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How Much Wealth an AI Stock Market Crash Could Destroy
61–70 of 110 posts
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#62Earlier quoted context omitted.
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.
Government printing bills has literally nothing to do with the amount of wealth in the world. They don't use those physical objects to pay government debts, nor do they dole them out to stranger or "friends".
The government can generate money in the short term by changing lending rates ("the Prime"), which allows you to buy more for less interest, which encourages purchases. The long-term effect includes paying off that interest, of course, and someone still has to want to loan money at that rate; if the Prime went to zero your credit card rates still wouldn't be zero.
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#63Counter 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…
That is how it seems, yes.
But Nvidia also has some less than transparent arrangements to support their customers in buying their goodies.
Which is not to say they aren't making money, it's more that in hindsight we may discover that the p/e ratios were not the primary measure we should have paid attention to...
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#64I think the real issue comes down to how these companies are being valued. As the article points out, "the top 20 firms account for 52%, with the same number deeply invested in AI." This concentration makes the market more vulnerable to any major setback in AI's growth. But the question remains: Are these valuations justified?
As I mentioned in earlier writing [1][2], many AI stocks are priced assuming the tech will deliver far more immediate and consistent returns than history suggests. These speculative assumptions are similar to the dotcom era, where companies like Yahoo and Pets.com were valued based on hype/expectation rather than fundamentals. If AI doesn't live up to the hype, the consequences could be even worse today imo, given how much more of American wealth is tied up in stocks.
Edit: Just read a related WSJ [3] article.
[1] https://pdub.click/2511242 [2] https://pdub.click/251210e [3] https://www.wsj.com/personal-finance/the-everyday-investors-...
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#65Earlier quoted context omitted.
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
So you're saying I'm invincible!
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#66Earlier quoted context omitted.
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
That doesn't reflect the reality of life for those in the bottom half of the wealth distribution, and especially for those in the bottom quarter. $30K is a lot of money to them. The 30th percentile of income in the US in 2023 was under $30K. They're hoping to grow their $50K to $100K or $150K before retiring at 70.
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#67I'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?
Yes, it would assuming pension funds have AI/Tech stock exposure.
- A rule of thumb suggested by one study is that every $100 drop in stock market wealth leads, on average, to a $3.20 drop in consumer spending. Under such an assumption, a dotcom-style crash would cut American consumption by about $890bn, or 2.9% of GDP.
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#68Earlier quoted context omitted.
Yeah. You don't own more or less of anything. Five sticks of gum, a car, 10 shares of $MSFT, a Mewtwo Ultra Rare. You have exactly same assets as before. The businesses of which you are a fractional owner have the same fundamentals. But other people won't trade other assets for yours at the same rate.
Don't the invested dollars poured into infrastructure that won't yield gains represent a loss of value? Especially if the same investment could have been put to work somewhere more fruitful.
It's (1) a loss of expected value (2) misspent resources.
You spent $X to buy RAM chips, expecting that you could produce $Y with it. But you didn't. So you (1) failed to realize the expected value $Y, and (2) misallocated $X, which in hindsight you would have used differently.
Again, that's all learning that future expectations do not match reality.
The decision/action happened earlier, and is separate from the realization. Attributing the material loss to the realization is misplaced.
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#69https://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.
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…
> (the vast majority of wealth for the non wealthy in the US is someone's primary residence real estate)
But this is not solely on the top 10% to be maligned. We should force everyone to save.... even $5-10/month adds up for the least privileged over time. We force everyone to immediately pay taxes because the money would not be there year end - we should do the same for saving because it is easier than changing human behaviour.
A lack of education at most societal levels to: be taught the impacts of forgoing now for later, think long term, act long term, resist impulse to spend on consumer or ego level goods for societal "approval" or mating.
Home are the primary source of wealth for families because it is forced payment.
It is what a good parent would do - and every person needs a "parent" for some aspect of our lives (we're all bad at something).
Re: How Much Wealth an AI Stock Market Crash Could Destroy
#70As long as potential feels bigger than reality, investors keep pouring in.
Case in point: The dot-com crash came only after the web matured and reality finally hit the limits of its potential.
By that logic, an AI crash would likely come only once AGI arrives and the true boundaries of its impact become visible. Or, the progress towards AGI seems to stall.