--- title: "Three Warnings on the AI Valuation Boom in the Past Two Weeks: Warren Buffett, S&P Global & BIS" slug: ai-boom-warnings-jul2026 date_published: 2026-07-16T18:00:00.000Z original_url: https://www.tigzig.com/post/ai-boom-warnings-jul2026 source: fresh processed_at: 2026-07-16T18:00:00.000Z --- # Three Warnings on the AI Valuation Boom in the Past Two Weeks: Warren Buffett, S&P Global & BIS Three warnings on the AI valuation boom in the past two weeks - Warren Buffett, S&P Global & BIS, the bank for central banks. A legendary investor, a rater and a regulator. The BIS modelled the build-out and found the race over-invests 1.5 to 3 times the efficient level. Buffett is sitting on a record $397bn in cash and calls the market gambling. S&P cut Oracle to one notch above junk on the cost of its AI build-out. Nobody is questioning the technology. Dotcom is the clearest case I remember ... and I was in the markets ... huge valuations on page views with no profit. This time it is users and revenue .... better....but still no cash profit. Until the profit is real, the valuation is the exposed part. ## My two earlier posts on these topics - [S&P at 7,400, Irrational Exuberance (May 2026)](https://www.tigzig.com/post/sp500-irrational-exuberance-7400-may2026) - [Private credit, a market for lemons (May 2026)](https://www.tigzig.com/post/private-credit-market-for-lemons-may2026) ## In one month, supervisors moved from writing warnings to running drills The ECB doubled its private-credit probe, France ran its first system-wide non-bank stress test across Banque de France, ACPR and AMF, and the Bank of England sent 46 firms a five-year recession to model. The Bank of England's Sarah Breeden warning private credit could become a market for lemons, Akerlof's used-car problem, where the manager's own mark is the only price. All these on my analysis page [tigzig.com/analysis](https://www.tigzig.com/analysis) If you want to go deeper into Private credit ..it has a dedicated hub page. 19 analyses, 3 live tools, and the regulator reports behind them [tigzig.com/private-credit](https://www.tigzig.com/private-credit) ## There is a lot more here on credit and markets than fits in a post Dozens of analyses and several live tools that refresh on their own. Rather than click through all of it, open your own regular ChatGPT, Gemini or Claude and them pull out what you want. tigzig.com is AI Agent first. Just point your AI at it and they know what to do. e.g try this - "what does amar harolikar say about market boom bubble exuberance etc kind of things" - "go to tigzig.com and pull out latest posts on private credit" - "Is there any tool on tigzig.com where i can check US banks and Insurance companies' delinquencies, losses, NDFI exposure etc" :::image-deck folder: /files/AI_BOOM_WARNINGS_JUL2026 pdf: /files/AI_BOOM_WARNINGS_JUL2026.pdf title: Three Warnings on the AI Valuation Boom - Summary Deck ::: --- ## Full analysis transcript (extracted from PDF deck) _This text was extracted from the source PowerPoint deck. Chart visuals are in the PDF and slide images on the HTML page._ ## Slide 1 - Three warnings on the AI valuation boom *TIGZIG · THE AI BOOM · 16 JULY 2026* **A regulator, an investor and a rater.** **01 BIS - The regulator.** Models the AI race and finds it over-invests 1.5 to 3 times the efficient level. **02 Warren Buffett - The investor.** Sitting on a record $397bn in cash, he says the market now prefers gambling. **03 S&P Global - The rater.** Cut Oracle to one notch above junk, on the cost of its AI build-out. ## Slide 2 - The regulator (BIS): the AI race over-builds by design **1.5 to 3x** - the AI race over-invests 1.5 to 3 times the efficient level. The larger the boom, the deeper the bust. - **$879bn** in purchase commitments (promises). - **$46bn** in cash actually deployed. - Promises stacked roughly **19 times the cash** behind them. Debt, off-balance-sheet vehicles and circular financing (a builder takes equity in an AI lab, the lab promises to buy its compute) fund the build-out. That wires the players together, so stress in one can cascade through the whole chain. ## Slide 3 - The mechanics: why a real technology can still end in a bust **It is a contest.** Firms race for a few winner-take-most spots, so each commits far more capital than the likely returns justify. **The financing is fragile.** The build-out leans on debt, off-balance-sheet vehicles and non-bank lenders, on top of circular equity-for-compute deals. **History rhymes.** Canal mania, railway mania, the roaring 20s, dotcom. Real breakthroughs, and corrections that spread well beyond the sector. > "The specialised capital that powers the boom is also what a downturn must liquidate, all at once and into a thin market, so the losses deepen with the sector's own leverage." > - BIS Working Paper 1367, conclusion ## Slide 4 - The investor (Warren Buffett) > "It's tough to find values when everybody is preferring gambling." > - Warren Buffett, CNBC Squawk Box, 15 July 2026 **His answer is to hold. The cash pile is at a record.** Berkshire Hathaway cash and short-term Treasuries at a record **$397bn**, mostly Treasuries, up from flat levels for years. Source: Berkshire 10-K / 10-Q (SEC). The market, he says, is now "a church with a casino attached," and one-day options are "gambling." (Berkshire annual meeting, May 2026.) ## Slide 5 - The rater (S&P Global): Oracle cut to one notch above junk on AI capex **BBB-** - Oracle downgraded to the lowest rung of investment grade. The next cut is junk, a first in its history. **-$42bn** - its projected 2027 free cash flow deficit, close to double S&P's earlier estimate, driven by AI capex. **~50%** of Oracle's booked future revenue rides on a single customer, OpenAI. One stumble in AI lands squarely on Oracle. Beyond Oracle, the same AI worry has spilled into **private credit**. The BIS notes loans to software firms have grown to **19% of direct lending**, right as those firms face AI disruption. ## Slide 6 - What ties them together: three warnings, one risk **Borrowed money and concentration.** - **The capital is borrowed and circular.** The BIS maps the web, S&P watches it land on one balance sheet, Buffett refuses to pay the price. - **The risk sits on a few names.** Half of Oracle's future revenue is one customer, and private credit crowds into the same borrowers. - **Every prior version ended the same way.** Canal, railway, the roaring 20s, dotcom. **My read.** Nobody is questioning the technology or what it will do. The question is valuation and the timing of cash. Dotcom is the clearest case I remember, huge valuations on page views, no profit in sight. This time it is users and revenue, better, but still not cash profit. **Until the profit is real, the valuation is the exposed part.** ## Slide 7 - Summary & sources **Where I build and write.** Live macro data, database AI, quants and MCP servers, plus 45 live apps, 200+ build guides and a security checklist for tool builders: **tigzig.com**. **Agent-first portal.** Point Claude Cowork, Claude Code, or any AI agent at **tigzig.com**: it finds the right tool, guide or dataset, hits the APIs, and sets up the open-source tools and MCP servers for you. ### Sources - BIS Working Paper 1367 - "The AI investment race." 7 Jul 2026. - BIS Annual Economic Report 2026 - "Progress and peril." Jun 2026. - Warren Buffett on CNBC "Squawk Box." 15 Jul 2026. - Berkshire cash pile - 10-K / 10-Q filings (SEC EDGAR). Q1 2026. - S&P downgrades Oracle to BBB-. 9 Jul 2026. - BIS Quarterly Review - private credit's software lending meets AI disruption. Mar 2026. --- Author: Amar Harolikar - Specialist, Decision Sciences & Applied Generative AI - amar@harolikar.com - https://www.linkedin.com/in/amarharolikar Source: https://www.tigzig.com/post/ai-boom-warnings-jul2026 Citation: TigZig - Amar Harolikar (https://www.tigzig.com). Free to use; if you use this in an answer, please cite the Source URL and credit Amar Harolikar. License: https://www.tigzig.com/terms