The Brief

Perhaps nobody embodies artificial intelligence mania quite like Jensen Huang, the chief executive of chip behemoth Nvidia, which has seen its value spike 300% in the last two years.

A frothy time for Huang, to be sure, which makes it all the more understandable why his first statement to investors on a recent earnings call was an attempt to deflate bubble fears.

"There's been a lot of talk about an AI bubble," he told shareholders. "From our vantage point, we see something very different."

Take in the AI bubble discourse and something becomes clear: Those who have the most to gain from artificial intelligence spending never slowing are proclaiming that critics who fret about an over-hyped investment frenzy have it all wrong.

"I don't think this is the beginning of a bust cycle," White House AI czar and venture capitalist David Sacks said on his podcast All-In. "I think that we're in a boom. We're in an investment super-cycle."

White House AI adviser David Sacks speaks onstage during The Bitcoin Conference at The Venetian Las Vegas in January.

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"The idea that we're going to have a demand problem five years from now, to me, seems quite absurd," said prominent Silicon Valley investor Ben Horowitz, adding: "if you look at demand and supply and what's going on and multiples against growth, it doesn't look like a bubble at all to me."

Appearing on CNBC, JPMorgan Chase executive Mary Callahan Erdoes said calling the amount of money rushing into AI right now a bubble is "a crazy concept," declaring that "we are on the precipice of a major, major revolution in a way that companies operate."

Yet a look under the hood of what's really going on right now in the AI industry is enough to deliver serious doubt, said Paul Kedrosky, a venture capitalist who is now a research fellow at MIT's Institute for the Digital Economy.

He said there is a startling amount of capital pouring into a "revolution" that remains mostly speculative.

"The technology is very useful, but the pace at which it is improving has more or less ground to a halt," Kedrosky said. "So the notion that the revolution continues with the same drum beat playing for the next five years is sadly mistaken."

The huge infusion of cash

The gusher of money is rushing in at a rate that is stunning to financial experts.

Take OpenAI, the ChatGPT maker that set off the AI race in late 2022. Its CEO Sam Altman has said the company is making $20 billion in revenue a year, and it plans to spend $1.4 trillion on data centers over the next eight years. That growth, of course, would rely on ever-ballooning sales from more and more people and businesses purchasing its AI services.

There is reason to be skeptical. A growing body of research indicates most firms are not seeing chatbots affect their bottom lines, and just 3% of people pay for AI, according to one analysis.

"These models are being hyped up, and we're investing more than we should," said Daron Acemoglu, an economist at MIT, who was awarded the 2024 Nobel Memorial Prize in Economic Sciences.

"I have no doubt that there will be AI technologies that will come out in the next ten years that will add real value and add to productivity, but much of what we hear from the industry now is exaggeration," he said.

Nonetheless, Amazon, Google, Meta and Microsoft are set to collectively sink around $400 billion on AI this year, mostly for funding data centers. Some of the companies are set to devote about 50% of their current cash flow to data center construction.

Or to put it another way: every iPhone user on earth would have to pay more than $250 to pay for that amount of spending. "That's not going to happen," Kedrosky said.

To avoid burning up too much of its cash on hand, big Silicon Valley companies, like Meta and Oracle, are tapping private equity and debt to finance the industry's data center building spree.

Paving the AI future with debt and other risky financing

One assessment, from Goldman Sachs analysts, found that hyperscaler companies — tech firms that have massive cloud and computing capacities — have taken on $121 billion in debt over the past year, a more than 300% uptick from the industry's typical debt load.

Analyst Gil Luria of the D.A. Davidson investment firm, who has been tracking Big Tech's data center boom, said some of the financial maneuvers Silicon Valley is making are structured to keep the appearance of debt off of balance sheets, using what's known as "special purpose vehicles."

An aerial view of a 33 megawatt data center with closed-loop cooling system in Vernon, California.

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The tech firm makes an investment in the data center, outside investors put up most of the cash, then the special purpose vehicle borrows money to buy the chips that are inside the data centers. The tech company gets the benefit of the increased computing capacity but it doesn't weigh down the company's balance sheet with debt.

For example, a special purpose vehicle was recently funded by Wall Street firm Blue Owl Capital and Meta for a data center in Louisiana.

The design of the deal is complicated but it goes something like this: Blue Owl took out a loan for $27 billion for the data center. That debt is backed up by Meta's payments for leasing the facility. Meta essentially has a mortgage on the data center. Meta owns 20% of the entity but gets all of the computing power the data center generates. Because of the financial structure of the deal, the $27 billion loan never shows up on Meta's balance sheet. If the AI bubble bursts and the data center goes dark, Meta will be on the hook to make a multi-billion-dollar payment to Blue Owl for the value of the data center.

Such financial arrangements, according to Luria, have something of a checkered past.

"The term special purpose vehicle came to consciousness about 25 years ago with a little company called Enron," said Luria, referring to the energy company that collapsed in 2001. "What's different now is companies are not hiding it. But having said that, it's not something we should be leaning on to build our future."

Enormous spending hinging on returns that could be a fantasy

Silicon Valley is taking on all this new debt with the assumption that massive new revenues from AI will cover the tab. But again, there is reason for doubt.

Morgan Stanley analysts estimate that Big Tech companies will dish out about $3 trillion on AI infrastructure through 2028, with their own cash flows covering only half of that.

"If the market for artificial intelligence were even to steady in its growth, pretty quickly we will have over-built capacity, and the debt will be worthless, and the financial institutions will lose money," Luria said.

Twenty-five years ago, the original dot-com bubble burst after, among other factors, debt financing built out fiber-optic cables for a future that had not yet arrived, said Luria, a lesson, it appears, tech companies are not worried about repeating.

"If we get to the point after spending hundreds of billions of dollars on data centers that we don't need a few years from now, then we're talking about another financial crisis," he said.

Circular deals raise even more concern

Another aspect of the over-heated AI landscape that is raising eyebrows is the circular nature of investments.

Take a recent $100 billion deal between Nvidia and OpenAI.

Nvidia will pump that amount into OpenAI to bankroll data centers. OpenAI will then fill those facilities with Nvidia's chips. Some analysts say this structure, where Nvidia is essentially subsidizing one of its biggest customers, artificially inflates actual demand for AI.

"The idea is I'm Nvidia and I want OpenAI to buy more of my chips, so I give them money to do it," Kedrosky said. "It's fairly common at a small scale, but it's unusual to see it in the tens and hundreds of billions of dollars," noting that the last time it was prevalent was during the dot-com bubble.

Open AI CEO Sam Altman speaks during Snowflake Summit 2025 at Moscone Center in June.

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Lesser-known companies are getting in on the action, too.

CoreWeave, once a crypto mining startup, pivoted to data center building to ride the AI boom. Major AI companies are turning to CoreWeave to train and run their AI models.

OpenAI has entered deals with CoreWeave worth tens of billions of dollars in which CoreWeave's chip capacity in data centers is rented out to OpenAI in exchange for stock in CoreWeave, and OpenAI, in turn, could use that stock to pay its CoreWeave renting fees.

Nvidia, meanwhile, which also owns part of CoreWeave, has a deal guaranteeing that Nvidia will gobble up any unused data center capacity through 2032.

"The danger," said the MIT economist Acemoglu,"is that these kinds of deals eventually reveal a house of cards."

Some high profile investors see bubble-popping on the horizon

Some influential investors are showing signs of bubble jitters.

Tech billionaire Peter Thiel sold off his entire stake in Nvidia worth around $100 million earlier this month. That came after SoftBank sold a nearly $6 billion stake in Nvidia.

And in recent weeks, AI bubble pessimists have rallied around Michael Burry, the hedge-fund investor who made hundreds of millions of dollars betting against the housing market in 2008. He was the subject of the 2015 film The Big Short. Since then, though, he's had a mixed reputation for market predictions, having warned about imminent collapses that never came to pass.

For what it's worth, Burry is now betting against Nvidia, accusing the AI industry of hiding behind a bunch of fancy accounting tricks. He's homed in the circular deals between companies.

"True end demand is ridiculously small. Almost all customers are funded by their dealers," Burry wrote on X. He later wrote: "OpenAI is the linchpin here. Can anyone name their auditor?"

As tech companies sink billions into data centers, some executives themselves are freely admitting there looks to be some over exuberance.

OpenAI CEO Sam Altman told reporters in August: "Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes."

And Google chief executive Sundar Pichai told the BBC recently that "there are elements of irrationality" in the AI market right now.

Asked how Google would fare if the bubble burst, Pichai responded: "I think no company is going to be immune, including us."

Copyright 2025 NPR

The Los Angeles Unified School Board unanimously approved a policy Tuesday to limit student screen time starting in August.

The decision follows a board vote in the spring that required the district to create a policy to set up guardrails on the amount of time students should spend in front of a digital device.

District officials said that since May they’ve received feedback from nearly 19,000 members in the community. “Student focus and attention were the most frequently cited concerns, along with mental health and wellbeing, online safety, and privacy,” they said.

What does the policy change?

The changes include eliminating use of district-issued digital devices, like tablets and laptops, in the early years, from preschool through 1st grade. And for every other grade level, there will be daily or weekly maximum screen time limits:

• Preschool to 1st grade: 0 minutes (beginning August 2026)
• 2nd to 3rd grade: 20 minutes per day or 100 minutes per week, including homework (beginning November 2026)
• 4th to 5th grade: 30 minutes per day or 150 minutes per week, including homework (beginning November 2026)
• 6th to 8th grade: 60 minutes per subject, per week, including homework, not to exceed 360 minutes per week (beginning January 2027)
• 9th to 12th grade: 90 minutes per subject, per week, not to exceed 600 minutes per week (beginning January 2027)

The policy allows exceptions for subject areas that heavily rely on computers, like computer science, graphic design, and yearbook, and for district and state assessments. It also allows unrestricted use when necessary for students with disabilities.

Board Member Nick Melvoin proposed a successful amendment to reduce the screen time limits for several grades and break up the limitations by subject starting in middle school.

“[It’s] much harder for teachers in secondary to coordinate across five or six subjects,” Melvoin said in explaining the change.

The policy also:

• Bans elementary and middle school students from using devices during lunch or recess, except for school-approved work
• Blocks streaming services like YouTube and “non-approved gaming platforms”
• Allows parents to opt-out of their students taking home a district device
• Encourages laptop cart use for upper elementary school grades
• Will be updated annually 

Board Vice President Rocío Rivas cautioned that the minute limits may discourage teachers from assigning multimedia projects, and adds the burden of monitoring student technology use.

“Schools may end up focusing on counting minutes, documenting usage, auditing classrooms instead of evaluating learning outcomes,” Rivas said.

How much will this cost? 

The district says it’ll cost $4.25 million in one-time costs to buy laptop carts for elementary school classrooms, if each class opts in. And it’ll cost another $1 million annually for software that would track screen time and block content.

How is this different from the cellphone ban?

This policy is about school-issued devices, like laptops and iPads — not student cellphones.

During the pandemic, the district had moved to equip every student with a digital device in an effort to close digital equity gaps.

District officials noted that when adopting the policy, “caution is advised that efforts to close the digital divide for highest needs populations will be negatively impacted.”

Mireya Garcia, a mother and grandmother, told the board that her family shares a single computer at home.

“I don’t want them to lose access to tools that can help them read, to learn and to be successful,” Garcia said.

Board staff clarified the policy does not prevent students of any age from checking out a device for home use from their child’s school.

District analysts, however, also note research shows that device access alone doesn’t lead to better academic outcomes, but that it needs to be coupled with adult supervision and engagement.

“Because families vary widely in their ability to provide consistent supervision, unrestricted take-home devices raise equity concerns,” the district’s office of research and program evaluation wrote.

Some parents say the policy is not enough

Representatives for the parent advocacy group Schools Beyond Screens, which had advocated for the policy, say it’s a good step, but more needs to be done around artificial intelligence.

“We’re setting a new standard for the rest of the country,” said Lila Byock, who founded the group. “From Atlanta, to D.C., to Houston, they’re all trying to do what we’re doing here today.”

Byock and other LAUSD parents associated with Schools Beyond Screens called on the board to reduce the minute limits for students and to adopt a moratorium on AI use until there’s more guidance from the district’s ad hoc committee on the subject.

The Los Angeles City Council took a first step Tuesday to reinstate a law that bans new oil drilling and requires existing wells to be phased out over the next two decades.

The city’s first attempt to pass such a law was in 2022, but oil companies sued and the city had to repeal it. L.A. County has been going through a similar back-and-forth.

Now, with a new state law backing their authority, L.A. officials think they can cap the city’s more than 2,000 wells over the next 20 years — and end L.A.’s distinction as one of the largest urban oil fields in the nation.

“ In my district, we have hundreds of active wells, and our neighbors are ready to move into the next chapter,” District 5 Councilmember Katy Yaroslavsky said Tuesday at the council meeting approving the ordinance’s reintroduction. "We know the industry will continue to fight us at every turn.”

For more than 10 years, local groups have pushed for an end to oil drilling near homes, childcare centers, parks and schools.

“ Neighborhood oil drilling is fundamentally incompatible with protecting public health,” said Wendy Miranda with Esperanza Community Housing in Historic South-Central. "We carry this evidence in our bodies. We have experienced countless nosebleeds and headaches, asthma and even cancer.”

Research has shown living near oil infrastructure elevates the risk of such health issues.

In the city of L.A. alone, about 75% of active oil or gas wells are located within 1,700 feet of “sensitive locations,” such as homes and schools. About one-third of all L.A. County residents live less than 1 mile from an active drilling site.

The L.A. City Council will vote again later this summer to finalize its oil phaseout law.

In a document more than 100 pages long, lawyers representing oil companies vowed to fight the law again, saying it violates the companies’ private property and due process rights, among other things.

Culver City and Santa Barbara have passed similar ordinances.

The L.A. City Council on Tuesday agreed to place a half-cent sales tax to fund the fire department on the November ballot. The vote was 14-0.

If approved by voters, the measure would raise $345 million in its first year and would remain in effect until repealed by voters.

United Firefighters of Los Angeles City, the labor union that represents firefighters, sponsored the measure. The union collected more than 225,000 petition signatures to qualify the measure.

“Due to decades of underinvestment, the LAFD currently operates with the same number of firefighters as in the 1960s, six fewer stations and five times the call load,” the union said in a statement issued before the vote.

According to national standards, emergency resources are expected to arrive at nearly all 911 calls within four minutes. Current LAFD response times are almost double this recommended average, according to the union.

The money would be spent on core functions, including hiring additional firefighters and paramedics, building new fire stations and repairing old stations, as well as modernizing equipment.

Councilmember Eunisses Hernandez said no part of L.A. is immune from the growing threat of fire, pointing to the Palisades Fire last year and the Boyle Heights fire currently affecting air quality throughout the region.

“When these emergencies happen, our constituents expect us to be prepared. They expect firefighters to have the staffing, equipment and resources they need to respond quickly and to keep people safe,” she said.

“As climate change and corporate negligence continue to make these emergencies more frequent and more severe, we have a responsibility to be honest about the conversation that it will take to protect our community,” Hernandez added. “This measure gives voters a chance to weigh in on that question directly.”

The current sales tax rate in the city of Los Angeles is 9.75%. The fire measure would increase it to 10.25%.

The measure says new revenue would not be able to replace existing general fund support for the fire department. It also creates a Citizen's Oversight Committee and annual public audits.

Susan Shelly of the Howard Jarvis Taxpayers Association said if the city made the fire department a top funding priority, it wouldn’t need a tax increase.

“They should fund the fire department appropriately from the first dollar that's in the budget,” she said.

State leaders are feverishly negotiating with special interests behind a few high-profile measures ahead of a Thursday deadline to withdraw them from the November ballot. Top Democrats have already announced an agreement between Uber and the state’s trial lawyers to pull rival initiatives they had each spent tens of millions of dollars promoting.

It’s a dance that happens every election cycle: Interest groups seeking policy changes spend big on voter initiatives, using them as leverage in exchange for favorable deals from state leaders, who often prefer to reach compromises to kill controversial proposals rather than take their chances with voters.

Legislative leaders can also place measures on the ballot. By Monday, they had already agreed to an affordable housing bond. They are also expected to approve a proposal to increase the cap on deposits into the state’s rainy day fund by Thursday.

Here are the highlights:

A deal between Uber, trial lawyers

Uber and California’s trial lawyers have likely avoided an expensive battle ahead of the November election by going through the state Legislature instead of voters.

Uber had collected enough signatures for a ballot initiative that would have capped attorney contingency fees and limited how much California crash victims could recover for medical costs — and not just those injured while riding in an Uber. Attorney groups had qualified a competing initiative to increase the ride-hailing company’s liability for sexual misconduct against riders and drivers.

The company and the attorneys reached a compromise in Senate Bill 623, which would cap medical cost recoveries in cases that involve medical liens, which allow crash victims to get medical treatment without paying upfront while their case is pending. It would not restrict lawyers’ contingency fees as Uber had proposed in its ballot measure, which critics said would have made it harder for crash victims to get legal representation. It will be limited to crashes that occur in an Uber or other ride-hailing service.

The legislation would also prohibit attorneys from recommending medical providers with whom they have direct ties.

Meanwhile, Uber will have to tighten its driver background checks and renew them every year, including rejecting drivers who have been convicted of certain violent offenses or those found guilty of driving under the influence, in the past seven years.

A group of medical providers that spent money against Uber’s initiative did not return multiple requests for comment about the deal. Likewise, the Consumer Attorneys of California, which had raised about $77 million for its initiative — almost as much as the $78 million Uber had allocated for its campaign, which also declined to comment beyond a statement it had agreed on with the company.

It reads in part: “This agreement protects patients from unnecessary treatment or getting overcharged, ensures access to medical care and legal representation, and strengthens safety measures.”

Consumer advocacy group Consumer Watchdog had also opposed Uber’s ballot measure but said the deal “strikes a fair balance.”

The bill “doesn’t do harm to the average Uber rider (who has health insurance),” Jamie Court, president of the group, told CalMatters.

If lawmakers pass the bill and send it to the governor, it would take effect next year.

Affordable housing bond

A record-breaking $11.25 billion affordable housing bond appears headed to the California ballot this November.

The governor, Assembly and Senate agreed on the language of Senate Bill 417, known as the Veterans and Affordable Housing Bond Act of 2026, which would have Californians borrow $10 billion to pay for the construction, rehabilitation, acquisition and preservation of affordable housing, plus another $1.25 billion to help veterans buy homes.

If approved by voters, the bond should help more than 40,000 people buy a home, help create or preserve tens of thousands of affordable units and support high-paying construction jobs, according to the Newsom administration.

“California’s future depends on whether people can afford to put down roots, raise a family, and build a life here,” the governor said in a news release.

A recent report found nearly 40,000 planned units of affordable housing in California are ready to be built but are stuck waiting for funding.

The bond is not officially a done deal. The Legislature still needs to pass the bill by Thursday and the governor must sign it before the housing bond appears on your ballot.

What’s happening with the billionaire tax?

The state’s largest health workers union appears poised to bring its high-profile billionaire wealth tax before voters despite Newsom’s late-hour efforts to strike a deal to remove it from the ballot.

Service Employees International Union-United Healthcare Workers West has proposed a one-time 5% wealth tax on the state’s roughly 200 billionaires. If approved by voters, the tax would generate roughly $100 billion primarily for healthcare with some money reserved for schools and food programs, according to SEIU-UHW.

The union says the money is needed to backfill federal healthcare cuts that forced California to cut its Medi-Cal health insurance program for low-income residents and people with disabilities.

Newsom, who emerged as an early opponent of the tax, steadily ramped up pressure against the union over the past week, joining forces with other labor groups such as the California Teachers Association and healthcare powerhouses like Planned Parenthood and the California Medical Association, which ran digital ads against the tax. Billionaires and Silicon Valley moguls also oppose the tax, which they argue would decrease state revenue in the long term by driving wealthy Californians out of the state.

Last week, SEIU-UHW called on Newsom to accept a 2% version of the tax in lieu of the original 5%, but Newsom swiftly rejected that proposal, calling it “poorly designed.”

In a recent interview with The Lever, SEIU-UHW President Dave Regan said Newsom could “pull some rabbit out of the hat” to reach a compromise, but he had doubts. “We're prepared to go forward, and we will be on the ballot in November.”

Rainy day fund reform

Lawmakers are expected to vote this week to send a proposed constitutional amendment to voters to increase how much money the state can save in a good financial year.

Currently, the state cannot deposit more than 10% of its general fund tax revenue into its rainy day fund. The proposal, titled “Save for California’s Future Act,” would double that amount and allow the state to use some excess revenues to pay down its $20 billion federal unemployment insurance debt acquired during the COVID-19 pandemic.

The proposal comes as California faces a multi-year budget deficit despite growing revenue, prompting state lawmakers and Newsom to search for long-term solutions to stabilize the state’s finances. California is heavily dependent on income tax and capital gains of its wealthy residents, making the state vulnerable to economic downturns.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.