Speaker · Updated
Liaquat Ahamed: latest market views
Summary
Financial historian and former investment manager and World Bank economist, he won the 2010 Pulitzer Prize for History for 'Lords of Finance' and wrote '1873: The Rothschilds, the First Great Depression, and the Making of the Modern World' (Penguin Press, 2026).
Chorus has 21 views from Liaquat Ahamed across 2 episodes on Prof G Markets and Bloomberg Talks since October 15, 2026. Their latest calls: bearish on NVIDIA.
Where they stand
Their latest bullish or bearish call on each company.
- NVIDIABearish ·
What they talk about most
The latest views
Newest first. Every quote is checked against the episode's transcript.
AI infrastructure & data centers
Data center buildout is increasingly debt-financed and opaque, with no clear sense of total debt.
Until recently hyperscalers funded data center construction out of earnings. The scale of the build-out has now outrun their resources, so they have turned to debt. Much of this debt is opaque, and nobody knows how much there is. Nvidia is effectively lending to its customers, though it does not call it lending, so the share of construction financed by debt is unknown. Ahamed sees this as the key risk, drawing a parallel to 1873, when about three quarters of railroad construction was financed with borrowed money.
“the key risk in the data center boom is overbuilding and overbuilding finance by debt. ... We don't actually know how much debt there is.”at 21:07
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
NVIDIABearish
Nvidia is effectively lending to its customers, making data center financing hard to gauge.
At the centre of the data center financing chain is Nvidia, which Ahamed says is essentially lending to its customers even though it does not call it lending. Because this vendor financing is not visible, it is hard to know how much of the construction is debt-financed. He treats this opacity as a warning sign, so his stance is cautious, though he states no explicit price or fundamental view on the stock.
“At the center is a company like NVIDIA, which is essentially lending to its customers. It doesn't call it lending, but it is a form of lending.”at 21:59
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
Falling token prices and eroding profitability are the warning signs of AI data center overcapacity.
In 1873, railroad overbuilding showed up as excess capacity and eroding profitability: only a quarter of US railroads could pay dividends by the end of 1872. The analogy for AI is that data center construction is pushing down the price of its output, which Ahamed takes to be tokens, and token prices are falling. He says profitability erosion is the other big factor and is where he would look for trouble, but admits he does not know how to measure it or whether demand for tokens is inexhaustible.
“I suppose the analogy today is, you know, is all of this data center construction leading to a fall in the prices of their output, which I suppose is tokens, and token prices are going down.”at 23:00
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
AI infrastructure & data centers
Data center overbuilding is structural: each firm's caution still adds up to excess capacity.
Satya Nadella said Microsoft would prevent overbuilding by being careful, citing the railroad book. Ahamed argues Nadella got the wrong end of the stick. Each company acts carefully on its own, but the collective outcome of their decisions causes overbuilding. This is a prisoner's dilemma: no firm wants to give up market share by slowing construction, so each keeps building. Preventing it would require collective action, which he doubts is possible, so overbuilding is inherent in the competition to be one of the two or three winners.
“I think he got the wrong end of the stick. Because each individual railroad company, in the same way that each individual tech company, is trying to be careful. It's the collectivity of their decisions that leads to overbuilding.”at 24:57
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
Past private investment booms all ended in excess capacity, rate spikes and crashes; AI looks similar.
Ahamed lists four or five US private investment booms: the 1870s railroad booms, the 1920s, the dot-com bubble and the mid-2000s real estate bubble. Each lasted two to four years, each left excess capacity, each saw interest rates spike as everyone competed for capital in the late stages, and each ended in a crash. He leaves the question of whether this time will be different as a rhetorical one, implying the AI boom follows the same pattern.
“All of them lasted two to four years. All of them ended up with excess capacity. And all of them, interestingly, ended up with a spike in interest rates as everyone was competing for capital in the final stages of the boom, and all of them ended up with a crash.”at 26:49
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
AI infrastructure & data centers
Data center investment is about 3-4% of GDP, below prior 5% boom peaks, so the boom may be mid-way.
Past private investment booms ran at 2-4% of GDP and peaked at about 5% of GDP, and each lasted two to four years. The current data center boom has run about two years, and next year's spending is projected at around $1.5 trillion, roughly 3-4% of GDP. Ahamed concludes that the boom is not yet at historical extremes and could be halfway through, though he says history gives no precise timing. He also notes that AI now dominates the stock market and crowds out other investment.
“We've had booms go on for four years. So we could be halfway through the process. ... This current boom is not at 5% of GDP... That's probably three to 4%. We're not at the sort of extremes that we've experienced in the past.”at 29:10
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
AI capex absorbing world savings is pushing long-end US yields up about 150 basis points.
Private investment booms absorb such a large share of the world's savings that they push interest rates up. Long-end US rates have already risen about 150 basis points, and by more in other countries. Ahamed says this is typical late in these booms, when everyone competes for capital. The rise in rates then causes knock-on effects, including defaults on other debt.
“Interest rates have risen, whatever, a 150 basis points in the long end in The US, even more in other countries. ... These booms absorb such a large percentage of the world's savings that it causes interest rates to spike up.”at 31:08
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
AI infrastructure & data centers
Local community protests against data center construction are a modern random risk that could derail financing.
In 1873, Jay Cook's failure to finance the Northern Pacific was partly caused by running into wars with Native American tribes in the northern territories, which made the railroad's goal impossible. Ahamed sees the modern equivalent as political protests against data center construction by local communities. He calls this one of the random effects that could shake the boom, and says it is one of the things he would worry about.
“I suppose the modern day equivalent is the political protest against the construction of data centers.”at 32:39
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
US equities at 250% of GDP make consumption vulnerable to a stock market decline via wealth effects.
The equity market is now about 250% of GDP, versus roughly half that in 2000. The economic boom has become self-sustaining over the last two years partly because of wealth effects from rising equity prices, a factor that did not drive the economy in the past. If equities fall, the consumption hit from those wealth effects is hard to predict, and it is unclear how the Federal Reserve would manage it.
“One is the size of the equity market relative to GDP. I mean, the equity market is now 250% of GDP. ... In 2000, the equity market was half the size relative to GDP.”at 41:25
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
A 6% of GDP budget deficit means the US has probably run out of fiscal room for the next downturn.
With the US budget deficit at 6% of GDP, he argues authorities have probably used up their fiscal options. Combined with the Fed's constraints, this leaves policymakers with fewer tools than in the last crises, so the next downturn would be harder to manage.
“We've got a budget deficit that's at 6% of GDP. ... We've probably run out of bullets in terms of fiscal policy.”at 42:29
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
Reversal of foreign inflows into US equities could trigger a dollar selloff that complicates Fed easing.
Roughly $1 trillion moved from foreigners into US equities over the last twelve months. If that money reverses and flows out of the dollar, the currency falls. That would make it hard for the Fed to ease, since easing could worsen the dollar's decline and threaten its inflation goals.
“A trillion dollars has gone from foreigners into The US equity market in the last twelve months. If that turns tail and there's a flood of money out of the US dollar, what does the Federal Reserve do?”at 42:46
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
In the next downturn the Fed faces a dilemma: easing risks inflation, unlike 1929's gold-standard constraint.
In 1929 central banks were tied to the gold standard and felt unable to ease, which made the crash worse. Today no one is bound to gold, but the Fed is bound by its inflation mandate. Easing a dollar and inflation-constrained economy could worsen knock-on effects, so the Fed's room to act is narrower than in recent crises.
“This time around, no one's tied to the gold standard, but are we tied to keeping inflation under control? Does that make the knock on effects much worse?”at 46:18
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
AI infrastructure & data centers
A major AI buildout player may fail to raise capital, triggering a giant market shock.
Drawing the railroad parallel, he expects one of the major players in the AI infrastructure build-out to hit financing problems and suddenly be unable to raise capital. He names Oracle and OpenAI as possibilities without committing to either. He expects this to hit the market as a sudden shock, similar to the way the railroad financing failures of 1873 triggered the panic.
“One of the major players will face financing problems. ... Will suddenly, you know, will suddenly not be able to raise the capital. ... so I think that will come as a giant shock across the market.”at 52:20
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
Competition from Chinese open models could suddenly cause a mass erosion in AI industry profitability.
He sees competitive pressure from open models produced in China as a second possible source of crash in the AI boom. If cheaper open models arrive, they could sharply cut the profitability of the companies that have invested heavily in AI infrastructure. He presents this as one of several scenarios and does not forecast it firmly.
“Will there be competitive pressures from, I don't know, open mod... Models produced by the Chinese that suddenly causes a mass erosion in profitability.”at 52:53
Prof G Markets: Will The AI Boom End Like The Railroad Crash Of 1873? — ft. Liaquat Ahamed ·
AI infrastructure & data centers
AI infrastructure spending matches railroad-era scale and is largely debt-financed, like the 1870s railroad boom.
He compares the AI boom to the railroad mania. In 1870s America, about 5% of GDP went into railroad construction, which he says would be about $1.5 trillion in today's terms, comparable to the money now going into data centers and AI infrastructure. In both eras the money was mostly borrowed: the US bond market dwarfed the equity market, and about 80% of railroad money came through bonds. He argues the same debt-financed pattern is beginning to show up now.
“Today's terms would be $1,500,000,000,000. So comparable to the amount of money that's going into data centers and AI infrastructure. What was also true then and is beginning to be true now is most of it was debt financed.”at 2:38
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
Yes, AI is in a bubble; timing the burst is hard, and it could run two more years.
Asked whether AI is in a bubble, he says yes, but says the timing is the hard part. Past infrastructure booms ran two to four years before unwinding, and this one is about two years old, so it could last another two years. He points to a pattern: over-investment erodes profitability, as by 1872 only one in five railroads was paying a dividend. He warns to watch for the same erosion in AI as profitability starts to decline.
“Yes. But getting the timing right of when it's going to burst is the giant challenge. Previous infrastructure booms have taken anywhere from two to four years to play themselves out. So I don't know. We're two years into this one. It could go on for another two years.”at 5:24
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
Boom-driven borrowing is pushing yields up; rates rose 150bp in a year, with crowding out globally.
Booms typically push interest rates up, and he says rates have already risen about 150 basis points in the last twelve months. He says this is a global phenomenon, not just American. Everyone is trying to get their hands on capital while governments are borrowing heavily. He argues that the resulting competition for capital also raises real interest rates and crowds out workers and construction resources, which he says is already happening.
“interest rates have gone up by a 150 basis points in the last twelve months and the other thing to remember is this is not just in The US this is a global phenomenon... everyone's trying to get their hands on as much capital as they can... at a time when governments are borrowing an enormous amount.”at 7:30
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
AI infrastructure & data centers
Circular financing in AI is hidden leverage: great on the way up, terrible on the way down.
He describes circular financing as 'essentially a hidden form of borrowing', which is leverage. He draws on the pattern from past crises: borrowing heavily during a boom is what kills you, because when the cycle turns the debt bites on the way down. He concludes the arrangement is great on the way up and terrible on the way down.
“Circular financing... It's essentially a hidden form of borrowing. So it's leverage and the thing we've learned in crisis after crisis is the thing that kills you is when you borrow a lot of money in a boom... it's great on the way up, and it's terrible on the way down.”at 16:12
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
US equity market is at a historically bloated ~250% of GDP, with foreign inflows adding to the overhang.
Equity markets never reached this size in a financial crisis before. The equity market peaked around 110% of GDP in 2000, while the US equity market is now about 250% of GDP. In the last twelve months about a trillion dollars has flowed into US equities from foreigners. He counts private equity as well, noting public equities are only about 75% of the story, which he calls a giant overhang.
“Until 2000, the size of the equity market got up to a 110% of GDP... So The US equity market is 250% of GDP and on top in the last twelve months a trillion dollars has come into The US equity market from foreigners.”at 24:39
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
Monetary policy mistakes, not the bust itself, turn boom-bust cycles into crises.
He argues that the economy is surprisingly resilient to boom-bust cycles, which are terrible but do not necessarily lead to a massive financial crisis. What converts a bust into a crisis is a monetary policy mistake. He cites 1873 as one example and 1929 as another, when authorities let banks go under. He says that did not happen in 2008, which is why that episode was different.
“The economy is surprisingly resilient. What really converts a boom bust cycle into a crisis is a mistake in monetary policy... That's what happened in 1929 when they let the banks go under. That didn't happen in 2008.”at 29:09
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
Bailing out bankers but not homeowners after 2008 fueled left and right populist resentment.
He says bankers were blamed for the crisis but did well afterwards. In 2008 the bankers were bailed out while homeowners were not. That created enormous resentment, which showed up on the right in the Tea Party and on the left in Bernie Sanders and Occupy Wall Street. He says the result is an unholy coalition of left and right saying the system does not work, which he links to the populism seen globally.
“If you go back to 2008, who was bailed out? The bankers. Who was not bailed out? The homeowners... it created enormous resentment... both from the right wing... and the left wing, so Bernie Sanders and Occupy Wall Street, and so you get this unholy coalition of both the right and the left saying this system does not work.”at 32:05
Bloomberg Talks: Author of '1873' Liaquat Ahamed Talks New Book ·
Shows
- Prof G Markets · 1 episode
- Bloomberg Talks · 1 episode
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