Every test in Kevin O'Brien's world history class in high school ended the same way. Stay with me, it might just be the worst call I make in my career.
No scan sheet. No lucky guesses. An essay. Whatever the topic was, empires, wars, revolutions, you finished by building an argument in complete sentences and defending it, while Mr. O'Brien watched a room full of teenagers at St. Anthony High School in Wailuku, Maui, learn the difference between knowing a date and understanding a pattern. Although, Lindsay, Peter, Shane and I weren’t seeing it at the time, two of his ideas are more relevant than ever.
The first was recency bias. We trust the present too much because the present is the part we can see. Last year feels permanent. Last quarter feels like a law of nature. The second idea sat right behind it: history repeats itself. Not the events. The patterns repeat, because the people do. The fear. The greed. The certainty that this time the old rules have been retired.
O'Brien had backup at home. My mom had a saying she reached for constantly: you can't see the forest for the trees. As a kid I never understood it, and I made fun of it, repeating it back in a mocking voice every time it showed up, which was often. I say it now. At work. In my own voice. It is the same lesson O'Brien was teaching, hers just came without the essays. Recency bias is the classroom name for it. You get stuck on the tree in front of you, this quarter, this headline, and you lose the forest it belongs to. It only took me thirty years to be reminded.
I have been thinking about Mr. O'Brien a lot this year, because I now sit in rooms where very smart adults talk about AI, and almost every argument I hear would have failed his test.
Yesterday is why. The Nasdaq fell 5.5 percent, its worst day in nineteen months. Chip stocks fell 12 percent. The trigger was not an earnings miss. Democrats swept the midterms, and data centers, now a campaign issue in state after state, suddenly look like something Washington can slow down. By midday my feed had split into two certainties: this has never happened before, and this is exactly how it ends. Both camps were sure, on about six hours of information. Watching it, I kept hearing a world history teacher from Wailuku. Recency bias. History repeats itself. So I ran his test on the whole argument.
The case for repeating
Start with the railroads, because Mr. O'Brien would have. Railroads remade America. They also got wildly overbuilt. When the Panic of 1893 hit, roughly a quarter of the railroad mileage in this country went into receivership within about a year. Northern Pacific. Union Pacific. Santa Fe. The tracks stayed, and the country kept using them for a century. The investors who paid for them got carried out.
The fiber boom ran the same play with better marketing. Between 1996 and 2001, telecom companies spent more than $500 billion laying fiber optic cable, much of it borrowed, on the theory that internet traffic would double every hundred days forever. Traffic grew fast. It did not grow like that. By 2001, only about 2 to 5 percent of the long-haul fiber in the ground was actually lit. Bandwidth prices fell roughly 90 percent. WorldCom and Global Crossing went bankrupt. The Nasdaq fell 78 percent from its March 2000 peak to its October 2002 bottom, and something like $5 trillion of paper wealth went with it.
And then the part nobody quotes at conferences: a decade later, that same dark fiber carried the modern internet. The technology was real the whole time. Being right about the technology did not save the people who financed it at the top.
Now read the current headlines with that essay in front of you. Chip and cloud money is moving in a circle again. In September 2025, Nvidia said it would invest up to $100 billion in OpenAI, whose data centers will be filled with Nvidia chips. A Bernstein analyst, Stacy Rasgon, wrote that the deal will fuel "circular" concerns. Mr. O'Brien had a shorter phrase for arrangements like that. He called it the pattern. Vendor financing flattered the revenue of Lucent and Nortel all the way into the fiber peak, too.
The case for net new
Here is where the essay gets harder, because the differences this time are real, and pretending otherwise is its own kind of recency bias.
The builders are different. The fiber boom was financed by junk-rated newcomers borrowing like the future had already happened. The AI buildout is being paid for by the most profitable companies in history. The big four platforms guided to roughly $725 billion of capital spending in 2026, and every revision since has gone up. That is an enormous number, roughly twice the telecom peak as a share of the economy, but the balance sheets carrying it are not the balance sheets that broke in 2001. These companies can absorb a bad outcome. WorldCom could not absorb a Tuesday.
The demand is also more visible than it was in 1999. Eyeballs were a metric people invented because there was no revenue to count. Cloud contracts are revenue you can count. Nobody has to promise anything this time. The purchase orders exist.
Meta reported on October 21. Revenue rose 26 percent to $64.6 billion. Real money, from real advertisers. Meta also spent $34.9 billion on capital projects in the quarter, which is more than the $32.8 billion its operations generated in cash. Free cash flow was negative $2.1 billion. Both halves of that paragraph are true. That is the whole argument in one company.
Alphabet reported after the close on October 28. Google Cloud revenue more than doubled, up 103 percent to $30.7 billion. Alphabet also spent $51.4 billion on capital projects in the quarter and posted negative free cash flow of $9.1 billion. The market knocked the stock down about 9 percent after hours. The demand was the best evidence the bulls have produced all year. The cash flow was the best evidence the bears have produced.
Amazon reported after the close on October 29, and it was the strongest demand print of the week. Revenue rose 12 percent to $201.9 billion. AWS grew 39 percent to $46 billion in the quarter, roughly a $184 billion annual run rate, at a 38.7 percent operating margin, and management projected AWS growth above 40 percent in both 2027 and 2028. Amazon held its 2026 capital spending plan at about $220 billion. The bear line sits in the same release: over the last twelve months Amazon generated $168.3 billion in operating cash flow and still posted negative free cash flow of $42.4 billion, because the build is that big. The stock fell about 7 percent after hours anyway. AWS also reported a $578 billion backlog, more than double a year earlier. But 39 percent growth at that scale is not a promise. It is a number in a filing.
And then there is the demand document nobody had in 1999. Anthropic filed its S-1 on October 26, the first audited look inside a frontier AI lab. Revenue went from $41 million in 2023 to $4.6 billion in 2025, then $16.3 billion in the first half of 2026 alone. Customers spending more than $100,000 a year went from about 950 to more than 11,900 in twelve months, and existing customers spent roughly nine times what they had spent a year earlier. The filing says plainly that demand for its products currently exceeds the compute it can get its hands on. That is not a metric invented to avoid counting revenue. That is revenue, counted, with auditors watching.
The same filing hands the bears their paragraph, and an honest essay includes it. Most of that revenue is consumption based, and customers can turn it down. Against it sit more than $500 billion of compute commitments, most of them owed whether the usage shows up or not. In 1999 the demand was imaginary and the bills were real. In 2026 the demand is documented and the bills are bigger. Whether that is a difference in kind or only in timing is the whole question. The S-1 does not answer it. It just makes both sides prove their case with numbers.
So the cash-rich argument needs an update. Three of the strongest balance sheets in history just spent past their own cash flow to fund this build. The balance sheets are still strong. The direction is worth circling in red, because spending that outruns cash flow is how the old pattern starts, even when the companies doing it are good ones.
But Mr. O'Brien would circle one more difference, and it cuts against the bulls. Fiber waited. A strand of glass in the ground in 2001 was still state of the art in 2011, which is why the second owners got rich on it. A GPU does not wait. The useful life of the chips filling these data centers is two to three years before the next generation makes them the expensive option. If demand arrives late this time, the asset does not sit patiently in the ground. It depreciates on a rack. The one asset from the last cycle that forgave its investors is the one thing this cycle does not have.
And notice what yesterday's selloff was not about. Nobody reported that demand for AI had fallen. Amazon's $578 billion backlog did not shrink overnight. The market was not repricing the technology. It was repricing the timeline, and the permission. Mr. O'Brien would have underlined that part. The pattern repeats. The trigger never does.
What the pattern actually says
So, is the AI bubble history repeating, or is it net new? Write the essay honestly and you land where Mr. O'Brien always pushed us: the question is wrong. Both things are true at once, and they always have been.
The technology repeats as real. Railroads were real. The internet was real. AI is real. The financing is what repeats as fragile. Every cycle, the build gets ahead of the proven demand, the money starts chasing its own tail, and the people who point at the gap get told they do not understand the future. Sometimes the gap closes in time. Sometimes the first owners pay for a future that the second owners get to enjoy at a discount.
Recency bias runs in both directions, which is the part I have to remind myself. The bulls overweight this quarter's sold-out capacity. The bears overweight a crash that happened 25 years ago and call it a law. Mr. O'Brien was not teaching us to predict the past. He was teaching us to hold two ideas at the same time without flinching: it has happened before, and it has never happened exactly like this.
His test was never really about the dates. It was about whether you could make the argument, in writing, with the evidence on the table. All of it. Including the evidence that hurt your side.
So here is my call, since the opener promised one. AI is not going anywhere, and neither is the demand. It sits in filings now, with auditors on it, and a $578 billion backlog does not unwind over one bad Thursday. I think the builders spend through the fear, the usage keeps compounding, and the cash flow flips. The risk is not that the demand turns out to be imaginary. The risk is the timeline, the permits, the politics. The stuff that never shows up on a capex chart.
One thing I never did was go back and tell him any of this. Teachers hand out lessons like his and mostly never hear where they landed. So here is the last essay, Mr. O'Brien. Thank you. The class was called world history. It turned out to be about everything since.
