of default within five years. The company had taken on $50 billion in debt at 9% interest while generating only a 1% return. As analyst Gil Luria put it, that's "like taking out a margin loan to buy Treasuries." The credit markets were screaming that this company might implode. And yet, this is not the story of an AI stock market crash about to happen. It is the story of a bubble hiding somewhere else entirely.

The Public Markets Are Already Pricing in the Risk

The conventional fear is that an AI bust will drag down the entire stock market. But the evidence suggests that public market investors have already been discounting that possibility for months. While AI stocks have risen in price, their valuations—the multiples investors are willing to pay for each dollar of earnings—have actually fallen sharply.

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What you'll learn

  • 1 (00:30) **The AI Credit Crisis Begins** - Ed Elson introduces the episode by describing a "tale of two bubbles" triggered by alarming headlines about AI capital destruction and CoreWeave's bond crisis.
  • 2 (03:02) **Why the AI Business Model Is Breaking** - The fundamental economics of AI are deteriorating as costs rise and revenues fall.
  • 3 (03:54) **The Surprising Thesis: The Bubble Isn't in Stocks** - Elson argues that despite the AI turmoil, the stock market is not about to crash because the risks are already priced in.
  • 4 (06:08) **Big Tech: Cautious Optimism, Not Hysteria** - The major tech companies are reasonably valued and far from dot-com bubble levels.
  • 5 (07:13) **The Real Bubble: Private AI Startups** - The true overvaluation is hiding in the private markets, specifically in OpenAI and Anthropic.
  • 6 (07:54) **Anthropic's "Adjusted" Profitability Is Misleading** - Elson tears apart the accounting gymnastics used to justify high valuations.
  • 7 (08:56) **Why Private and Public Markets See Different Prices** - The divide between VC investors and Wall Street explains the valuation gap.

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Guests on this episode

Ed Elson

Show Notes

In this episode of Ed Elson’s newsletter, Simply Put, Ed unpacks why the real AI bubble hasn’t actually hit the public markets — yet. 

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