Inside View: Grok, Stocks and Jocks

 

“"Who will win the NCAA football championship in 2040?" I asked Grok, Elon Musk's artificial intelligence chatbot. After a long pause, it answered, "Impossible to predict." C'mon, where are your claimed reasoning skills?

 

Meanwhile Mr. Musk's company, xAI, is reeling from Grok calling itself "MechaHitler" and spewing hatred. The company blamed this on "certain user prompts" that caused Grok "functionality to reinforce any previously user-triggered leanings." Hmmm. So it's users' fault? That's partially true.

 

I've long called X, which Grok uses for training data, a cesspool of snark. If you train your AI model using online data -- Google trains its AI on Reddit -- your output is going to mimic online users, often confused, anxiety-ridden narcissists. Watch any Lena Dunham show for examples. What did they expect?

 

CEO Linda Yaccarino, hired to boost ad sales, resigned from X this month as part of ongoing turnover. Sales? Who needs sticking sales when you have AI? Recently, xAI raised $5 billion at a $113 billion valuation from venture capitalists and SpaceX.

 

As I see it, until real revenues kick in, AI continues to be a wealth transfer from venture capitalists and electricity customers to Nvidia and data-center operators such as Amazon, Microsoft and Oracle.

 

Wait, electricity customers? Yes. Transmission organization PJM Interconnection, a 13-state power grid operator, estimates that because of a spike in demand from data centers, customer electricity bills could jump 20% this summer. That's like your overserved uncle who hallucinates delusions of grandeur, and you pay his bills. Plus, there are so many AI models, it's a gamble to pick the winner.

 

Speaking of gambling, the One Big Beautiful Bill limits tax deductions to 90% of professional gamblers' losses and expenses. The uproar is amusing because, really, who cares? It isn't like gamblers do anything productive for society like, say, designing AI chips. I wonder if the same law applies to those trading backed-by-nothing crypto coins, who, let's face it, are mostly basement-dwelling gambling addicts.

 

Last month stablecoin company Circle Internet Group went public at $31. It now trades at $224, worth $50 billion. Its USDC coin is backed 1:1 by highly liquid dollar-denominated assets. Almost like travelers checks or check-kiting, they collect interest, now $2.3 billion annualized. It's an overvalued bank.

 

Many existing stablecoins aren't backed 1:1 by dollars or U.S. Treasurys. Perversely, the recently passed Genius Act, enforcing a 1:1 peg, may be bearish as some believe that a few non-U.S. stablecoins use their excess cash to buy Bitcoin and other cryptocurrency to create momentum price movements. We'll see.

 

Either way, my proprietary Bubblicious indicator has gone from Bazooka Joe to Dubble Bubble. For stocks too. AI company Palantir's stock is selling at 102 times sales and 423 times earnings. Great company, but yowza! Former Google CEO Eric Schmidt said in April, "the AI revolution is underhyped," bizarrely echoing Kleiner Perkins' John Doerr saying the internet was underhyped, leading into the dotcom crash. I've been wrong about crypto, underestimating its archetype hype.

 

Is this the Trump Pump? Recently, Robinhood began rolling out tokenized shares tied to private companies such as OpenAI and SpaceX to European buyers. Buyer beware as OpenAI says the company has no connection to these offerings, but it's sure a sign of the frothy times. I've seen a T-shirt reading, "You are the exit liquidity." Don't be that.

 

Markets often operate on the dangerous "Greater Fool Theory" meaning a stock may be overvalued, but someone will pay more for it. That also seems true of professional sports teams, which generate more prestige than profits. The Lakers are selling for $10 billion.

 

That bloat is creeping into college sports. Allowing student athlete compensation for their Name, Image and Likeness has spiked recruiting costs. It was cute when a local BBQ joint subsidized the offensive line. Now it's out of hand.

 

Remember last November, when Oracle co-founder Larry Ellison helped buy the commitment of quarterback Bryce Underwood to Michigan away from Louisiana State University? Mr. Ellison's wife, Jolin, is a Michigan alumna. They contributed to a NIL collective, which reportedly ponied up more than $10 million for Mr. Underwood.

 

What is the endgame? In December former Milwaukee Bucks co-owner Marc Lasry told the Sports Business Journal that as costs spiral, "You're gonna see a number of schools selling their teams." Maybe 51% for $500 to $750 million as the cost of winning.

 

Who has that kind of money? Well, Nvidia is worth $4 trillion, so engineering schools may someday dominate. Which is why Grok should have told me that Carnegie Mellon or MIT, whose alumni have designed much of the AI and crypto infrastructure, will win the NCAA football championship in 2040. Now that's reasoning. I would bet on it, but I can't write off all of my losses.” [1]

 

1. Inside View: Grok, Stocks and Jocks. Kessler, Andy.  Wall Street Journal, Eastern edition; New York, N.Y.. 21 July 2025: A15.