AI Bubble: 'We are facing multiple financial crises'

[paleotn]

Hundreds upon hundreds of billions in debt and equity poured into something that so far produces little more than uninspired, cookie cutter term papers, buggy code, and some kind of weird porn genre. But if any one of the AI players pulls back on investment by a nickel, the bubble bursts, trillions in market cap evaporate, and the financial unwinding may be even worse than 2008. Aside from the huckster hype, it seems they got themselves in a financial trap. Whenever I hear an outside analyst or a company insider say "this better bloody work or...!" it's time to take your money and move to the exits. Rapidly.

[IbogaProject]

1. Careful to underestimate thus tech

The models ability to code has been leapfrogging every couple of months now. The pace of innovations is intensifying. Yes it is a bubble, but first we will have a horrid period with AI fueled hacking, fraud and defamation. Even if the tech can do what it claims the economic contraction will not just slow growth but contract our total soending. Our system fails when growth stops.

[paleotn]

3. The pace of HYPE is intensifying. Not the actual usefulness....

Seriously, AI has consumed 750 billion to perhaps one TRILLION dollars of capex funding through end of 2025......for what? You're making the fusion power argument. It's just months to years around the corner. Well, it's been months to years and .... where is it? OH! You want hundreds and hundreds of billions more? They're reaching the end of tech firm excess cash / venture capital and are having to tap debt markets to fuel the capex burn. Never, ever a good sign.

Useful tools eventually? Maybe. But at what cost (turning Texas into a ginormous server farm) and where the hell is the financial payoff? End of the day that's ALL that matters. THAT'S why people invest their money. To get their money back with a bit extra. Otherwise, what the hell is the point? What and where are the actual financial returns on all this capex??? Other than some vague huckster crap, they can't tell you. Do you realize the scale those returns would have to be on a nearly one trillion dollar investment to make it financially worthwhile and not the biggest waste of capital in human history?

Varies by industry, but in my real world, if I have a project with an ROI of less than 10% and a payback greater than 5 years, I would get laughed at. And that's on a measly $100K investment. Why is this different somehow? The AI industry can't even tell us with a straight face what those investment return projections actually are on the nearly a trillion dollars they already blown. It's madness.

[Bev54]

2. Many Americans still think the stock market is "the economy"

and Bondi reinforced this myth by touting the Dow is over 50,000 (below now). Firstly it is not the economy and I very much agree that it is being held high by tech stocks, primarily AI. Even with the AI holding it up the US stock market is not performing better than other countries, in fact right now it's in about 8th place of other country's stock markets. The US increased approx 12-13%, whereas many others increased by far more. Canada outperformed them all and increased 27% and the difference is most of our stock market is made up of companies such as mining, oil and gas, finance etc, not an AI bubble.

[paleotn]

4. It's not, but it's connected.

If the server farm build out tanks, all those construction workers are out of work, a la 2008. And all the material suppliers are on hard times. Local US governments are seeing no payoff on the tax incentives they granted. And then there's the debt and who's backstopping it and how that impacts your ability to buy a house or a car. Again, 2008. A myriad of feedbacks. The housing crises was both a Wall Street, company balance sheet crises that affected damn near everyone. Don't think you're insulated. None of us are and that's why we should be calling out this crazy shit.

[Bev54]

5. We know we are not insulated and we will feel any fall from the US.

The difference is we know and are making preparations to mitigate the damage. The US has not even admitted the problem.