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.
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.
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.
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.
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.
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.
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!
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?
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 - the market did crash and then Fed stepped in. Rates were cut and Fed
> War in Ukraine will tank the stock market - Market did go down by -30% between Jan-Oct 2022 and went nowhere for sometime after that.
> High interest rates will tank the stock market - Impact for this remains to be seen. Even during 2008 the high interest rates risk persisted for couple of years before the crash. So, I'd give it more time.
> Tariffs will tank the stock market - Did we not see a 20% drop before tariffs were put on hold for 90 days?
> IA will tank the stock market - I don't have much conviction on this one.
It is true that no one knows when a prolonged market crash like 2008 will happen. Maybe never. Government has figured out that Fed intervention can help the market stay afloat. So, maybe unless Fed doesn't step in for a long time these predictions will come true.
The flip side of this is that investment returns of a diversified portfolio (net of inflation) is slowly going down. The choices are to either concentrate or find alternative investing vehicles. That is one of reasons private equity is out looking for alternate income sources like buying up houses and hiking up the rents etc.
It’s not hard to predict that events will happen. It’s hard to do so with more precision than the next guy.
Something I learned in H2 of 2021, when I nearly went broke betting on a correction. Wasn’t wrong, one did occur. Just failed to realize I couldn’t figure out exactly when.
All of your examples did tank the stock market. At least in the meaning a 20+% drop over a time period in the order of months of less.
They are however not examples of long depressions. Which I think is reasonable to expect we'll see less of, given that more and more regular people feel the need to put their money in the stock market. There is simply no alternative. And every time we reach new heights. This is also expected.
Will this go on forever? Probably not. But it won't look like the 1930s. The stock market is a crowd, not a science.
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.
TINFOIL HAT SAYS: Since you used the P-word, consider the 2008 election and the possibility that a similar bubble-bursting occurring at the appropriate time to maximize chances to flip Congress in 2026.
I've been trying to figure this out, like I think the 2008 bubble burst for a lot of reason but it was basically a ponzi scheme that ran out of new people to buy houses at constantly inflated rates.
Bernie Madoff got caught when 2008 happened and he didn't have enough money to pay back investors, if 2008 never happened he maybe keeps going.
For Elon Musk, and maybe why he bought Twitter, he has to stay popular enough that enough people believe his companies are the best investment available. If someone surpassed him, and Tesla didn't seem like the place where robots or self-driving might happen, then people would probably move away.
For AI, maybe something similar? People would have to start deciding that investing somewhere else is better than investing in AI and let the AI companies start to fail.
Presumably the cause of a bubble is just too many people thinking AI is the best place to invest their money? And the bubble will pop when they decide to invest somewhere else?
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.
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.
"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.
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.
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.
31 comments
[ 3.0 ms ] story [ 55.8 ms ] threadNo 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.
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.
> 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!
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?
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.
> War in Ukraine will tank the stock market - Market did go down by -30% between Jan-Oct 2022 and went nowhere for sometime after that.
> High interest rates will tank the stock market - Impact for this remains to be seen. Even during 2008 the high interest rates risk persisted for couple of years before the crash. So, I'd give it more time.
> Tariffs will tank the stock market - Did we not see a 20% drop before tariffs were put on hold for 90 days?
> IA will tank the stock market - I don't have much conviction on this one.
It is true that no one knows when a prolonged market crash like 2008 will happen. Maybe never. Government has figured out that Fed intervention can help the market stay afloat. So, maybe unless Fed doesn't step in for a long time these predictions will come true.
The flip side of this is that investment returns of a diversified portfolio (net of inflation) is slowly going down. The choices are to either concentrate or find alternative investing vehicles. That is one of reasons private equity is out looking for alternate income sources like buying up houses and hiking up the rents etc.
It’s not hard to predict that events will happen. It’s hard to do so with more precision than the next guy.
Something I learned in H2 of 2021, when I nearly went broke betting on a correction. Wasn’t wrong, one did occur. Just failed to realize I couldn’t figure out exactly when.
They are however not examples of long depressions. Which I think is reasonable to expect we'll see less of, given that more and more regular people feel the need to put their money in the stock market. There is simply no alternative. And every time we reach new heights. This is also expected.
Will this go on forever? Probably not. But it won't look like the 1930s. The stock market is a crowd, not a science.
I'd be happy for someone to tell me I'm wrong. Otherwise it will take something dire to break this cycle.
Bernie Madoff got caught when 2008 happened and he didn't have enough money to pay back investors, if 2008 never happened he maybe keeps going.
For Elon Musk, and maybe why he bought Twitter, he has to stay popular enough that enough people believe his companies are the best investment available. If someone surpassed him, and Tesla didn't seem like the place where robots or self-driving might happen, then people would probably move away.
For AI, maybe something similar? People would have to start deciding that investing somewhere else is better than investing in AI and let the AI companies start to fail.
Presumably the cause of a bubble is just too many people thinking AI is the best place to invest their money? And the bubble will pop when they decide to invest somewhere else?
When LLMs start playing the stock market autonomously, then we should start worrying.
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.
I find this article hollow because nowhere does it analyze the value or potential of AI.
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.
the rush of new tech is always confusing, new tools requires new skills and time to find its place in the world.
Vibes have told me it long ago became one.