As a bystander directly immune to the fortunes of AI going up or down, it does feel like there are a lot more people thinking this is inning 9 of the LLM story than there are people thinking it's inning 3. Which makes it tempting to believe it's probably closer to inning 3.
> As a bystander directly immune to the fortunes of AI going up or down
Sorry to break it to you but you are neither immune nor a bystander to the fortunes of AI going down. You are part of it all whether you like it or not.
You're not breaking anything to me. I deliberately phrased it as "directly immune" because I have no financial stake in AI-related companies. Obviously a debt-bomb of any type imploding reverberates across the economy.
> I have no financial stake in AI-related companies
so zero exposure to any popular index? Even “ex-US” is tsmc and sk-hynix in a trenchcoat. I think it was BHP exclaiming that theyre an AI play because they cover 85% of the raw materials in DC build outs.
In the current mania “no financial stake in AI-related” is a very bold claim.
The entire economy collapsing would likely heavily affect you even if you have no financial stake in AI-related companies similarly to how subprime mortgage crisis in the 2000s affected even people without mortgages.
In fact, the subprime mortgage crisis impacted the average Joe much more than the fuckers responsible for it, who ran away scot-free with fat money bags.
The financial crash that will happen as the result of the AI speculation bubble popping will be the exact same. You won't see Altman or Dario on the streets, that's for sure.
How do I get zero direct and indirect stock market exposure, no electricity price impact, no RAM or GPU price impact, etc?
I'd love to live in a world where AI firms bidding these things up doesn't affect me but I'm really struggling to understand how they aren't impacting the market.
If I'm poor I'm still indirectly exposed through the stock market. Employers stock goes down I get fired. Employer has better robotics because of AI? I get fired. Datacenter wants to get built where land is cheap? I get evicted.
Just because I'm too poor to own stocks doesn't mean stock prices don't affect me. That's indirect exposure not direct exposure.
I guess if you're older, retired, sufficiently wealthy and have few needs (house paid off, lots of savings, don't care too much about acquiring new tech) then you can easily not be affected.
I'm sure they're less exposed to it but it's hard to say they're completely immune. They might be oblivious to the indirect effects it has on them, until roads have worse maintenance (after some sort of economic downturn) or healthcare gets more automated (for better or worse). AI revolutionising things might just cause their children to spend more time with them after getting fired.
My grandpa who fits these descriptions doesn't have a landline/phone (and never had one) yet he's affected by computers when he has to interact with banks or healthcare, he also holds quite some tech stocks.
I think it's the magnitude of the situation that is more concerning than how close we are. We might not know when it pops but when it does, the dominos are in a pretty precarious position.
It is like being in a city where Edison wired up lights.. and people are like..well I guess electricity has played out!
We have only begun to extract the value of commoditized intelligence. Sure there are arguments on local models and pricing power.. but I think we will be compute constrained for the near future.
But the incentive to produce that intelligence is so high, that many opportunities become practical to explore. And many of them show doing AI inference workloads at 1000x cheaper and with 1000x less power, and sometimes 1000x faster.
If any one of these happens, or two, or all three, then the loans for trillions will become worthless while the use of AI can explode. The relationship between cost and ai intelligence output need not be linear over time, which is absolutely what the people financing are assuming.
Personally, I think linear over 5 years is about right, but no longer than that.
This is an interesting angle, and one I hadn't considered before. Would it be overly cynically to draw a line between it and the recent willingness [1] of many on the frontier to support some sort of coordinated pause or slowdown? I think that proposal has genuine value on its own merits, but it might also give a lot of overly-optimistic financing a chance to pay off before cheaper inference crashes the market.
This is a straw man position. Who is saying AI is doomed? There were previous winters but the technology kept improving. What people are doubting is all the current hype around it. Stuff like AGI and the singularity being right around the corner with fully automated societies and robots dong all your chores for you.
Rather than it being presented as productivity tool for enhancing human labor and activity, it's presented as an eventual god that will radically transform the rules of economics and everything else, and thus it needs to be forced into everything. That's absurd hype and with it all the absurd VC funding and valuation. Thus it's seen as a huge financial bubble.
More precisely the mismatch in investment and debt and timelines. The people laid the fiber (if that is even an apt description) were not the ones who made money from that investment. If there is even some sort of mismatch in the investment timeline then that could mean all the current investors are wiped out and someone else will eventually profit from their work.
You’re arguing against claims I never made. You can reject AGI hype and still believe AI demand, infrastructure buildout, and commercial adoption will continue growing.
Absolutely lots of hype but there is lots of value behind generated (unlike crypto) and we are still very early. This is what I was pointing at. There are folks on very extreme both sides, you are a good example, and I happen to believe it’s probably somewhere in the middle.
it is a little ironic how software devs loved creative destruction and "paradigm shifts" until it happened to them. I think what happened to Journalism is unfolding again but this time to the software development industry. Some will survive and adjust but many won't, the change is just too fast and sudden for an industry use to being immune.
I think other industries are use to being continually disrupted by advances in technology and so will adapt easier and faster. Which again, is kind of ironic..
The robotics story is a good example of where overexuberance may be entering the market. What is the connection between LLMs or image generation and robotics, beyond the vague intuition that they're both futuristic AI tech? (Perhaps AI maximalism is true and the entire economy will be eaten soon, but then none of this sector-specific analysis matters.)
There is a huge overhang. Same techniques and sometimes even the same models can drive a lot of robotics coordination and decision making.
Here is probably one of the more clear examples. A model trained on video and also robotic simulation/recording (probably ensembled with control systems/mobility models) will likely be at the core of how robots make decisions and plan.
This is way outside my area of expertise though. I've only dabbled in more classic robotics and control systems, but these multi-modal sequence to sequence models are highly adaptive and can effectively transfer learning across very different domains.
unfortunately, the dotcom ate just money; the housing crash ate money and people. This will be some combination of the two; I wouldn't doubt a few pension funds in the deep red states get crushed if it takes money and property with it.
That doesn't preclude something like a dot-com crash. It also doesn't mean everything in the current hype cycle will come true either. Plenty of people still shop at physical stores, read printed materials, and actually don't like being stuck at home if they can help it.
Similarly, majority of people still don't 3D-print stuff they can get cheaply at Walmart or from Amazon. Or use VR/AR as their primary form of interaction.
It's more likely that we're seeing the limitations of discrete/digital binary computing architectures, and this will speed up the birth of new or the resurgence of hitherto-"exotic" architectures, like ternary, analog, etcetera
One thing's for certain: There's no way anyone who's come close to Sauron's Ring (made actual use of AI) wants to part with it :')
> Which makes it tempting to believe it's probably closer to inning 3.
Yeah, this is what I'm thinking. New ways of productizing the technology are still be defined as people are using it. The pricing models are evolving in real-time as the providers figure out what the market will bear.
> 1929, Dotcom, Great Recession, 2010's Flash Crash - none of these were in the public discussion before they happened.
The "public discussion" is a whole different thing. They weren't in the public discussion because macroeconomic theory isn't something mom and pop like to chat about on the weekend. They only become dinner-table discussion topics when the impacts hit main street, after they happen. But bubbles in recent history have been pretty reliably identified beforehand:
It isn't hard for economists to find bubbles, where the market is taking on high levels of risk. What is downright near impossible to do is predict what specific event will cause the dominos to begin dropping, or when it will happen.
Michael Burry almost got wipe out if the bubble last just a bit longer. He started shorting way before the crash. He was lucky that he held long enough. There are many others see the same thing but just lost right before the end of the race.
That's why timing the crash is hard. The market has to agree with you but also at the right time
I was there for the Great Recession, and they were indeed in the public discussion. I remember the year 2007, as a 20 year old anti-capitalist, I was counting days until the economic crash. As predicted by plenty of left-wing economists at the time.
The only people who didn’t see it coming were the capitalists who were invested in the inflated market, and had bought into pseudo-scientific economic theories that served the single purpose of affirming what the capitalists already believed.
This is a bit of a "broken clock is right eventually" sort of thing, though. I could say without any evidentiary basis "there will be a financial crisis" for years and eventually be right, but I don't think it would be fair to say that I predicted it in a meaningful way. The details matter.
I was too - and to be frank: it's dishonestly revisionist to say this was a topic in the public eye.
There's a very good reason a book (and movie) like The Big Short was such a big hit. It's because it was about the handful of people who actually saw the crash coming and were confident enough to put their money and reputation on the line.
The entire left wing of the political spectrum saw this coming (except social democrats; whom I don’t consider left wing). And if you were shorting stocks to make money of off this, you probably were not left wing. Additionally, left wing economists get plenty of ridicule from main stream capitalists no matter what they say, so there really is no reputation to either earn nor to keep.
Indeed, the internet is absolutely gonna be with us forever, but I’d hate to be the guy who bought Cisco stock in August of 2000. (It took 25 years to recover.)
Although at its peak, CSCO was up ~2500% in a 5-year period, whereas NVDA is “only” up ~1000% in a similar timeframe.
I worry that all this talk about "China can't be allowed to beat the West on LLMs" is a setup to saddle the public with a bailout in the name of national security.
The people who made money on fiber and railroads were the inheritors after the timeline mismatch bankrupted the original players who did the investment. Even if AI turns out to be everything it promises, you can mistime the investment and lose everything.
How long does a train track last? Does a fiber optic cable last? Both are greater than 30 years, both will persist (relatively well) without use, and the benefits of scrapping or removing them are minimal. This allowed future companies to take advantage of them. Even if GPUs running at high load last five years, if the data center they are in goes bankrupt (because the AI bubble bursts), it’s likely they’ll be stripped and sold to make way for more productive CPU-based uses and to recover some of the cost of the bankruptcy. The surrounding buildings and infrastructure will have longer use, but it doesn’t translate to a net future benefit with AI.
Has anyone seen a definitive mathematical proof of this? I have seen countless articles and exposes about the hidden debt. These are incredibly sophisticated companies so presumably they wouldn’t let themselves get into a company ending bind. But what are the chances this is actually an MBS type situation where the system is truly overloaded and a few sacrificial lambs are needed?
Enron committed serious fraud, and not because what they did was made illegal after the fact. Unless I'm missing something, none of the big AI companies have committed serious fraud (or at least, not any that's been revealed).
> Has anyone seen a definitive mathematical proof of this? I have seen countless articles and exposes about the hidden debt.
There's an old WSB saying: the market can remain irrational longer than you can remain solvent. The AI craze is that but on 'roids.
> These are incredibly sophisticated companies so presumably they wouldn’t let themselves get into a company ending bind.
The problem is, company C-levels don't care about the long term health of the company. They only think about next quarter (in a misguided interpretation of "shareholder duty/fiduciary duty") and their bonuses tied to their KPIs.
> But what are the chances this is actually an MBS type situation where the system is truly overloaded and a few sacrificial lambs are needed?
The system definitely is overloaded to hell and beyond after well over a decade of ZIRP. That money never got deflated out of the system in a healthy way and now everything is looking to fall apart.
Unfortunately, such events are already "priced in". VC essentially is built on 1 of 100 investments striking it big and 99 going bust. A market correction won't hurt the big guys, but it will definitely hurt all the small guys.
That's cynical nonsense that executives don't look past the next quarter. There would be none of this AI investment if that were true. It's all a long-term play with huge investments and minimal revenue by comparison in the short run.
NVDA had the foresight two decades ago to invest in CUDA. That's not next quarter thinking.
We need to stop thinking that just because they have money they're incredibly sophisticated. We have a few examples like Mark Zuckerberg, who had early success with FB, but he seems to be incapable of investing in profitable products. E. Musk: great at selling his companies, but laughably bad at making profits at the same level of expenses. Sam Altman: never had a real job he did well other than raising money. This is the kind of people that control these companies.
> I have seen countless articles and exposes about the hidden debt.
eh trolling for clicks. It's just not on the balance sheet (if i have my terms correct) so you have to look in a different report to find the numbers. If it was truly hidden then discovery of the debt would trigger lawsuits from investors. Major investors know about it already that's why no one is getting upset over it except for laymen. btw, laymen in the stock market (retail investors) just serve as red meat or cannon fodder for actual traders with real money and real information.
edit: there will def. be significant winners and losers, the stakes are very high and the dollar amounts are very large.
People were saying this about the Lehman Brothers and the entire financial sector at the time, right up until their bankruptcy and the great recession. Some predictions turn out to be correct. And with the benefit of hindsight, obviously so, though how much of a hindsight is needed to make it obvious is up for debate. I would argue for the AI bubble, very little indeed.
> AI’s insatiable need for debt has so far been matched by investors’ appetite for it, but they may turn nauseous on the belly-busting volumes coming from tech giants.
Headline doesn't really match the facts in the article. The article seems to say "hyperscalers are borrowing an enormous amount and so far people are lending to them. Other people are worried that this will stop".
It completely unclear where this 1.65T is going to come from to pay the bill. Revenue from people buying AI doesn’t even come close to covering it, even with crazy aggressive assumptions about the cashflow that could be generated from that.
The Wall St vs Silicon Valley showdown that’s setting up here looks like it will be quite epic. If last week was any preview, get your popcorn ready.
The number is large - but I'm not quite sure it's existential. The hyperscalers have been making a ton of money and I'm not quite convinced that 200B of debt for Amazon is "world ending".
Amazon is setting itself up to get bruised a bit, but it has a sufficiently diverse business and cash flow from non AI things that it will be fine.
Pure play companies, startups, and investors are looking a lot less safe. For example there are other pure plays where debt service alone is like 25-30% of revenue, which is just insane numbers. There are also many investors and funds with extremely precarious positions in AI that are at risk of unraveling with a bang like we saw last week.
South Korea had an extremely large population of retail investors investing in options and leveraged ETFs, to the point that 3% of the adult population has now been margin-called.
what happens when you mix world wars, potential food and water shortages, and a rising unrest with the local governments? (edit: and a massive inequality in resource distribution). (edit 2: and a drop in jobs).
Any historical precedent for this all occurring together with technological hype/fast growth?
> And unlike earlier periods of heavy debt, the Federal Reserve is no longer a big buyer of Treasuries, placing a heavy burden on private-sector investors.
Not only is that not happening, it is currently illegal for the mint to do so.
You may have seen the headline recently where Sec. Bessent held up a mockup of a bill printed out on a regular sheet of letter paper[0], and there's bill circulating to change the law, but it will not pass[1].
Sorry to break it to you but you are neither immune nor a bystander to the fortunes of AI going down. You are part of it all whether you like it or not.
so zero exposure to any popular index? Even “ex-US” is tsmc and sk-hynix in a trenchcoat. I think it was BHP exclaiming that theyre an AI play because they cover 85% of the raw materials in DC build outs.
In the current mania “no financial stake in AI-related” is a very bold claim.
The financial crash that will happen as the result of the AI speculation bubble popping will be the exact same. You won't see Altman or Dario on the streets, that's for sure.
I'd love to live in a world where AI firms bidding these things up doesn't affect me but I'm really struggling to understand how they aren't impacting the market.
Just because I'm too poor to own stocks doesn't mean stock prices don't affect me. That's indirect exposure not direct exposure.
You're never too poor to own stock.
My grandpa who fits these descriptions doesn't have a landline/phone (and never had one) yet he's affected by computers when he has to interact with banks or healthcare, he also holds quite some tech stocks.
We have only begun to extract the value of commoditized intelligence. Sure there are arguments on local models and pricing power.. but I think we will be compute constrained for the near future.
Journalists have been eager to call AI "over" since 2022, and yet:
- Models just got good at writing code this year
- Models just got good at editing images last year
- Models just got good at cinematic video this year
This hasn't even played out. It hasn't even started.
Why on earth would this be the end?
The robotics story is just getting started, too.
I literally do not write code anymore.
If any one of these happens, or two, or all three, then the loans for trillions will become worthless while the use of AI can explode. The relationship between cost and ai intelligence output need not be linear over time, which is absolutely what the people financing are assuming.
Personally, I think linear over 5 years is about right, but no longer than that.
[1] https://www.pacingthefrontier.com/
Rather than it being presented as productivity tool for enhancing human labor and activity, it's presented as an eventual god that will radically transform the rules of economics and everything else, and thus it needs to be forced into everything. That's absurd hype and with it all the absurd VC funding and valuation. Thus it's seen as a huge financial bubble.
Absolutely lots of hype but there is lots of value behind generated (unlike crypto) and we are still very early. This is what I was pointing at. There are folks on very extreme both sides, you are a good example, and I happen to believe it’s probably somewhere in the middle.
This could happen this year or next, assuming you're willing to pay $30k for the hardware.
- Fable
- Seedance
- Nano Banana / GPT Image
- Kimi
- ChatGPT
These tools are 80-90% of my day now.
Google Search? Meh. Chrome? Eh. Mac or Linux? Honestly just input devices now.
The models are the hottest thing in the world.
I am getting so much done. If I told myself from two years ago the progress these models would have made, I wouldn't have believed it.
That's not correct, is it? Opus 4.5 came out in Nov 2025. Some might say models were good at coding even before that.
I think other industries are use to being continually disrupted by advances in technology and so will adapt easier and faster. Which again, is kind of ironic..
(i am a dev myself but it still makes me laugh)
Here is probably one of the more clear examples. A model trained on video and also robotic simulation/recording (probably ensembled with control systems/mobility models) will likely be at the core of how robots make decisions and plan.
https://deepmind.google/blog/gemini-robotics-2-brings-whole-...
This is way outside my area of expertise though. I've only dabbled in more classic robotics and control systems, but these multi-modal sequence to sequence models are highly adaptive and can effectively transfer learning across very different domains.
Similarly, majority of people still don't 3D-print stuff they can get cheaply at Walmart or from Amazon. Or use VR/AR as their primary form of interaction.
I too would use "plenty" rather than look at the horribly depressing stats.
Basically, 80% of sales are still brick-and-mortar. That doesn't seem very depressing?
One thing's for certain: There's no way anyone who's come close to Sauron's Ring (made actual use of AI) wants to part with it :')
Yeah, this is what I'm thinking. New ways of productizing the technology are still be defined as people are using it. The pricing models are evolving in real-time as the providers figure out what the market will bear.
Ever since the 2008 housing crisis, people have been predicting the next bubble-burst/black-swan event.
The one that really crushed the markets was the one almost body saw coming: Covid-19.
Tulips, 1929, Dotcom, Great Recession, 2010's Flash Crash - none of these were in the public discussion before they happened.
The "public discussion" is a whole different thing. They weren't in the public discussion because macroeconomic theory isn't something mom and pop like to chat about on the weekend. They only become dinner-table discussion topics when the impacts hit main street, after they happen. But bubbles in recent history have been pretty reliably identified beforehand:
https://web.archive.org/web/20180330001927/https://www.barro...
https://www.economist.com/special-report/2005/06/16/in-come-...
It isn't hard for economists to find bubbles, where the market is taking on high levels of risk. What is downright near impossible to do is predict what specific event will cause the dominos to begin dropping, or when it will happen.
Anecdotally, I have family who don't follow the stock market at all and are talking about the "AI Bubble" that's about to pop.
That's why timing the crash is hard. The market has to agree with you but also at the right time
The only people who didn’t see it coming were the capitalists who were invested in the inflated market, and had bought into pseudo-scientific economic theories that served the single purpose of affirming what the capitalists already believed.
There's a very good reason a book (and movie) like The Big Short was such a big hit. It's because it was about the handful of people who actually saw the crash coming and were confident enough to put their money and reputation on the line.
Although at its peak, CSCO was up ~2500% in a 5-year period, whereas NVDA is “only” up ~1000% in a similar timeframe.
Fiber and railroads don't need tens of billions of dollars in continuing yearly maintenance expenses to keep them from going stale.
For those without accounts, given faded body
A lot of publications pay attention to that.
A lot of people love reading things (often only reading things) that make then feel right/correct/justified.
A lot of publications live or die on ad views.
And just like that we have a viable media business model!
FWIW Enron was also a „sophisticated company“ at the time
There's an old WSB saying: the market can remain irrational longer than you can remain solvent. The AI craze is that but on 'roids.
> These are incredibly sophisticated companies so presumably they wouldn’t let themselves get into a company ending bind.
The problem is, company C-levels don't care about the long term health of the company. They only think about next quarter (in a misguided interpretation of "shareholder duty/fiduciary duty") and their bonuses tied to their KPIs.
> But what are the chances this is actually an MBS type situation where the system is truly overloaded and a few sacrificial lambs are needed?
The system definitely is overloaded to hell and beyond after well over a decade of ZIRP. That money never got deflated out of the system in a healthy way and now everything is looking to fall apart.
Unfortunately, such events are already "priced in". VC essentially is built on 1 of 100 investments striking it big and 99 going bust. A market correction won't hurt the big guys, but it will definitely hurt all the small guys.
NVDA had the foresight two decades ago to invest in CUDA. That's not next quarter thinking.
We need to stop thinking that just because they have money they're incredibly sophisticated. We have a few examples like Mark Zuckerberg, who had early success with FB, but he seems to be incapable of investing in profitable products. E. Musk: great at selling his companies, but laughably bad at making profits at the same level of expenses. Sam Altman: never had a real job he did well other than raising money. This is the kind of people that control these companies.
eh trolling for clicks. It's just not on the balance sheet (if i have my terms correct) so you have to look in a different report to find the numbers. If it was truly hidden then discovery of the debt would trigger lawsuits from investors. Major investors know about it already that's why no one is getting upset over it except for laymen. btw, laymen in the stock market (retail investors) just serve as red meat or cannon fodder for actual traders with real money and real information.
edit: there will def. be significant winners and losers, the stakes are very high and the dollar amounts are very large.
Headline doesn't really match the facts in the article. The article seems to say "hyperscalers are borrowing an enormous amount and so far people are lending to them. Other people are worried that this will stop".
You say this as if when "lending stops", it isn't a big deal. What you're describing is a concern for a collapse in finance markets.
My future's so bright I gotta' wear million dollar shades.
Now if the number was ?? and labeled "undisclosed"... that would present a more serious problem.
The Wall St vs Silicon Valley showdown that’s setting up here looks like it will be quite epic. If last week was any preview, get your popcorn ready.
Pure play companies, startups, and investors are looking a lot less safe. For example there are other pure plays where debt service alone is like 25-30% of revenue, which is just insane numbers. There are also many investors and funds with extremely precarious positions in AI that are at risk of unraveling with a bang like we saw last week.
chuckle
Still no credible long term solution to the so-called "UBI" for all and the abundance fantasies and the utopia that was supposedly "promised".
That setup isnt true for the US, not even close.
Any historical precedent for this all occurring together with technological hype/fast growth?
> And unlike earlier periods of heavy debt, the Federal Reserve is no longer a big buyer of Treasuries, placing a heavy burden on private-sector investors.
You may have seen the headline recently where Sec. Bessent held up a mockup of a bill printed out on a regular sheet of letter paper[0], and there's bill circulating to change the law, but it will not pass[1].
0: https://ichef.bbci.co.uk/news/1536/cpsprodpb/97ed/live/f6126...
1: https://www.congress.gov/bill/119th-congress/house-bill/1761
https://www.pbs.org/newshour/politics/u-s-mint-produces-a-1-...