Without diversification, we’re just setting ourselves up for an economic rug pull the moment the AI growth hits the law of large numbers and people realize its not the magic they think it is. Economically? Don’t worry it’ll just be another “oops, your 401k lost a bit, here’s a bailout” moment. AKA, stimulus with sprinkles.
Sloppy opinion piece. Stock market increases are bad because it makes rich people happy, but select US sectors are lagging behind Europe which is somehow also bad. Low immigration resulting in a labor force squeeze is bad, but this is offset by reduced demand because of AI, which is, you guessed it, also bad lol
We'll know next year if it's not the right move. If we get another wave of incremental upgrades at best then AI will clearly be in a bubble and it's time to look for the exits. If we keep getting major advances then any country _not_ going all in on AI will be left behind.
> No nation has seen an immigration boom-bust cycle near the scale of the one roiling America. Net immigration nearly quadrupled after 2020 to peak at well over 3mn in 2023, but the backlash led by President Donald Trump sent that figure into freefall. This year only around 400,000 net new arrivals are expected, and that could be the trend in the coming years.
Its not a bubble because the economy isnt actually about trade any more, its about power. The people in power now know that control over technology is the name of the game. It doesnt have to have a return on investment, it has to enable control of public opinion and eventually, robots.
There is other emerging tech we could be investing in that other economies are doubling-down on. But the Administration has made green energy harder for American companies. And a lot of health tech too is tougher under the current administration. Tarrifs, affordability, etc also hit hard on small businesses, making growth there tough.
> Foreigners poured a record $290bn into US stocks in the second quarter and now own about 30 per cent of the market — the highest share in post-second world war history. Europeans and Canadians have been boycotting American goods but continue buying US stocks in bulk — especially the tech giants.
I fail to find any plausible explanation for this other than the fact that yes, it is a bubble. Tesla, a car company facing declining sales, an executive exodus, and a CEO who’s more of a liability, is almost a $1.5T company now. An absurd P/E of 259. Sure, P/E isn't the most realiable metric. But, for a company with declining sales, and onslaught from Chinese competitors, a P/E of anything above 50 is absolutely ludicrous. Do people actually buy into the absurdity of humanoid robots and robotaxis?
"Be fearful when everyone is greedy." I’ve cashed out of U.S. stocks, and I think it's wise thing to do when craze is at its peak.
"The Depression was preceded by a period of industrial growth and social development known as the "Roaring Twenties". Much of the profit generated by the boom was invested in speculation, such as on the stock market, contributing to growing wealth inequality. Banks were subject to minimal regulation, resulting in loose lending and widespread debt. By 1929, declining spending had led to reductions in manufacturing output and rising unemployment. Share values continued to rise until the October 1929 crash, after which the slide continued until July 1932, accompanied by a loss of confidence in the financial system. By 1933, the U.S. unemployment rate had risen to 25%, about one-third of farmers had lost their land, and 9,000 of its 25,000 banks had gone out of business. President Herbert Hoover was unwilling to intervene heavily in the economy, and in 1930 he signed the Smoot–Hawley Tariff Act, which worsened the Depression. In the 1932 presidential election, Hoover was defeated by Franklin D. Roosevelt, who from 1933 pursued a set of expansive New Deal programs in order to provide relief and create jobs. In Germany, which depended heavily on U.S. loans, the crisis caused unemployment to rise to nearly 30% and fueled political extremism, paving the way for Adolf Hitler's Nazi Party to rise to power in 1933. Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%; in the U.S., the Depression resulted in a 30% contraction in GDP."
I read these articles about how much of a suckers bet AI is and start feeling existential dread about the coming market crash.
Then I remember I just did a weeks worth of work in a few hours and feel a lot better about my prospects at least.
AI won't replace people, but it will make people who know how to use it vastly more efficient. In the same way that a tractor made a farmer more efficient.
1) the average American is heavily dependent on equities in their 401k for retirement,
2) so the stock market has to go up,
3) but the stock market is already at record valuations and it's difficult to see how forecasted growth levels justify the current valuation let alone an increased valuation,
4) without revenue growth, the only way for companies to sustain EPS growth is massive reduction in costs,
5) labor is the primary cost for most companies,
6) in come the AI folks telling CEOs that "AI can replace most of their workforce",
7) and so as the article states, everyone goes all in and "America is one big bet on AI"
That leaves us with only 2 possibilities - AI either replaces a significant part of the workforce or it does not. If it does not, the bubble bursts and the economy crashes. If it does, the economy still crashes because consumer spending is 70% of GDP and if the majority of the population becomes unemployed then spending collapses.
I don't think people have realized the latter (or at least they're deliberately choosing to ignore it). That said, I believe the former is more likely (AI not replacing the majority of the workforce in the near future). Either way, buckle up.
It is a little frustrating how we as a society have just decided that corporations don’t need to make money, and indeed can just ponzi their way indefinitely as long as they use some vague “tech” branding.
I think this “rapid growth at all costs” is going to bite us, and I think it is possible that it’s going to bite us even more than the .Com bubble or the 2008 crash.
I really hope I am wrong, but I don’t see we can expect companies to keep growing if we don’t require them to be profitable.
If we build out a bunch of data center infrastructure or (better yet) energy/power plant related infrastructure, and AI doesn't pan out, is it really so bad?
I think its a bit like trains in the 1800s. Plenty of overspending, plenty of speculation that went bust, but in a lot of ways the country was better for all the madness.
Borderline all or nothing bet. The distribution of AI capex investment and burnt/stranded assets is not like past bubbles.
Railroad boom. Most of spending moving heart to build out rail network that increase CONUS rail by +400%. US freight backbone. 50+ year infra. Upgrade signal etc and improve network capacity.
Dotcom Boom. Most of spending in moving earth to build out ~150m of fiber. Agnostic pipes for backbone of internet. Also 50+ year infra. Upgrade switches at nodes to increase network capacity.
AI boom. Most of investment going into chips with <5 year deprecation cycle. Datacenters <10 years, heavily specialized for AI use, i.e. power/cooling makes it inefficient/not economic for general compute.
Looking like ~20% goes to eletricfication capex (if it gets built at all). That's the stranded asset i.e. consolation prize, ~10% (generous) increase in US electrification, which isn't nothing, but also not substantial.
Also consider Tulip mania. Tulips die in a few weeks. All value gone.
TLDR potentially bulk of AI investment is closer to tulips in terms of deprecated / stranded assets past medium term i.e. <10 years, than rail or fiber.
The most insidious thing about this bet isn't that it fails...
It's that it could succeed.
Loosing the bet will only mean lots of ultra rich people have wasted tons of money - winning it means the average person, wherever they're American, Chinese, Russian or European (or wherever else you wanna list) will be fucked... And the ultra rich will be the only beneficiaries.
But nothing makes me think AGI is achievable through LLMs alone, so I guess I don't mind that bet too much. It's just a question of time when it fails - and the failure will likely not be completely catastrophic, as there is actual value in LLMs, albeit much less then the market is valuing it.
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[ 3.8 ms ] story [ 42.7 ms ] threadUSA already bet on software when it let China overtake manufacturing.
Now the only worse thing to betting on AI would be slowing it down inside USA.
But come on, there should be an alternative.
Without diversification, we’re just setting ourselves up for an economic rug pull the moment the AI growth hits the law of large numbers and people realize its not the magic they think it is. Economically? Don’t worry it’ll just be another “oops, your 401k lost a bit, here’s a bailout” moment. AKA, stimulus with sprinkles.
So yeah... keep buying those dips girls and boys.
Call me if you have an act.
Book us if you need to rebuild community.
If true, that's <1% of the population?
I fail to find any plausible explanation for this other than the fact that yes, it is a bubble. Tesla, a car company facing declining sales, an executive exodus, and a CEO who’s more of a liability, is almost a $1.5T company now. An absurd P/E of 259. Sure, P/E isn't the most realiable metric. But, for a company with declining sales, and onslaught from Chinese competitors, a P/E of anything above 50 is absolutely ludicrous. Do people actually buy into the absurdity of humanoid robots and robotaxis?
"Be fearful when everyone is greedy." I’ve cashed out of U.S. stocks, and I think it's wise thing to do when craze is at its peak.
> The hundreds of billions of dollars companies are investing in AI now account for an astonishing 40 per cent share of US GDP growth this year.
In other words, investment in AI is a massive private-sector stimulus program, powering economic growth.
Questions for which no one knows the answer include:
* Will these AI investments earn a positive rate of return in the aggregate?
* Without these investments on AI and their second-order economic effects, would the US economy be growing?
* Are the higher-order effects of AI investments temporary, or can they become self-sustaining (for example, via creation of new jobs and industries)?
https://en.wikipedia.org/wiki/Great_Depression
Then I remember I just did a weeks worth of work in a few hours and feel a lot better about my prospects at least.
AI won't replace people, but it will make people who know how to use it vastly more efficient. In the same way that a tractor made a farmer more efficient.
1) the average American is heavily dependent on equities in their 401k for retirement,
2) so the stock market has to go up,
3) but the stock market is already at record valuations and it's difficult to see how forecasted growth levels justify the current valuation let alone an increased valuation,
4) without revenue growth, the only way for companies to sustain EPS growth is massive reduction in costs,
5) labor is the primary cost for most companies,
6) in come the AI folks telling CEOs that "AI can replace most of their workforce",
7) and so as the article states, everyone goes all in and "America is one big bet on AI"
That leaves us with only 2 possibilities - AI either replaces a significant part of the workforce or it does not. If it does not, the bubble bursts and the economy crashes. If it does, the economy still crashes because consumer spending is 70% of GDP and if the majority of the population becomes unemployed then spending collapses.
I don't think people have realized the latter (or at least they're deliberately choosing to ignore it). That said, I believe the former is more likely (AI not replacing the majority of the workforce in the near future). Either way, buckle up.
I think this “rapid growth at all costs” is going to bite us, and I think it is possible that it’s going to bite us even more than the .Com bubble or the 2008 crash.
I really hope I am wrong, but I don’t see we can expect companies to keep growing if we don’t require them to be profitable.
I think its a bit like trains in the 1800s. Plenty of overspending, plenty of speculation that went bust, but in a lot of ways the country was better for all the madness.
Railroad boom. Most of spending moving heart to build out rail network that increase CONUS rail by +400%. US freight backbone. 50+ year infra. Upgrade signal etc and improve network capacity.
Dotcom Boom. Most of spending in moving earth to build out ~150m of fiber. Agnostic pipes for backbone of internet. Also 50+ year infra. Upgrade switches at nodes to increase network capacity.
AI boom. Most of investment going into chips with <5 year deprecation cycle. Datacenters <10 years, heavily specialized for AI use, i.e. power/cooling makes it inefficient/not economic for general compute.
Looking like ~20% goes to eletricfication capex (if it gets built at all). That's the stranded asset i.e. consolation prize, ~10% (generous) increase in US electrification, which isn't nothing, but also not substantial.
Also consider Tulip mania. Tulips die in a few weeks. All value gone.
TLDR potentially bulk of AI investment is closer to tulips in terms of deprecated / stranded assets past medium term i.e. <10 years, than rail or fiber.
It's that it could succeed.
Loosing the bet will only mean lots of ultra rich people have wasted tons of money - winning it means the average person, wherever they're American, Chinese, Russian or European (or wherever else you wanna list) will be fucked... And the ultra rich will be the only beneficiaries.
But nothing makes me think AGI is achievable through LLMs alone, so I guess I don't mind that bet too much. It's just a question of time when it fails - and the failure will likely not be completely catastrophic, as there is actual value in LLMs, albeit much less then the market is valuing it.