Meanwhile…
"When bubbles happen, smart people get overexcited about a kernel of truth." Those are the words spoken last week by OpenAI CEO Sam Altman that sent the world’s stock markets into a tailspin, losing $1 trillion in value. Nvidia’s shares fell 3.5% while Palantir crashed nearly 10%. It’s not a good sign when words spoken at a private dinner for business leaders can crash the market. That’s not what robust health looks like.
Now, I don't doubt for a minute that AI will have a profound impact on our lives in the coming years. Chat GPT is already far better than I predicted a year ago and I'm able to use it (or its competitors) for a range of functions. It makes me better, or at least more efficient, in a range of ways. But I still have to write. I still have to think.
It’s definitely cool that we now have a tool that can read and summarize 100 page piece of analysis in under a minute. But how many 100 page reports have you ever actually read? AI is extremely useful, but it’s only begun to change the actual nature of work in a few sectors, like software development and content creation.
But don’t take my word for it. A new study by MIT’s Media Lab, found that “Despite $30 - $40 billion in enterprise investment into GenAI, this report uncovers a surprising result in that 95% of organizations are getting zero return.”
Change is coming, that’s clear. Eventually. But there’s a lot of money on the line right now on a technology that may be innovative, but has no clear way of making money yet.
Inventing Chat GPT 1 cost Sam Altman’s investors a reported $20 billion, and the new versions aren't much cheaper.
Then there’s the massive investment needed to produce the chips the software runs on. Plus all the data centers needed and their power demands. Back in the day, the depreciation schedule on servers was around 7 years. Data centers were supposed to last 10 years.
Today, servers become useless after 2-3 years and some chips are obsolete by the time they're installed. Nearly-new data centers may have to be torn down now that updated cooling systems have been invented. If AI isn’t making money, how will this ultimately get paid for?
The furious pace of theoretical progress means we can redesign technology faster than we can build or pay for it. We're re-writing what's possible at an impossible pace. Assuming this will all work out somehow is naive. The invisible hand of the market is not a merciful one.
There’s no recession at the moment and stock markets have been hitting record highs. But both are increasingly dependent on this rush towards AI adoption. Take away the Majestic 7 stocks, with their peak-level P/E ratios, and the world’s stock markets look extremely boring.
Any long-term plunge in share values could have severe economic consequences, since consumers cut back on spending the moment their stock portfolios tank. But in economies like the U.S., dependence on the AI boom is also growing. Renaissance Macro Research found that AI data center expenditure has contributed more to GDP growth recently than all U.S. consumer spending combined.
That’s a lot riding on a single sector…one whose business model is still in the works. For some perspective, electrification began in the 1880’s. But measurable productivity gains didn’t really take off until the 1920’s. The wheel was invented millennia before Henry Ford was born.
Make no mistake: Chat GPT, or the actual product that eventually emerges from it, will be huge. For now, it’s great at parlor tricks like writing your LinkedIn posts.
The blunter Altman is, the more compelling I find him. "Someone will lose a phenomenal amount of money. Some investors are likely to get very burnt here."
It’s just that he thinks his own investors are safe. “You should expect OpenAI to spend trillions of dollars on data center construction in the not very distant future,” he said. “And you should expect a bunch of economists wringing their hands, saying, ‘This is so crazy, it’s so reckless,’ and we’ll just be like, ‘You know what? Let us do our thing.’”
Altman’s OpenAI may well do fine. But there’s a whole ecosystem of copycats and competitors out there fighting for survival, each with their own circle of creditors, investors and loans to pay. That’s where the real risk lies.
RE News
Even the government now appears to be coming to the realization that old office buildings are a financial black hole. That’s the message I’m taking from news that the Czech state is poised to buy building B in Harfa Business Center in 2027. There’s a lot of upside to this story. For one thing, up to 1,300 tax administration employees from multiple locations across Prague will finally get to work in a modern business environment. For another, the state expects to cash in up to CZK 1.6 billion by selling off older buildings while avoiding at least CZK 500 million in repair costs for deteriorating facilities. First up on the auction block is the historic tax administration building on the corner of Lazarská Street and Jungmannovo.
Prague's iconic Letná metronome is back in action after a two-year, CZK 2 million renovation. PSN has owned and maintained the 25-meter kinetic sculpture by Vratislav Karel Novák since 1996. The seven-ton structure was installed in 1991 on the site where a monstrous statue of Stalin once disfigured Prague’s skyline. The metronome swings 60 degrees using a two-ton counterweight mechanism.
Prologis signed leases covering 295,000 square meters of warehouse space in the Czech Republic during H1 2025, pushing occupancy up to nearly 98%. The company completed 28 lease agreements, including 11,000 sqm renewal at Prague-Rudná park with a major logistics firm. Its CEE occupancy levels are broadly similar: 95% in Poland (322,000 sqm leased), 97% in Hungary (113,000 sqm), and 95% occupancy in Slovakia.
APF Venture Capital CR, an agricultural land investor owning 930 hectares, declared bankruptcy with debts exceeding CZK 1 billion, including taxes and creditor obligations. APF raised capital through public loans and cryptocurrency tokens before problems erupted following disputes with capital providers. Businessman Jan Čermák's S-24 holding recently acquired stakes in the parent group. A creditors' meeting is scheduled for November 12 to determine asset distribution.
Coca-Cola is considering selling Costa Coffee just seven years after acquiring the chain for over $5 billion. But at $2 billion - 2.7 billion, the estimated sale price is more of a piccolo than a lungo. Costa runs nearly 4,000 locations globally including 47 in Czech Republic. Rising arabica coffee costs and intense competition contributed to declining margins, with 2023 losses of nearly £10 million despite record revenues of £1.22 billion.
Residential property auctions have become popular again as soaring demand outstrips supply. Czech real estate agencies estimate 15-30% of secondary market apartments now sell through competitive bidding, with prices often exceeding initial offers by tens of percentage points. Current market conditions favor sellers who leverage online bidding platforms to maximize returns on attractive properties.
Czech economic confidence rose 1.4 points to 101.1 in August, driven by business optimism climbing 2.7 points to 101.5—particularly in services, construction, and retail sectors. Services confidence reached its highest level since April 2008. However, consumer confidence dropped 5.1 points to 99, with more households expecting deteriorating personal finances and national economic conditions over the next twelve months, pushing consumer sentiment below its long-term average after three months of improvement.
Quotes
🗞️"Just imagine if the two largest economic powers of the democratic world had not reached an agreement and had started a trade war - it would have been celebrated solely in Moscow and Beijing...With retaliatory tariffs on our part, we would risk fueling an expensive trade war with negative consequences for our workers, consumers and our industry." Ursula van der Leyen
🗞️“Over the last year, Nvidia’s market cap has overtaken the total valuations of the main stock indexes in the UK, France and Germany. It’s also overtaken the entire S&P 500 energy sector, to whose members will fall the task of powering the machines that use Nvidia chips.” John Authers (Bloomberg economist)
People
-Ikea Czech Republic has appointed Erika Intisová as the new head of operations for Czech Republic, Hungary, and Slovakia starting September 1st. She replaces David McCabe, who managed the region since 2021. Intisová joined Ikea in 2010 and most recently worked in France before taking the regional role. Meanwhile, Juvencio Maeztu will become Ikea's first foreign CEO globally in November.
Biz News
Hyundai will halt production lines next week for three shifts due to reduced vehicle demand and logistical needs. The Nošovice facility employs 3,000 workers who will receive 70% pay during downtime. This follows similar shutdowns at year-end. The automaker plans to produce approximately 295,000 vehicles in 2025, down from 2024 levels, prompting a line speed reduction from 66 to 60 vehicles per hour.
The Czech Republic is running out of gravel. That may sound banal, but the problem could threaten plans for major highway projects, high-speed rail and nuclear power investments. Czechia has 2.5 billion cubic meters in geological reserves, but just one-third are currently extractable and municipalities are rejecting new permits. The state plans to designate 51 sites as strategic in nature in order to help push through planning for new quarries.
Chinese automakers are expanding beyond early-adopter MG to establish Czech market presence, with BYD and Chery launching dealer networks in 2025. Chinese brands captured 5% of European sales and nearly 4,700 vehicles in H1 2025. MG leads with 3,002 units sold, ranking 11th nationally.
Blackstone will acquire Warehouse REIT after rival bidder Tritax BigBox abandoned its competing takeover offer. Tritax's June bid initially valued at 114.2 pence per share, declined to approximately 106 pence. Blackstone's victory consolidates control over the UK warehouse landlord.
Spanish fashion giant Inditex, owner of Zara and Bershka brands, reported 17.8% profit growth to CZK 357.9 million in Czech Republic during fiscal 2024/2025. Revenue jumped 21.8% to CZK 4.1 billion while employment increased by 46 workers to 666 total staff. Personnel costs rose 18.1% to CZK 354.8 million. Globally, Inditex operates 5,563 stores across 200 markets, with founder Amancio Ortega ranking as the world's 12th richest person with assets exceeding CZK 2.5 trillion.
ThePrime Reader
-Savills: Energy efficiency still low in Prague office sector
-Crestyl achieves planning breakthrough on Savarin
-Michal Sotak (Cushman & Wakefield): Emotions drive investment
-Michal Bilý (108 Real Estate): Q2 new industrial leases strengthen
-Robert Ides (ARETE): We’ll recycle our equity abroad
-Martin Klán (Amadeus): Nový Máj’s butterflies should stay
-Karin Shalev Shogol (AFI CZ): We want 5,000 flats in 5 years
-Savills: H1 investments soar to €2.1 billion in Czechia
-Fred Hlobil (FH+ Real Estate): New money is coming into young sectors
-CPI offers to buy back 7% bonds at 7.75%
-Reality check for landlords: Prague Q2 resi rents fall
-New Podcast with Mark Robinson (EnCor Wealth Mgmt)
-Weak demand & resi boom stunt office development
-Huge changes coming to Prague’s high street
-Savills strengthens Prague valuations team
-Gen Z’s Return to Office Comes at a Price