All those statements made sense to me at the time. And I have no doubt that one of these days, someone will make a correct prediction. But who the hell know what and when.
Diversify, be reasonable and be prepared for it to happen someday. But freaking out with any new prediction of doom is not the winning strategy.
jordanb · 1h ago
One interpretation is that asset owners as a class have complete control in our system and they will always be made whole no matter what happens.
This may require extracting additional rents from consumers, from workers, from renters, from debtors (including the government) but whatever changes have to be made to protect asset holders will be made regardless of the cost. An example of this in action was the collapse of SV Bank where the rules of our federal deposit insurance program were rewritten on the fly to protect the depositors. Imagine having an insurance policy, incurring an uncovered loss, and then compelling the insurance company to retroactively rewrite your policy to cover the loss!
crystal_revenge · 2h ago
Yea, after the pandemic I've stopped making any predictions about the stock market and bubbles.
It's clear we're living in an illusion, but I'm pretty sure there are enough people invested in that illusion that it won't stop until it is no longer physically possible to maintain. I'm increasing convinced that when whatever dream we're living in ends, it will end catastrophically, but I'm not even certain I'll live to see that happen.
iaaan · 2h ago
See the documentary Hypernormalization for a more in depth look at this feeling
scyzoryk_xyz · 34m ago
A great work of art. One that identifies this spectrum of feeling. But one that should be taken with a grain of salt, a subjective arrangement of visual material as captured by the BBC.
orky56 · 1h ago
It's less of an illusion but more that the reality is separating into two, one which we live and breathe as day-to-day working class/consumers and another that caters to the market makers of government & private sector.
rindalir · 2h ago
I think this expresses how many of us feel very eloquently.
reactordev · 2h ago
All it takes is a couple hours of consumer sell-off to trigger a complete collapse.
finghin · 2h ago
Very true, and the hedge funds and institutional investors will have game plans for this, some will work, some won’t.
Retail investors, as usual, will be worst hit (I say this as a European with no stake in US stocks).
reactordev · 1h ago
I believe their plan is to offload the risk to the chains. I've been asked by several firms if I would be interested in joining them - so I assume that want to lock up their assets on the chain or want to offload risk to it. I'm more keen on the latter.
Still - nobody make any sudden moves and we'll ride out what remaining value we can squeeze.
impossiblefork · 1h ago
The way I see it, prices are too high. War is one thing, but it's abroad and the restrictions have been minimal. But interest rates went from <1% to 4.5% without valuations going down or profits going up. This means that investors are pricing companies as if though interests rates can be lowered. I don't think they can, because inflation in the US already quite high despite the 4.5% interest rates and with these tariffs upon that, it probably can't be lowered. For this reason I think companies should be priced using the 4.5% interest rate as a best guess, maybe 4% works, maybe 3.5%, but they're current priced as if though the interest rate is is <1%.
Tesla has a P/E ratio something like 26 times what other well-run automotive companies have. Boeing has a price like Airbus, despite no profits, etc.
Commercial real estate prices have gone down, and that's reasonable, but you've had both the interest rate increases and this WFH+hybrid remote thing becoming common, and since the interest rates have gone up from such a low level I think this is still overvalued, because 1% -> 2% should in theory mean halving the value if the rent is constant, and it went <1% to 4.5%.
I think it's a miracle that there hasn't been a crash. I wonder what weird things have been going on that have ensured that there hasn't been one yet. So I think your perspective is strange. The situation is absolutely crazy, and has been for years, but that doesn't make it not crazy.
bcrosby95 · 2h ago
Yeah, the way I describe it is: rich people are rich and the money has to be put somewhere.
regularization · 2h ago
From 2004 to 2009, the inflation rate was less than 4% each year. Gold was $443 an ounce in March 2005 and $975 an ounce in March 2008. Yes rich people had to put their money somewhere as banks and then corporate America started to collapse during the surprise crisis, they took them out of equities for banks offering subprime mortgages and put them into assets like precious metals and the like.
Also in 1999 MSFT was $57 a share. In 2009 it was $16 a share. It cracked $57 again in 2016. 17 years to go sideways.
Cisco never reached its 2000 peak again. Of course companies like Pets.com just went out of business.
hodgehog11 · 2h ago
And rich people aren't getting richer through smarter investments, but by wealth accumulation on existing assets that people need.
jcbrand · 2h ago
Being able to hold on to wealth is an underestimated and undervalued ability.
It's actually pretty easy to lose money. Everybody is happy to help you part with yours.
hodgehog11 · 1h ago
I really want to believe this, but I have a hard time seeing this applying to the ultra-wealthy nowadays. There are far too many strategies to hold on to your wealth or to get it back.
Aside from lottery winners whose assets start liquid, are there examples of people in the last 5 years with over $100 million in assets that permanently lost most of their wealth without doing something really stupid?
orky56 · 1h ago
That's why the first million is the hardest since it's working capital for most working folks. After that, it can stay invested and compound.
koolba · 1h ago
> Diversify, be reasonable and be prepared for it to happen someday.
Indeed, but even with something like SPY, there’s quite the concentration in tech:
Top 10 Holdings (37.99% of Total Assets)
NVDA 8.07%
MSFT 7.37%
AAPL 5.77%
AMZN 4.11%
META 3.12%
AVGO 2.57%
GOOGL 2.08%
GOOG 1.68%
BRK-B 1.61%
TSLA 1.61%
Now that’s intentional as it’s market cap weighted. But the investing world is in for a rude awakening if things start to pop.
it_citizen · 1h ago
I don't think putting all your net worth in S&P would be considered diversified.
With an MSCI world, those companies would drop to ~22% exposure. Throw a bit of real estate, more exposure to your home country if you are not in the US some real estate, some bonds and you can make it drop to <10%.
jonfromsf · 1h ago
Just buy $RSP or a similar equal-weightage ETF.
lokar · 7m ago
We need a etf that weights with the log of the market cap
abraxas · 1h ago
Those techniques rarely worked in the past as the broad stock market retreat usually affects stocks across the board. The best diversification is into uncorrelated asset classes. But there is some art in determining what's likely to remain uncorrelated. Bonds and gold are usually decent guesses.
All those events don't tank the stock market because they were based primarily on fear.
What will tank it are lies based on greed.
> Dot-com: overvalued companies with no revenue
> Mortgage: banks lying/lending about credit scores
> Covid: continuing online & EV trend, meme stocks, SPACs
> AI: continuing scaling laws, high ROI?
tcmart14 · 2h ago
As others have said, we did see effects, but a quick recovery of many of these events or the full scale of damage still isn't known and quantified. We definitely are in a bubble, but like you suggest, diversify. Don't stop investing, just be smart. Market can remain irrational longer than you can remain solvent. Time in the market also beats timing the market. And lastly, it sorta isn't surprising that things quickly recover. Tons of people's retirement accounts are injecting money into the stock market regardless of what is going on. We will likely never see long term significant drops just due to the fact that we've devised a system of a non-stop garuntee stream of money into it.
nothercastle · 2h ago
Ai is the stock market so there is that problem
godelski · 34m ago
Some of those things did happen though.
I think there's an incorrect valuation by looking at where things are today. I mean Black Monday, the 2009 housing crash, DotCom Bubble, and others were times the market did tank yet we've since recovered.
So how are we measuring the accuracy of those predictions? From Jan to April the Trump admin was announcing tariffs. VOO's (S&P500) lowest price this year was on April 8th at $456.74 and on Feb 19th it was $563.67. We see similar patterns with covid and invasion of Ukraine. Do we consider a 25% reduction "tanking"?
I agree that with enough time that everything will work itself out. But I do not think that this means we should ignore or downplay damage done in the short term.
bhouston · 2h ago
You present these as straw man exaggerations, but they were real things that happened.
> The global pandemic will tank the stock market
It actually did screw up the economies of a lot of countries and companies and it messed with stock markets as well. It increased debt worldwide, it increased unemployment that took years to recover.
> High interest rates will tank the stock market
There is a well established relationship between lower stock market returns when there is high interest rates.
> War in Ukraine will tank the stock market
It significantly hurt the Russian stock market, at least the sanctions did. But war tends to be a stimulus for the economy as long as it isn't too large of a war.
jsbisviewtiful · 45m ago
There was an article I saw this morning saying only the very top of the S&P 500 are the stocks showing substantive growth in recent years, companies below that have been relatively slow to show growth. Additionally, since the pandemic and Ukraine war started global cost of goods have been rapidly increasing, much faster than they should be. Now with AI, the market in the US is losing a lot of jobs - both entry level and above. The latest US job numbers were so terrible Trump fired someone to try and cover it up.
I'm not sure what else needs to happen to show the economy has been doing poorly for all but the richest segments. The return of a blatant and severe caste system and mass starvation?
card_zero · 2h ago
Inessential Affluence?
MeIam · 1h ago
- The pandemic did in fact tank the market
- Wars never tank the market and they jack up the military industry so no one would have said that
- High interest rates did tank the market once last year already and in the past because it provides for risk free gains
- Tariffs did tank the market so Trump played the reversal games
- Will AI tank the market? It will if it creates unemployment.
Diversifying does not stop the tanking. It will reduce the risk related to poor choices all at once
eaglelamp · 1h ago
The primary harm of a bubble is *not* a crash in equity values, it is the misallocation of capital. The worst outcome would be for the misallocation to continue due to the intervention of asset owners with the most to lose who are also in control of the state.
All of the events you listed have had significant economic effects and required massive intervention from the state to buoy asset prices. The longer this continues the more our economy becomes geared to producing "value" for this small, and shrinking, group of owners at the expense of everyone else.
onlyrealcuzzo · 2h ago
To be fair, there's a subtle but important difference to:
- we're going into the next Great Depression (a once in a lifetime occurrence)
- a small subset of stocks (that happens to make up a huge portion of the entire equity market in the US) has extreme PE and PEG ratios and will pop (which happens every few years)
I think your point largely stands for both cases, but it's important to delineate them.
If you're preparing for a Great Depression - you're likely only going to be right by coincidence. If you're preparing for a stock bubble to pop, at the very least, you've got better odds.
IAmGraydon · 2h ago
Kind of a weird post given that the pandemic did tank the stock market (-35%), interest rates and the war in Ukraine did tank the stock market (-28%), and the tariff announcement did tank the stock market (-21% and we have yet to see the full fallout).
Hikikomori · 2h ago
All of these did tank the stock market, but it also recovered quickly.
simianwords · 2h ago
Therefore the dips were an aberration - they should not have happened. Recovery is a sign that the previous dip was an incorrect prediction by the market.
SantalBlush · 1h ago
No, the dips resulted in government interventions--like the Fed raising liquidity or Trump removing some tariffs--which then caused stocks to rally again.
The term "Fed put" is decades old.
apwell23 · 2h ago
Trump election will tank the stock market - Many nobel prize economists and experts .
Fernicia · 2h ago
He did though. The S&P 500 fell 18% around Mar/Apr. That's unprecedented for a US market experiencing no external shocks.
matthewdgreen · 1h ago
And the US dollar is still down 10%.
kristianc · 2h ago
The New Yorker also has a vested interest in making people freak out about AI. If anyone with a prompt can churn out something that passes as a New Yorker essay, the monopoly on tone, cadence, and authority starts to crumble.
theredleft · 2h ago
Turning into? It already is. I wish I had a hedge fund to direct towards shorting AI-driven companies.
neals · 2h ago
It's helping me find things, understand things and do things. I'm sure some of those startups will figure something out that makes sense. And eat the rest.
dkarl · 2h ago
This was the story of Amazon in the .com bubble, but buying Amazon in 1999 was not a good deal. Even if you know who the winner is going to be, you can still lose.
janlukacs · 2h ago
Please share examples. Real life game changing examples that were not possible before.
I get this sinking feeling that this "bubble" may never burst on its own, since the political environment now is different from the 2000s. Inequality is much higher post-COVID, with the ultra-wealthy sucking up the assets of the middle class. Those assets are going into the stock market for AI companies with the objective of eventually replacing people so they never need to pay the working or middle class ever again. Even if the AI doesn't perform quite at the level of normal employees, there's very little competition in the market anyway.
I'd be happy for someone to tell me I'm wrong. Otherwise it will take something dire to break this cycle.
matthewdgreen · 1h ago
I saw a figure yesterday showing that current AI data center investment exceeds all consumer spending in terms of GDP. This is important, because consumer spending is normally 2/3rds of GDP. This means consumer spending isn't great, and data center investments probably can't sustain this pace forever. It's also not clear that there will be a return on these investments (one that flows to the specific companies seeing the investment.)
strange_quark · 58m ago
I think the figure wasn't that data center capex exceeded consumer spending, but that data center capex contributed more to GDP growth than consumer spending did. Still really really bad and indicative of a bubble, but an important difference.
ausbah · 2h ago
9 of the past 5 market crashes have been successfully predicted
simianwords · 2h ago
they wouldn’t have happened if they were predicted largely by the market.
ASalazarMX · 1h ago
With MSFT being worth 4 trillions right now, it looks like a legitimate AI bubble. Those valuations have entered the realm of fantasy.
mumbisChungo · 2h ago
No matter how right the AI crowd is, elements of it are/will be a bubble.
No matter how right the bubble crowd is, the market becoming irrationally exuberant for a brief period of time does not invalidate the technology or the rapid change we'll see as a result of it.
DragonStrength · 2h ago
For sure, the Dotcom crash didn’t mean the web was bad technology.
jameshart · 2h ago
Not technically bad, anyway. Just… socially destructive to the fragile web that held society together.
NitpickLawyer · 2h ago
Yeah, this is what all the bubbleists miss. We got FAANG++ out of the last bubble, and they literally rule the world with the tech that was promised during said bubble. Catsdotcom and dogsdotcom failing had 0 impact on the tech itself.
It's the same today. A lot of the hyperVCfunded startups will fail, without a doubt. But the tech giants will get their money from this tech, and it will be ubiquitous in ways we can't even imagine now.
strange_quark · 46m ago
I'm not sure that the dotcom bubble leaving behind the web means that AI (and by AI I mean LLMs) are going to be transformative in the same way the internet was. Just because it happened once doesn't necessarily mean it's going to happen again.
To be clear, I don't think LLMs are going to vanish, there's clearly some things they're good for, but there's also some really big differences between the AI bubble and the dotcom bubble. People are very skeptical and worried about AI, they (the general public) aren't really using it for anything more than search, there hasn't been any clear economic data indicating that it improves productivity in a meaningful way, and a killer app hasn't really emerged that isn't a free chatbot. Plus, the majority of the money is concentrated in the same 5 or 10 companies just passing it back and forth between each other before eventually handing it over to NVIDIA. Maybe I was just too young to pay attention to the dotcom bubble, but the vibe seems completely different.
bithive123 · 2h ago
Of course it's a bubble. It's only about 20% as useful as the claims driving the current irrational exuberance. All it can do is generate pictures and text, and we had those _coming out our eyeballs_ for at least a decade. Prior to generative AI, each of us already had more access to images and text with which to stimulate ourselves than we could consume in a lifetime.
When did we forget that discovering "truth" via symbol manipulation is a fraught proposition at best? It was in the 17th century that Leibniz proposed that encoding logical propositions into a propositional calculus would allow all intellectual disputes to be resolved mechanically.
"For it would suffice for them to take their pencils in their hands and to sit down at the abacus, and say to each other (and if they so wish also to a friend called to help): Let us calculate."
The original AI bro! Any day now...
I've been thinking lately that the real value of a piece of code is that there is at least one human alive somewhere supporting it. You remove that, and the value proposition gets extremely shaky. Folks are going to have to learn this first hand as their brain becomes full of echoes of LLM output, rather than the output being an echo of some brain process (you know, _actual_ intelligence).
But sure, if you can convince enough people that you've invented a real magic 8-ball, you might be able to convince enough of them to shake it for the rest of their lives. Me, I'm not convinced that the marginal value of "new" text and images is there.
seanmcdirmid · 2h ago
People have been saying this at least for the last 10 years. I think if advancements stop being made at a rapid clip, the bubble might implode. But every year it seems like its a whole new ballgame.
When LLMs start playing the stock market autonomously, then we should start worrying.
marcosdumay · 2h ago
Oh, man, there have been 10 years since ChatGPT made the news in 2022?
How time flies!
seanmcdirmid · 2h ago
People have been predicting an AI winter ever since DNNs hit it big, and that was 2012/2013 or so. And then every year since 2015 they've been saying "this is the year the AI bubble will finally burst!" And then repeat that the next year.
ChatGPT was just another big leap in a bunch of big leaps that occurred in the last 15 years. You are being disingenuous in pretending that people didn't see AI as being hyped before ChatGPT came out.
marcosdumay · 1h ago
The finance bubble is pretty much a post-ChatGTP phenomenon.
There was some hype about AI before it, for completely unrelated products, with varying levels of real value behind them. What bubble there was about those has already popped long ago, missing the headlines because of the crypto hype.
seanmcdirmid · 1h ago
If you've been with HN for awhile, or you search the archives, similar topics to "Is the AI booming turning into an AI bubble" kept popping up long before CHatGPT came out. And this was DNNs, and it was same people (e.g. Hinton and his students) who were at the forefront of that also. And no, their previous projects didn't go bust.
marcosdumay · 56m ago
Well, ok, good point.
There has been people claiming that "their work will stop scaling any time now" for some 12 years. (To be fair, it can't scale forever and seems to have stopped scaling by now.)
That is a hype bubble. I maintain that it's not the bubble the article and everybody is talking about. People are talking about the billions (but the plural doesn't do it justice) running around looking for a return. A lot of their earlier projects weren't even supposed to make a profit.
jraph · 1h ago
AI was over-hyped. I remember how "AI" felt like marketing bullshit at the lab when I was there between 2015 and 2020.
Generative AI took it at the next level though. There is no comparison.
The meaning of AI has brutally changed. It used to refer to ML, deep learning and all these things. Now, it is a synonym of generative AI.
seanmcdirmid · 1h ago
The original paper where they took wikipedia as a corpus and generated a character by character generator (the precursor to the token-based transformer stuff) came out in 2012 (I think?). It isn't unrelated to the AI that was hyped up then, it is and was a direct evolution of the same ML we were talking about today (Hinton was an author on that paper).
jraph · 1h ago
Yeah yeah, there was also SCIgen in 2005 (when 3 MIT students submitted a fake paper and got it accepted).
I believe the difference is scale. It's not just Wikipedia, it's the whole web. Billions and billions are burned (and it seems highly unsustainable, where previously, stuff was made to work in public labs - possibly with things like Grid5000, but that's nothing compared to what's training and running LLMs today). One fifth to one third of HN's front page is AI. The thing is mainstream and omnipresent (before 2022, that stuff was mostly people working in research and tech companies, the informed general public might have heard of ML).
Around 2015, we were there: https://xkcd.com/1425/ (explain xkcd says September 24, 2014)
antithesizer · 2h ago
I remember reading this two years ago. And one year ago, too.
ch4s3 · 2h ago
Yeah, I mean there's a chance they're wrong and some chance they'll eventually be right. At this point it's clearly impossible to say for sure what the outcome might be. There were plenty of people in 2005 saying there was a housing bubble in the making and plenty of evidence that they were wrong. Were they right but too early? Were they wrong on fundamentals but happened to have guessed right? We could be seeing something similar here where the nay sayers are right for the wrong reasons, or they're simply haters whose desires may align with the eventual outcomes. Or not.
wongarsu · 2h ago
There were also people who said in 1999 that there was an unsustainable bubble of "internet" businesses. And they were right. The bubble burst, and the internet still went on to change the world
No doubt there's a lot of stuff right now that's completely overvalued, and companies that try to do things that the technology just isn't ready for yet. Those will eventually be culled, either one by one or all at once in a big burst. But for the way AI changes industries and our lifes that will only be a speed bump
ch4s3 · 1h ago
This is essentially what I’m saying. More succinctly, you can be right or wrong about a macro trend but your correctness is probably more time-boxed than people expect.
matthewdgreen · 1h ago
I remember reading this for years before the dot com bubble imploded, years before the housing bubble impoded, and months before the market woke up to the fact that COVID existed. (At least governments decided to print that last one away.)
On a more serious note, the fundamental issue in the first two crashes was that the markets stopped being able to rationally price things. My view is that this doesn't always mean there will be an immediate crash. It just means that when the inevitable downturn does happen, nobody will be able to figure out the correct pricing for anything -- and so a correction turns into a catastrophe.
eikenberry · 1h ago
Bubbles can last much longer than a couple years. The housing bubble in the US that finally popped in 2008 was building for at least a decade.
derektank · 2h ago
The market can remain irrational longer than you can remain solvent
HackerThemAll · 36m ago
Considering that the average Joe is talking about profiting from AI, then yes, AI boom becomes AI bubble.
leopoldj · 1h ago
Over-investment in a new technology seems to be a common thing. It happened with the Internet and railroad. A bubble forms which pops. But the process leaves behind valuable infrastructure.
nativeit · 27m ago
It's too bad the infrastructure in this context largely becomes obsolete in under a decade. Optimistically, we'll have a lot of data centers with a lot of generalized resources, but I have a feeling the margins get pretty thin on operating/maintaining those facilities absent high demand.
gervwyk · 1h ago
was cloud computing ever a bubble. yes. did it stabilize. sure. but its a powerful utility that shifted and created new value. the only speculation is where and by how much.
the rush of new tech is always confusing, new tools requires new skills and time to find its place in the world.
ASalazarMX · 59m ago
The AI bubble is, IMO, more like the DotCom bubble, where every startup believed having a modern website would return investments many times over. The only companies becoming rich are the ones selling shovels.
simianwords · 2h ago
To analyze whether AI is a bubble you need to analyze its value (like value investing).
I find this article hollow because nowhere does it analyze the value or potential of AI.
standardUser · 2h ago
A Tobin tax would do wonders to help decrease the delta between boom and bubble. But with the international economic order being shredded as we speak, that possibility seems further away than ever.
kelseyfrog · 2h ago
Of course it is.
Investors can't set realistic expectations for AI, so an ocean of capital is chasing a dream. When the rent comes due, the quick will cut and run. The rest will turn to extraction. If you want a front-row seat to the clusterfuck that is aligning LLMs with product placement or selling users' conversations to advertisers, you're in luck. Grab some popcorn.
ath3nd · 2h ago
Some articles arguing that's already the case (and why):
For me, the only consolation is things seem to be moving fast nowadays so the inevitable collapse must be close. See what happened to Github's CEO, it took 1 week from cocky to fired, hopefully the same happens to sama, Zuck, Musk and all the snake oil salesmen in this space:
Hopefully the amount of instability in the space and the many signals of stagnation (e.g OpenAI's valuation divorced from reality, the GPT-5 release, Claude changing their limits, Meta spending millions on single hires) will indicate to people paying attention that it's a very volatile and bubbl-y space to invest in.
I personally can't wait for the bubble to burst so I can "told you so" to all the enthusiasts/fanboys.
justcallmejm · 1h ago
"In the A.I. economy, it seems possible that many of the rewards will go to top firms that can afford to build and maintain large A.I. models..."
This is a flawed (and common, still, somehow!) idea of where value is within AI. The gigantic models are commoditizing rapidly. They practically incinerate cash.
There is real value being created at the layer where users can use a product they can actually trust. LLMs are certainly not that.
Our system, Aloe, is model agnostic - so when next month's model comes out we just get better. And we already beat the pants off the frontier models in capability, spending a tiny fraction of a percent of the capital to build the system.
The existing concentration of capital into big LLM companies is indeed a bubble. Eventually some of those VCs will wake up and invest where the value is being created, I presume.
teaearlgraycold · 2h ago
Now I’m torn between Betteridge's law and my belief that we’re in a bubble.
Ygg2 · 1h ago
No. It was always a bubble. You can thank me later.
stuckinhell · 2h ago
I think a Wharton Professor Ethan Mollick said it nicely: Whats the capex on creating GOD?
> War in Ukraine will tank the stock market
> High interest rates will tank the stock market
> Tariffs will tank the stock market
> IA will tank the stock market <- We are here
All those statements made sense to me at the time. And I have no doubt that one of these days, someone will make a correct prediction. But who the hell know what and when.
Diversify, be reasonable and be prepared for it to happen someday. But freaking out with any new prediction of doom is not the winning strategy.
This may require extracting additional rents from consumers, from workers, from renters, from debtors (including the government) but whatever changes have to be made to protect asset holders will be made regardless of the cost. An example of this in action was the collapse of SV Bank where the rules of our federal deposit insurance program were rewritten on the fly to protect the depositors. Imagine having an insurance policy, incurring an uncovered loss, and then compelling the insurance company to retroactively rewrite your policy to cover the loss!
It's clear we're living in an illusion, but I'm pretty sure there are enough people invested in that illusion that it won't stop until it is no longer physically possible to maintain. I'm increasing convinced that when whatever dream we're living in ends, it will end catastrophically, but I'm not even certain I'll live to see that happen.
Retail investors, as usual, will be worst hit (I say this as a European with no stake in US stocks).
Still - nobody make any sudden moves and we'll ride out what remaining value we can squeeze.
Tesla has a P/E ratio something like 26 times what other well-run automotive companies have. Boeing has a price like Airbus, despite no profits, etc.
Commercial real estate prices have gone down, and that's reasonable, but you've had both the interest rate increases and this WFH+hybrid remote thing becoming common, and since the interest rates have gone up from such a low level I think this is still overvalued, because 1% -> 2% should in theory mean halving the value if the rent is constant, and it went <1% to 4.5%.
I think it's a miracle that there hasn't been a crash. I wonder what weird things have been going on that have ensured that there hasn't been one yet. So I think your perspective is strange. The situation is absolutely crazy, and has been for years, but that doesn't make it not crazy.
Also in 1999 MSFT was $57 a share. In 2009 it was $16 a share. It cracked $57 again in 2016. 17 years to go sideways.
Cisco never reached its 2000 peak again. Of course companies like Pets.com just went out of business.
It's actually pretty easy to lose money. Everybody is happy to help you part with yours.
Aside from lottery winners whose assets start liquid, are there examples of people in the last 5 years with over $100 million in assets that permanently lost most of their wealth without doing something really stupid?
Indeed, but even with something like SPY, there’s quite the concentration in tech:
Now that’s intentional as it’s market cap weighted. But the investing world is in for a rude awakening if things start to pop.With an MSCI world, those companies would drop to ~22% exposure. Throw a bit of real estate, more exposure to your home country if you are not in the US some real estate, some bonds and you can make it drop to <10%.
All those events don't tank the stock market because they were based primarily on fear.
What will tank it are lies based on greed.
> Dot-com: overvalued companies with no revenue
> Mortgage: banks lying/lending about credit scores
> Covid: continuing online & EV trend, meme stocks, SPACs
> AI: continuing scaling laws, high ROI?
I think there's an incorrect valuation by looking at where things are today. I mean Black Monday, the 2009 housing crash, DotCom Bubble, and others were times the market did tank yet we've since recovered.
So how are we measuring the accuracy of those predictions? From Jan to April the Trump admin was announcing tariffs. VOO's (S&P500) lowest price this year was on April 8th at $456.74 and on Feb 19th it was $563.67. We see similar patterns with covid and invasion of Ukraine. Do we consider a 25% reduction "tanking"?
I agree that with enough time that everything will work itself out. But I do not think that this means we should ignore or downplay damage done in the short term.
> The global pandemic will tank the stock market
It actually did screw up the economies of a lot of countries and companies and it messed with stock markets as well. It increased debt worldwide, it increased unemployment that took years to recover.
> High interest rates will tank the stock market
There is a well established relationship between lower stock market returns when there is high interest rates.
> War in Ukraine will tank the stock market
It significantly hurt the Russian stock market, at least the sanctions did. But war tends to be a stimulus for the economy as long as it isn't too large of a war.
I'm not sure what else needs to happen to show the economy has been doing poorly for all but the richest segments. The return of a blatant and severe caste system and mass starvation?
Diversifying does not stop the tanking. It will reduce the risk related to poor choices all at once
All of the events you listed have had significant economic effects and required massive intervention from the state to buoy asset prices. The longer this continues the more our economy becomes geared to producing "value" for this small, and shrinking, group of owners at the expense of everyone else.
- we're going into the next Great Depression (a once in a lifetime occurrence)
- a small subset of stocks (that happens to make up a huge portion of the entire equity market in the US) has extreme PE and PEG ratios and will pop (which happens every few years)
I think your point largely stands for both cases, but it's important to delineate them.
If you're preparing for a Great Depression - you're likely only going to be right by coincidence. If you're preparing for a stock bubble to pop, at the very least, you've got better odds.
The term "Fed put" is decades old.
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I'd be happy for someone to tell me I'm wrong. Otherwise it will take something dire to break this cycle.
No matter how right the bubble crowd is, the market becoming irrationally exuberant for a brief period of time does not invalidate the technology or the rapid change we'll see as a result of it.
It's the same today. A lot of the hyperVCfunded startups will fail, without a doubt. But the tech giants will get their money from this tech, and it will be ubiquitous in ways we can't even imagine now.
To be clear, I don't think LLMs are going to vanish, there's clearly some things they're good for, but there's also some really big differences between the AI bubble and the dotcom bubble. People are very skeptical and worried about AI, they (the general public) aren't really using it for anything more than search, there hasn't been any clear economic data indicating that it improves productivity in a meaningful way, and a killer app hasn't really emerged that isn't a free chatbot. Plus, the majority of the money is concentrated in the same 5 or 10 companies just passing it back and forth between each other before eventually handing it over to NVIDIA. Maybe I was just too young to pay attention to the dotcom bubble, but the vibe seems completely different.
When did we forget that discovering "truth" via symbol manipulation is a fraught proposition at best? It was in the 17th century that Leibniz proposed that encoding logical propositions into a propositional calculus would allow all intellectual disputes to be resolved mechanically.
"For it would suffice for them to take their pencils in their hands and to sit down at the abacus, and say to each other (and if they so wish also to a friend called to help): Let us calculate."
The original AI bro! Any day now...
I've been thinking lately that the real value of a piece of code is that there is at least one human alive somewhere supporting it. You remove that, and the value proposition gets extremely shaky. Folks are going to have to learn this first hand as their brain becomes full of echoes of LLM output, rather than the output being an echo of some brain process (you know, _actual_ intelligence).
But sure, if you can convince enough people that you've invented a real magic 8-ball, you might be able to convince enough of them to shake it for the rest of their lives. Me, I'm not convinced that the marginal value of "new" text and images is there.
When LLMs start playing the stock market autonomously, then we should start worrying.
How time flies!
ChatGPT was just another big leap in a bunch of big leaps that occurred in the last 15 years. You are being disingenuous in pretending that people didn't see AI as being hyped before ChatGPT came out.
There was some hype about AI before it, for completely unrelated products, with varying levels of real value behind them. What bubble there was about those has already popped long ago, missing the headlines because of the crypto hype.
There has been people claiming that "their work will stop scaling any time now" for some 12 years. (To be fair, it can't scale forever and seems to have stopped scaling by now.)
That is a hype bubble. I maintain that it's not the bubble the article and everybody is talking about. People are talking about the billions (but the plural doesn't do it justice) running around looking for a return. A lot of their earlier projects weren't even supposed to make a profit.
Generative AI took it at the next level though. There is no comparison.
The meaning of AI has brutally changed. It used to refer to ML, deep learning and all these things. Now, it is a synonym of generative AI.
I believe the difference is scale. It's not just Wikipedia, it's the whole web. Billions and billions are burned (and it seems highly unsustainable, where previously, stuff was made to work in public labs - possibly with things like Grid5000, but that's nothing compared to what's training and running LLMs today). One fifth to one third of HN's front page is AI. The thing is mainstream and omnipresent (before 2022, that stuff was mostly people working in research and tech companies, the informed general public might have heard of ML).
Around 2015, we were there: https://xkcd.com/1425/ (explain xkcd says September 24, 2014)
No doubt there's a lot of stuff right now that's completely overvalued, and companies that try to do things that the technology just isn't ready for yet. Those will eventually be culled, either one by one or all at once in a big burst. But for the way AI changes industries and our lifes that will only be a speed bump
On a more serious note, the fundamental issue in the first two crashes was that the markets stopped being able to rationally price things. My view is that this doesn't always mean there will be an immediate crash. It just means that when the inevitable downturn does happen, nobody will be able to figure out the correct pricing for anything -- and so a correction turns into a catastrophe.
the rush of new tech is always confusing, new tools requires new skills and time to find its place in the world.
I find this article hollow because nowhere does it analyze the value or potential of AI.
Investors can't set realistic expectations for AI, so an ocean of capital is chasing a dream. When the rent comes due, the quick will cut and run. The rest will turn to extraction. If you want a front-row seat to the clusterfuck that is aligning LLMs with product placement or selling users' conversations to advertisers, you're in luck. Grab some popcorn.
- https://www.wheresyoured.at/ai-is-a-money-trap/
- https://www.wheresyoured.at/anthropic-and-openai-have-begun-...
For me, the only consolation is things seem to be moving fast nowadays so the inevitable collapse must be close. See what happened to Github's CEO, it took 1 week from cocky to fired, hopefully the same happens to sama, Zuck, Musk and all the snake oil salesmen in this space:
- 2-nd of Aug 2025 Github CEO delivers stark message to developers: "Embrace AI or get out of the industry" https://www.businessinsider.com/github-ceo-developers-embrac...
- 11-th of Aug 2025 Github CEO resigns https://www.theverge.com/news/757461/microsoft-github-thomas...
Hopefully the amount of instability in the space and the many signals of stagnation (e.g OpenAI's valuation divorced from reality, the GPT-5 release, Claude changing their limits, Meta spending millions on single hires) will indicate to people paying attention that it's a very volatile and bubbl-y space to invest in.
Sources:
https://www.theregister.com/2025/03/26/microsoft_ai_apocalyp...
https://nypost.com/2025/08/01/business/meta-pays-250m-to-lur...
https://techcrunch.com/2025/07/28/anthropic-unveils-new-rate...
https://arstechnica.com/information-technology/2025/08/the-g...
https://fortune.com/2025/08/08/openais-reported-500-billion-...
https://finance.yahoo.com/news/beneath-ai-bubble-economy-loo...
I personally can't wait for the bubble to burst so I can "told you so" to all the enthusiasts/fanboys.
This is a flawed (and common, still, somehow!) idea of where value is within AI. The gigantic models are commoditizing rapidly. They practically incinerate cash.
There is real value being created at the layer where users can use a product they can actually trust. LLMs are certainly not that.
Our system, Aloe, is model agnostic - so when next month's model comes out we just get better. And we already beat the pants off the frontier models in capability, spending a tiny fraction of a percent of the capital to build the system.
The existing concentration of capital into big LLM companies is indeed a bubble. Eventually some of those VCs will wake up and invest where the value is being created, I presume.