HN Explorer

Ask HN: Is anyone shorting the overspend in AI yet?

19 points by ggm ↗ HN
I and a small cohort of friends truly believe that the "$1T" floats are going to burn capital. We think this is a disaster of landgrab spend, and that the cost of a token cannot be recovered by future commercial use.

If this theory is correct, then following on from the housing debt crisis, this is a hollow shell and so somebody in finance should be shorting the floats, and betting on a crash to clean up.

Polymarket betting aside, is anyone able to confirm that there are funds looking at a short play in the AI space, or is everyone on-board with things and nobody is taking the other side of the bet?

I am not in fintech or investing, I am not seeking alpha to do this, I don't invest directly. I am however interested in validating my theory that somebody smart out there sees a huge upside in the explosion when this attempt to buy market share in Unicorn juice explodes.

NVDA as an example has under 2% of its trade in shorts. I can't tell if thats big or small TBH. Feels small.

16 comments

[ 2.7 ms ] story [ 35.3 ms ] thread
freakynit
Did this research last week on the same thing:

NVIDIA (NVDA) — The Short / Underperformance Thesis - https://nvidia-stock-analysis.pagey.site/

This is pump and dump on the largest scale we have ever seen. It's effectively privatize the profits and socialize the losses.

Schiendelman
This doesn't make sense. It completely misses that there are tons of other companies that will happily take the Nvidia capacity at the same price if their biggest customers reduce spend.
bigyabai
Who replaces Nvidia? That's the 5 trillion dollar question, and nobody has stepped forward to answer it.

The closest the industry came to replacing CUDA was with Khronos and OpenCL, but that ship has sailed. CDNA, Apple Silicon, Intel Inside, none of them are trying to take Nvidia's crown. The niche for HPC will exist, and Nvidia continues to serve the niche while others turn up their nose.

For my money, shorting Nvidia is like betting on Glass Joe to beat Mike Tyson. There's going to be incredible cloud spend on unglamorous stuff like defense and automated computer vision, and that will keep Nvidia's demand afloat even at a wild valuation.

rowbin
Many have theorized this. But i wouldn't bet money on it, the timing is just too unpredictable IMO.
NoahZuniga
The market can stay irrational longer than you can stay solvent.
da-x
AFAIK Michael Burry is shorting it via PUT options ­­— can look into what he is doing.
roryirvine
A related question might be whether anyone is seriously preparing for whatever opportunities present themselves after the bubble bursts.

For example, after the dot com bust, there was plenty of money to be made in aggregating bankrupt or underutilised telecoms assets - endless duct shares, dark fibre, and networking kit which could turn a profit if bought cheaply enough in a fire sale.

Is anyone preparing to bid pennies on the dollar for bankrupt AI datacentres? I can see how it might potentially make sense to do so in places like the EU or UK where increasing data sovereignty concerns might make locally-based small/mid-scale private inference an attractive proposition if the capital costs are low enough.

TimByte
I think a lot of people are mixing two different ideas: AI is overhyped and AI company stocks are about to crash. The first might well be true, but the second might not be. The dot-com bubble burst too, but the internet didn't go away. The question is more about who will be left standing once the era of endless capex growth ends.
atleastoptimal
Betting against deep learning has been a losing game over the past 5 years.

As long as the models keep getting better, you will keep losing betting against them.

bnova
Are you trying to do LEAP puts?
Mistletoe
There is no need to short. Just simply being in cash or assets uncorrelated to the stock market will be plenty. Study what outperformed after the dot com bubble burst. Things like gold, small cap value, and long term treasuries did well. And the great thing is you don’t have to time it, those assets historically provide great returns rain or shine.

https://portfoliocharts.com/2021/12/16/three-secret-ingredie...

giantg2
Instead od shorting NVIDIA, why not invest in stocks that would benefit from AI failures? Or diversify by investing in AI competitors, such as Alphabet (vertical integration with TPUs).
karakoram
While shorting can work for some people, I believe people who actually understand the underlying technology and are actually smart can make way more money riding the wave.

I don't mean just with stocks or in the market.

If truly know what's going on behind the scenes both technically and professionally, you'll know how to fully milk this super-trend.

The fact its a bubble or the spend is circular is besides the point, if you really know what you're doing, are in the right location, have access to the right people, making millions or billions is difficult but very much possible.