The AI bubble is bigger than you think
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The AI bubble is bigger than you think
1–10 of 16 posts
Re: The AI bubble is bigger than you think
#2They are dumping some of the risk on Saudi Arabia now. During the MBS, Musk, Huang, Trump meeting MBS had to upgrade his previous $600 billion shakedown to $1 trillion, all of which goes to oligarchs in "AI", defense etc.
As a result, for example xAI now builds a fossil fuel powered data center with a Saudi state-backed firm named Humain.
It will probably end up like the Twitter investment of the Saudis.
Re: The AI bubble is bigger than you think
#3There is a lot of bubbliness sure but some of the rhetoric is a bit sloppy. Like "swapping money back and forth" arguments is literally was economies and specializing results in.
The debt securitization could be an issue but one thing that stands out to me is the if GPUs are really being used as the lein or collateral, these are fundamentally depreciating assets and are marked as such even if the depreciation rates are slightly wrong.
Any new tech that renders current build out could dramatically hit this loans of course.
Re: The AI bubble is bigger than you think
#4They are dumping some of the risk on Saudi Arabia now. During the MBS, Musk, Huang, Trump meeting MBS had to upgrade his previous $600 billion shakedown to $1 trillion, all of which goes to oligarchs in "AI", defense etc. As a result, for example xAI now builds a fossil fuel powered data center with a Saudi state-backed firm named Humain. It will probably end up like the Twitter investment of the Saudis.
Do the Saudi’s have a trillion to actually invest. It feels like Zalensky’s commitment to Macron, or various other commitments I keep hearing about. All very “check’s in the mail” vibes.
Re: The AI bubble is bigger than you think
#5They are dumping some of the risk on Saudi Arabia now. During the MBS, Musk, Huang, Trump meeting MBS had to upgrade his previous $600 billion shakedown to $1 trillion, all of which goes to oligarchs in "AI", defense etc. As a result, for example xAI now builds a fossil fuel powered data center with a Saudi state-backed firm named Humain. It will probably end up like the Twitter investment of the Saudis.
Do the Saudi’s have a trillion to actually invest. It feels like Zalensky’s commitment to Macron, or various other commitments I keep hearing about. All very “check’s in the mail” vibes.
Good question. An NYT article that just came out says no:
https://www.nytimes.com/2025/11/19/business/pif-saudi-arabia...
According to the article, the sovereign wealth fund PIF has many poor/toy investments and is in need of bailouts itself.
The squandering of investment money globally is unprecedented. They could literally just build (not buy!) $200 billion in affordable housing in Berlin or London and rake in 6% annually, with zero risk. Instead they build failing luxury resorts with non-functioning robot servants.
Re: The AI bubble is bigger than you think
#6There is a lot of bubbliness sure but some of the rhetoric is a bit sloppy. Like "swapping money back and forth" arguments is literally was economies and specializing results in. The debt securitization could be an issue but one thing that stands out to me is the if GPUs are really being used as the lein or collateral, these are fundamentally depreciating assets and are marked as such even if the depreciation rates a…
Insane question, asked for the purposes of discussion: Would it make sense if those GPUs were top-of-the-line for years? Like if TSMC were destroyed?
Even then, I don't understand why being a landlord to the place were AI is trained would be financially exciting... Wouldn't investing in NVIDIA make a lot more sense?
Re: The AI bubble is bigger than you think
#7There is a lot of bubbliness sure but some of the rhetoric is a bit sloppy. Like "swapping money back and forth" arguments is literally was economies and specializing results in. The debt securitization could be an issue but one thing that stands out to me is the if GPUs are really being used as the lein or collateral, these are fundamentally depreciating assets and are marked as such even if the depreciation rates a…
>if GPUs are really being used as the lein or collateral, these are fundamentally depreciating assets and are marked as such even if the depreciation rates are slightly wrong.
As long as the initial value of a blackwell chip derived from correctly forecast and discounted cash flow is sound, this is correct. On the other hand, if the initial value is a function of scarcity/demand and high manufacturing cost that's wildly detatched from actual returns then 'could be an issue' is a significant understatement.
Re: The AI bubble is bigger than you think
#8Part of me wonders if a bubble can really pop when everyone keeps calling it a bubble that will pop any minute now. Same as with the recession talk since COVID. Usually, pesky things like lack of actual profits or value would result in a sustained decline in stock prices, but these days, there are so many gamblers involved that despite the lack of any real value, they'll "buy the dip" in such great numbers that it bounces back up. And then FOMO hits and more principlined investors jump in on the action.
So far at least. But is this supposed bubble too big for that effect to save it? It feels like a lot of predictions are being made based on historical events like the dotcom crash, the '08 recession,etc.. and maybe those predictions are right but things have changed since. retail investment is a completely different game. "mob psychology" is also a different game with the internet being adapted at a greater scale. Even the tech driving the "AI bubble" would be scifi for someone in '08.
Certainly the variables have changed. But has the formula/game also changed?
Re: The AI bubble is bigger than you think
#9Part of me wonders if a bubble can really pop when everyone keeps calling it a bubble that will pop any minute now. Same as with the recession talk since COVID. Usually, pesky things like lack of actual profits or value would result in a sustained decline in stock prices, but these days, there are so many gamblers involved that despite the lack of any real value, they'll "buy the dip" in such great numbers that it bo…
I think the idea that there's currently an 'index tracker bubble' is fascinating: i.e. that the total value of the S&P 500 is no longer based on a multiple of aggregate earnings but is instead driven by finding the price that needs to be paid to achieve the necessary 'churn' for tracker funds to fulfil their mandates as they allocate the funds that their subscribers place with them each month. This creates a scarcity premium that drives up prices and attracts more subcribers. This has a ratchet effect that never previously applied and that will probably prevail until something goes catastrophically wrong.
Re: The AI bubble is bigger than you think
#10Part of me wonders if a bubble can really pop when everyone keeps calling it a bubble that will pop any minute now. Same as with the recession talk since COVID. Usually, pesky things like lack of actual profits or value would result in a sustained decline in stock prices, but these days, there are so many gamblers involved that despite the lack of any real value, they'll "buy the dip" in such great numbers that it bo…
I think we are in a recession currently if you exclude the AI companies?