The AI Bubble Starting Gun

The AI boom is just getting started... 14-fold revenue growth incoming... Massive value creation... Thank you, Dan... Two bubbles under one roof... Booms are great while they last... Make sure you're prepared...

Larry Ellison just fired the starting gun on the AI stock market bubble...

On Tuesday, Ellison's company, Oracle (ORCL), reported a blowout quarter with cloud infrastructure revenues up 55%.

Ellison also said he expects the company's annual cloud infrastructure revenue to grow from $10 billion today to $144 billion by 2030. That's a 14-fold increase in just five years.

The stock market loved the news... sending Oracle's share price up as much as 42% on Wednesday. And Ellison briefly became the world's richest man – eclipsing Elon Musk – before the stock retreated.

Oracle's hyperoptimistic revenue growth projection and the market's reaction to it aren't the sort of things you see at market bottoms... or tops. It's what you see when the market has the speculative bit firmly in its teeth, with no intention of letting go anytime soon.

Regular readers are probably wondering what my bearish spin on this story will be. But as long as companies like Oracle keep putting up huge revenue increases and as long as there is good news on the AI front, the market could easily keep rising.

Like all bubbles, the AI boom is based on the creation of something massively valuable for humanity...

Corey McLaughlin and I recently spoke with our friend and colleague Marc Chaikin for an upcoming episode of the Stansberry Investor Hour podcast. Marc pointed out that the current AI market boom is fueled by capital spending.

In other words, hyperscalers like Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN) are building data centers that will provide real value to users soon. If you're using ChatGPT, Gemini, Grok, or other AI bots, that day has already arrived... though I suspect this is just the tip of a massive AI iceberg.

It's exactly like what WorldCom, Global Crossing, and many other companies around the world did by laying millions of miles of fiber-optic cable during the dot-com boom. We began seeing the benefits immediately with the Internet. But many of those companies (including the two mentioned here) went bankrupt.

In short, it's not easy to make money betting during the stock market boom phase.

Now, don't misunderstand me. Big money will be made. But we'll probably see all the big money from AI after a steep bear market has wiped out the speculative excesses and punished hyperscalers for building too much too soon – just like in the wake of the dot-com boom.

Think about Alphabet, Meta Platforms, and Amazon. These Internet-based companies are collectively worth more than $7 trillion today. And many trillions more in value have been created by Internet-enabled enterprises. I expect we'll see something similar with AI and that the market action and timelines will roughly rhyme with the dot-com boom and bust.

Then there's the crypto bubble...

Bitcoin's total market cap is around $2.3 trillion today. And the total crypto market's value is just above $4 trillion.

I believe the overwhelming majority of cryptos will go to zero some day in the not-too-distant future. But I also think crypto is here to stay, and bitcoin and a few others have the potential to change the way we store value and pay for things over the next several years. So just like with AI, there's money to be made after the speculative excess is cleared away.

And speaking of speculative excess...

The company with two bubbles under one roof...

On Wednesday, Pennsylvania-based Eightco (ORBS) announced that it has raised $270 million in a private placement of its publicly traded stock.

In a press release, Eightco said it intends to use the proceeds of its offering "to acquire and hold Worldcoin (WLD) as its treasury reserve asset" and that it may also hold Ethereum and cash as treasury assets. It's also changing its ticker symbol from OCTO to ORBS.

The company currently has two businesses, neither of which has anything to do with cryptocurrencies or AI. One finances inventories for e-commerce firms, and the other does the same thing for companies that sell refurbished mobile phones.

Eightco's press release is as nebulous as you'd expect for a company pivoting into the latest investor fads. What I glean from it is that the cryptocurrency called Worldcoin has some connection to a network called World, which involves the use of a World Orb device, an iris scanner that helps distinguish human users from AI bots online.

The World project was originally co-founded by OpenAI founder Sam Altman, with $250 million of funding from venture capital investors. The pitch was that you'd get free crypto if you let World scan your eye with the Orb. There's also World ID, which is supposed to be a digital ID card that tells the Internet you're a human.

It seems like World wants to give us a digital ID by scanning our irises, and this will help us distinguish real people from AI bots on the Internet. It sounds fishy to me, but I'm no tech guru.

All I know is that a small inventory-financing operation is pivoting into crypto and AI all at once. It's downright beautiful, if you consider the exploitation of speculative excess an art form.

The cherry on top of this pivot is that Eightco's new board chair is Dan Ives. You'll recall him from our August 8 Digest titled "Ugly Clothes and Bad Advice."

Ives is the Wall Street analyst who never met a mega-cap tech stock he doesn't like and wears goofy, brightly colored clothing covered in busy patterns. In August, I said his decision to sell his own graffiti-covered clothing designs must be a sign that speculative juices are taking over the stock market.

A character like Ives backing a company pivoting from a small inventory-financing operation to selling shares and buying Worldcoin (whatever it really is) seems like the chef's kiss, the sign that yes, we really are in the biggest speculative bubble in all recorded history.

It's like Ives sits around trying to think up my next Digest for me. So I must say, thank you, Dan, from the bottom of my heart. Your efforts are greatly appreciated.

The pivot announcement had the desired effect...

Eightco's market cap was less than $5 million before the announcement and as high as $7 billion after it, according to data compiled by Bloomberg. The share price skyrocketed from $1.47 to as high as $45. It's around $16 now.

So what's the company really worth?

Well, before the offering, it had total assets of nearly $49 million. So after the $270 million offering, we expect that to be around $319 million. Total liabilities of about $41 million leave Eightco with a net worth of about $278 million.

Eightco's market cap as of yesterday's closing was about $2.8 billion, roughly 10 times book value. Maybe the market is looking ahead. The company's prospectus indicates that it may sell stock "from time to time," for proceeds of as much as $2.7 billion. It sold 10% of that this week and perhaps has another $2.43 billion more it can sell. If management is smart, it'll sell the rest of it while the market cap is still absurdly high.

After all, besides being a sign that the AI boom is headed nowhere but up, Eightco's share price performance clearly demonstrates that demand for its shares far outstripped supply. Management needs to remember the time-honored Wall Street adage, "When the ducks quack, feed 'em." The quacking hit 130 decibels on Wednesday.

Eightco's pivot isn't new...

It's a standard sign that the speculative excess of the age has shifted into a higher gear.

Many years ago, a stockbroker told me about his experience as an industry newbie during the gold stock boom of the late 1970s.

At the time, gold and gold stocks were soaring fast. Folks felt there was no time for research. They had to get in or they'd miss out. (Sound familiar?)

So the broker bought stocks for clients that neither he nor his clients knew anything about – except that the company had the word "gold" in its ticker or name. This included non-gold businesses that added the word gold to their company name to attract investor interest. The broker's clients were sure that gold was an easy path to riches, and if the company's name had gold in it, that was good enough for them.

The market soared for a while. But the craziness took place at the tail end of the boom, so the gains were gone as quickly as they arrived – often becoming massive losses.

The gold stock boom was an all-out market frenzy fueled by soaring inflation, skyrocketing gold prices, and dire forecasts of hyperinflation and the end of the U.S. dollar. Gold eventually topped out at $850 an ounce in January 1980, kicking off a 19-year bear market.

The same sort of thing happened during the dot-com boom...

Back then, everyone was convinced the Internet would transform global commerce (which was correct, of course).

But in the final run-up of the bubble, folks were investing in any company whose name ended in ".com." These IPOs would be a roaring success, and folks who owned shares would enjoy a substantial rise in market value... until it all fell apart after the Nasdaq Composite Index peaked in March 2000. The technology-filled index didn't hit bottom until October 2002 and didn't recover its 2000 high until 2015.

We saw a somewhat less widespread version of this with blockchain stocks in 2017. Perhaps you remember beverage company Long Island Iced Tea changing its name to Long Blockchain – resulting in a one-day share price gain of more than 200%. The U.S. Securities and Exchange Commission eventually delisted the company's stock, saying it was misleading investors.

Several other companies did the same thing around that time. A biotech company called Bioptix changed its name to Riot Blockchain and said it would change its business to focus on cryptocurrencies. The stock rose more than 1,600% in 2017. And a company originally called AgriVest Americas changed its name to NXChain. Its stock rose as much as 1,700% in 2017.

You can guess how it turned out for investors. An August 2019 paper found that companies that put blockchain in their names had abnormally higher returns for two months and negative returns after five months.

This time around, companies might not be changing their names, but more and more of them are buying cryptocurrencies for their corporate treasuries. There are more than 100 publicly traded bitcoin treasury companies tracked by bitcointreasuries.net.

Booms are great while they last...

Everybody makes money, except those who refuse to participate.

The mood is optimistic and the news is filled with stories about new innovations, new businesses, fresh IPOs, and mergers and other transactions made in hopes of creating massive value.

It feels like a world's fair, with all the best and brightest of our time displaying their talents and wares, showing us the way toward a wealthier future.

So you should do what you can to enjoy it. Don't be afraid to participate, at least in a small way. But don't do anything stupid with your money.

All the warnings I've issued here and in The Ferris Report about what happens after a boom goes bust still apply. In fact, they'll become more and more urgent the higher the speculative bubble climbs.

If it were possible, I'd stay bullish right up until the top, then turn bearish down to the bottom. But nobody knows where the tops and bottoms are, so you have to find a different path forward.

Make sure you have a portfolio focused on high-quality businesses with excellent long-term prospects, purchased at prices that promise an adequate return. And stay diversified with bonds, commodity-related investments, managed futures, T-Bills, and bitcoin.

As long as you hold a diversified portfolio, avoid the convenient pivot stocks like Eightco, and don't load your entire portfolio with every AI-related stock you can find, you can participate in the massive new technology waves like AI and cryptocurrencies while avoiding big risks.

That type of portfolio should treat you well over the long term... which is the only term that matters to a real investor.

New 52-week highs (as of 9/11/25): ABB (ABBNY), AbbVie (ABBV), First Majestic Silver (AG), Allegion (ALLE), Arista Networks (ANET), Atmus Filtration Technologies (ATMU), AutoZone (AZO), iShares MSCI BIC Fund (BKF), Alpha Architect 1-3 Month Box Fund (BOXX), Ciena (CIEN), WisdomTree Japan SmallCap Dividend Fund (DFJ), Dimensional International Small Cap Value Fund (DISV), Western Asset Emerging Markets Debt Fund (EMD), iShares MSCI Emerging Markets ex China Fund (EMXC), EnerSys (ENS), Equinox Gold (EQX), Cambria Emerging Shareholder Yield Fund (EYLD), Comfort Systems USA (FIX), Franklin FTSE Japan Fund (FLJP), Franco-Nevada (FNV), Cambria Foreign Shareholder Yield Fund (FYLD), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), Alphabet (GOOGL), Houlihan Lokey (HLI), iShares Convertible Bond Fund (ICVT), Nuveen Preferred & Income Opportunities Fund (JPC), JPMorgan Chase (JPM), Kinross Gold (KGC), KraneShares CSI China Internet Fund (KWEB), L3Harris Technologies (LHX), Grand Canyon Education (LOPE), Mueller Industries (MLI), Neuberger Berman Next Generation Connectivity Fund (NBXG), Newmont (NEM), New Gold (NGD), OR Royalties (OR), O'Reilly Automotive (ORLY), Pan American Silver (PAAS), Sprott Physical Silver Trust (PSLV), Ryder System (R), Royal Gold (RGLD), Construction Partners (ROAD), Roivant Sciences (ROIV), ProShares Ultra Technology (ROM), Sandstorm Gold (SAND), iShares Silver Trust (SLV), SSR Mining (SSRM), TKO Group (TKO), Torex Gold Resources (TORXF), Global X Uranium Fund (URA), Vanguard S&P 500 Fund (VOO), Wheaton Precious Metals (WPM), and ProShares Ultra FTSE China 50 (XPP).

In today's mailbag, feedback on yesterday's Digest... Do you have a comment or question? As always, send your comments and questions to feedback@stansberryresearch.com.

"With the latest numbers on inflation, about 4.8% [annualized from the August Consumer Price Index] as reported by the government and probably twice that in real terms, that's nowhere near the 2% Fed target. And with all the negative economic numbers, from record bankruptcies to defaults on the 'buy now, pay later' schemes, I think it's time to drag out the dreaded stagflation word.

"The Fed is out of answers, and the economy is out of gas. Dropping rates 25 or 50 basis points will not magically re-invigorate the economy, and inflation is here to stay. And with the Federal government's debt over $37 trillion, how could anyone be optimistic about the markets? Yet all-time highs in the indices seem to be a common occurrence. The disconnect between Wall Street and Main Street is as glaring as ever." – Subscriber Jim V.

Good investing,

Dan Ferris
Medford, Oregon
September 12, 2025