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How Much Wealth an AI Stock Market Crash Could Destroy

economist.com

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Re: How Much Wealth an AI Stock Market Crash Could Destroy

#31

Post by hapless »

bachmeier wrote: post #12
toomuchtodo wrote: post #3

Earlier quoted context omitted.

The wealthiest 10% of Americans own 93% of stocks even with market participation at a record high - https://finance.yahoo.com/news/wealthiest-10-americans-own-9... - January 10th, 2024 > The richest Americans own the vast majority of the US stock market, according to Fed data. The top 10% of Americans held 93% of all stocks, the highest level ever recorded. Meanwhile, the bottom 50% of Americans held just 1% of all s…

You have to use caution when interpreting those numbers. The bottom 50% doesn't have much wealth, so a big chunk of their wealth will decrease. It also tends to be unevenly distributed, so for those trying to improve their situation (think someone 60 years old with $50K in retirement savings), it would hit really hard. Plus a lot of those people would lose their jobs when the highest 10% cut back on spending.

If you have $50k in retirement savings at age 60, you are already broke

Turning it into $40k or $70k is unlikely to impact your life outcomes

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#32

Post by mitthrowaway2 »

lateforwork wrote: post #21

Counter argument: https://www.nytimes.com/2025/12/09/business/wall-street-valu... Excerpts: In the 1990s and early 2000s, many of the companies leading the stock rally were not making much money, if any. This led to very high P/E ratios for some companies because share prices kept going higher, even when earnings were lagging well behind. While Nvidia’s stock price has risen roughly 1,000 percent over the past three…

But the circular financing throws those earnings into doubt. There's no question that Nvidia makes fantastic products, but right now a lot of its customers are buying those products using borrowed money, or money invested in them by Nvidia itself. Its highly questionable whether those earnings are sustainable.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#33

Post by lokar »

lateforwork wrote: post #21

Counter argument: https://www.nytimes.com/2025/12/09/business/wall-street-valu... Excerpts: In the 1990s and early 2000s, many of the companies leading the stock rally were not making much money, if any. This led to very high P/E ratios for some companies because share prices kept going higher, even when earnings were lagging well behind. While Nvidia’s stock price has risen roughly 1,000 percent over the past three…

In the case of nvidia, the price is based on expectations of future revenue, not current. And the future numbers are clouded by a web of opaque circular deals with customers.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#34

Post by IAmBroom »

koakuma-chan wrote: post #16
skx001 wrote: post #2

https://archive.md/EzGW2 - A drop in nominal values on the same scale as the dotcom bust would wipe out $16T, or 8% of American household wealth. Foreign investors would lose $7T.

What does "wipe out" mean? Money doesn't disappear when someone sells.

First, wealth and money are not the same. If you live in a mansion, but your bank account is zero, you can be wealthy and money-poor at the same time.

Money isn't some fixed object, like the amount of bills in circulation. It's the gross valuation of all sales, whether you trade a dollar bill or swipe a debit card or take out a small loan with a credit card tap.

And money can disappear, if something valued at $10 only sells for $9.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#35

Post by anticorporate »

skx001 wrote: post #2

https://archive.md/EzGW2 - A drop in nominal values on the same scale as the dotcom bust would wipe out $16T, or 8% of American household wealth. Foreign investors would lose $7T.

"Household wealth" is such a sneaky little phrase from the Economist to make it sounds like we're all equally exposed to this risk.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#36

Post by nothrabannosir »

willvarfar wrote: post #28
vanschelven wrote: post #15

I've never felt right about the framing of "destroying wealth" when stock prices go to some new number. If anything, the word "reflecting" seems more applicable?

Does it materially impact people's pensions? Globally, pension funds hold approximately $5–7 trillion directly in the top US tech stocks (the "Magnificent Seven" and adjacent AI infrastructure). Also in the last couple of years many pension funds have moved money into Private Equity and Private Credit to chase higher returns and they're the backstop for all the off-books AI datacenter buildout debt?

In the same way that winning at roulette does.

Is roulette wealth creation and destruction?

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#37

Post by Cthulhu_ »

willvarfar wrote: post #28
vanschelven wrote: post #15

I've never felt right about the framing of "destroying wealth" when stock prices go to some new number. If anything, the word "reflecting" seems more applicable?

Does it materially impact people's pensions? Globally, pension funds hold approximately $5–7 trillion directly in the top US tech stocks (the "Magnificent Seven" and adjacent AI infrastructure). Also in the last couple of years many pension funds have moved money into Private Equity and Private Credit to chase higher returns and they're the backstop for all the off-books AI datacenter buildout debt?

It can, but on paper pension funds will invest in long term low risk stonks so an AI crash would only be a minor setback.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#39

Post by throwaway984393 »

barbazoo wrote: post #4

Im sure the wealthy find a way to socialize these “losses”. Also what a shit headline. There’s no wealth destroyed, it’s all just numbers go up and down. But until you sell you haven’t lost any money, have you?

[dead]

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#40

Post by luka598 »

koakuma-chan wrote: post #16
skx001 wrote: post #2

https://archive.md/EzGW2 - A drop in nominal values on the same scale as the dotcom bust would wipe out $16T, or 8% of American household wealth. Foreign investors would lose $7T.

What does "wipe out" mean? Money doesn't disappear when someone sells.

Not sure, but one example I can think of is gov bailout, if the gov just prints the money and the asset becomes worthless.
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