Wall Street sees AI bubble coming and is betting on what pops it

DivingForGold

https://archive.ph/2G0uD#selection-1219.0-1219.64

oldjim798

This can't happen soon enough. AI is a vacuum sucking up a lot of capital and attention that could and should be put to much much better uses

tester756

On the other hand we've never invested as much in hardware & software optimization as we do now

schnebbau

We could go back to crypto and NFTs being the capital darlings?

dymk

Those did not suck up nearly the capital and attention that AI is. They were like GameStop and AMC.

infecto

But they also did not create the same amount of value that AI is. Certainly there is hype but also value is being generated.

barbazoo

Like what? Do you have any insight into what money might be spent on instead?

ishtanbul

Real infrastructure and housing

baq

Investors don't want 5x revenue valuations, they want 30x growth.

Make 'real infrastructure' and 'housing' companies attractive products for investors to buy and they'll buy. (No idea how to do that, don't ask me! :))

dwa3592

Healthcare research to start with.

kryllic

If there wasn't an ongoing de facto recession, I would wager that the overvaluation of companies _would_ be at or near dot-com bubble levels. These AI companies have plenty of venture capital, but consumers are probably not as influential as they were back then. I agree we likely won't see a dotcom-like crash, but there will still be fallout that will take months to settle.

omgJustTest

IMO what you are describing is distributed choice vs concentrated choice.

It's one of my main arguments against a crash: why would one (1) or a few choose to do that?

finghin

Unless I misunderstand your question, isn’t the obvious answer just short-term profit?

No investor has thus far invested something they can’t yet cash out.

omgJustTest

If there's no better growth story probably people have already trimmed for short term gains.

In some ways the technology companies, which such large growth, are their own consumers.

Unless they feel pressure from another growth story or a technical monetary effect, and I emphasize story because its about future returns, its unlikely.

Additionally this has grown so quickly that there is amazing talent being applied to these problems, its hard to imagine every good person has been sufficiently compensated that progress will stall.

miohtama

I sincerely hope this would kill Oracle with their karma

leviliebvin

What is missing from the picture with all these articles is the numbers. LLMs already have a few solid use cases as translators, general document processors, coding helpers ...etc. So the first question is, to what extent does this demand support the investment? Would it be enough if basically every SP500 corp provided paid LLM access to their employees? Or is the investment so big, that people are betting on less solid applications, like Agentic AI, with some non-trivial automation?

gmerc

Why pay much when you can get bare metal China LLM without the premium?

s1mplicissimus

I tried figuring out how to bet on the AI bubble popping since the circle investments - that's by the way the one thing the article does not explain.

Can someone from the dear HN financially savvy users clarify what kinds of specific bets could be placed to that avail?

infecto

We know over the long term it is exceptionally hard to beat the market, timing the market is near impossible. Everyone keeps talking about a bubble but we don’t know how big of one it is or when/if it will pop.

You are better off being in the market than betting on an idea that you don’t know will even happen or when.

I definitely think there is over enthusiasm in the space but at the same time I am not convinced that the demand for compute has let off yet.

My take is always you could build up some cash reserve in treasuries or somewhere like that and deploy it if a pop does happen. You will miss out on the potential growth but if you wanted to participate that is one way imo.

spwa4

But isn't that in the past?

Look at stocks: everything is synchronizing, for years now. Either something like 85% of stocks all go up, with a predictable difference between them (meaning, e.g. META moves about double GOOG does, whichever way it goes, up or down), or 85% of stocks all go down. SPY, VOO. And in fact the only ones that make a move to speak of are the MAG7. It isn't just that they're the fastest to rise, they're the only ones that beat the market.

Zoom out and you'll see that in recent years you can include even non-stock-market assets in this argument. Housing ... same (of course there I understand), Gold, surprisingly, same.

And that's ignoring the warnings European authorities are issuing these days. It's pretty public information at this point that European authorities expect open ("kinetic" if you will) hostilities between Germany, France and Russia to open somewhere between March 2026 and Jan 2027. That will crash the stock market. That will crash the housing market. That will probably even crash the gold market, AI or no AI. Imho, that will crash the value of fucking Trump tower. The places these warnings are coming from are very serious and not known for joking on these matters (like the German chancillary, which if anything is far too conservative, or the French department of health, which has literally never issued a warning like this)

ebiester

Just remember that the market can stay irrational longer than you can stay solvent.

Consider diversification in your portfolio. Maybe you divert a little more away from the US market, for example, which is heavily dependent on 7 stocks largely tied to AI.

nairboon

It really depends on what exactly you want to bet on and on what timeframe. More short term bet? Puts on the AI companies or an AI ETF. Do you assume that the rest of tech stays up even if AI pops? Then you could short some AI ETF and hedge with long QQQ. (=betting that the AI subset of Nasdaq will underperform relative to the Nasdaq.

electroly

Just knowing that the bubble will pop at some point in the future isn't enough to trade on. You'll get trounced if this is the only piece of information you have. To a first approximation, everybody knows the bubble will pop. The question is: when and how?

null

[deleted]

sleepyguy

Listened to Tom Lee on a Prof G Podcast and he made a lot of sense about it all.

https://youtu.be/2J_IGuA-IdY?si=uTptx9R-HMhjD9LH&t=1200

Worth listening to the entire podcast but this is a snip where he speaks about AI valuations. Somewhere in that podcast he brings up the fact that Costco is trading at double future earnings to NVIDIA, let that sink in.....

tug2024

[dead]