Arthur Hayes: AI bubble resembles 2008 and Bitcoin benefits

Arthur Hayes, co-founder of BitMEX, has published a new essay in which he argues that the current AI investment wave has more in common with a property bubble than with a technology cycle. In his view, the bubble will eventually burst in a way that looks more like 2008 than the dotcom crash of 2000, and that could actually be good news for Bitcoin.

Bitcoin is available at OKX and Bybit.

In brief:

• Hayes sees AI investments as a property play rather than a technological growth cycle.
• A bursting of the AI bubble would, in his view, resemble the 2008 credit crisis more than the dotcom crash of 2000.
• The expected response from central banks, more money creation, could push Bitcoin and the crypto market into a new bull market.

AI capex is property, not technology

In his essay titled “Situationship”, Hayes explains that the core of the debate revolves around how investors interpret the enormous capital investments in AI infrastructure. The prevailing view is that the construction of data centres and power plants is a technological investment that warrants high growth valuations. Hayes thinks differently: he sees it as property.

What makes it special compared with ordinary property is what is inside those data centres. According to Hayes, the computing power being built up within them creates silicon-based systems that can advance human civilisation in a way comparable to the arrival of the railways. But from a financial perspective, it remains a property story, and that has major implications for what a potential crash would look like.

A credit crisis, not a profit story

Hayes draws a direct comparison with 2008. Banks, hedge funds and private lenders are financing the construction of data centres on a massive scale, partly driven by governments in the US and China. Just as was the case with property back then, a situation of oversupply threatens to emerge. Investors think they are lending to a company like Apple, while in reality they are lending to something that resembles Lehman Brothers more closely.

The difference with the dotcom crash of 2000 is crucial. Back then, it was about companies that were not making a profit and had overly high expectations. Now it is a credit story in which problems arise from overfinancing of physical infrastructure. If that bubble bursts, central banks are expected to respond with liquidity easing and money creation, and Bitcoin, currently trading around $64.086, could benefit from that.

Hayes sees that combination of a bursting AI bubble and a response from central banks as the fuel for a new Bitcoin bull market. The full essay can be found on his Substack.