nvidia investing in openai, who invests in coreweave, who invests in nvidia is definitely a sustainable economic model and many people are saying it produces the best gdp
smh suddenly leftists don’t want circular economy anymore 🙄
nah but they will totally build a data center that’s more powerful that 10x current human computing power trust me bro they’re genious have you heard of the hyperloop?
Stock market crashes are inevitable because it’s fundamental to how the system works, so a crash is going to happen at some point. The big money is in being able to guess when.
I think size depends on how well the government will be able to step in and limit the damage, so potentially pretty big, but it’ll come down to timing. Ed Zitron says the money is going to run out in 2027, but if big tech keeps coming up with ways to kick the can down the road until a Democrat is back in office there might be some shrewder minds managing the money when the bubble bursts.
I think about this a lot and just remember a thing I read once: “the market can stay irrational longer than you can stay solvent”
That’s a hell of a low bar these days though
John Maynard Keynes
IMO it’s guaranteed to happen, because there is just no return on all those investments. Even the big contracts they keep touting only cover a tiny percentage of the giant hole they dug themselves into. Eventually someone will want their money back.
As for how bad it will be, I really can’t say. I think this whole thing is somewhat separate from the wider, real economy that caters to the actual needs people have, so it might not be super bad. But with that much money vanishing in a garbage fire you are bound to see heavy knock-on effects as real and useful corporations can#t get the loans they need etc.
It’s not separate at all when the financing for new data centers comes at the expense of developing any other tangible assets. Wasn’t the growth of the US GDP only 0.1% this last quarter when counting only sectors not related to AI?
Yea but that effect is already here. The economy is all fake anyway, I am not gonna worry about it too much, it doesn’t deserve it.
I don’t think they’re going to let it pop like 2008. They’ll probably keep it up until there’s some new shiny use for GPUs and data centers and then move onto that, letting the AI market deflate.
I suspect 90% of this is just justification for building more data centers and figuring out what to do with them later. But if some downturn leads into a bunch of data centers closing, then we’re heading for a big crash.
problem is, those gpus are only good for 3 years give or take before becoming obsolete, and those are at least half, if not closer to 60% of the cost of these data center builds
That seems absurd. Those centers have already been around for more than three years. At least AI has been.
If they had to trash 60% of their infrastructure every three years no one would’ve ever invested in this industry.
The Magnificent Seven are seven tech stocks that collectively make up 35% of the S&P 500, which means everyone’s 401k is highly exposed to them and the entire stock market is tied to their success or failure. When the crash happens, the devaluation of these stocks will crash like a tsunami through the rest of the economy. Retirements are fucked, other companies are fucked. AI has eaten so much of the liquid money supply that there won’t be much left sloshing around to provide bridge loans or invest in new companies.
it depends on how many banks have been floating this along. very rich investors rarely invest their own money. they borrow against their perceived wealth and negotiate a return percentage with big institutions to invest in shit like this.
so when it goes bad, those institutions are in the red. and the money they were holding for their clients is suddenly less than what was deposited. that’s pension funds/retirement accounts, endowments, etc.
there’s not enough chairs and the music has stopped, so the biggest institutions win and everyone else, their customers, lose.
additionally, none of those lenders wants to loan anybody anything anymore, so they don’t. that means communities can’t get credit to fix/upgrade infrastructure, projects are halted, and all the people who would do that work are laid off. they can’t make their payments, and another round of defaults hits from the retail end, leading to more toxic assets and more institutions fighting over another shrinking pile.
the whole engine of finance capital seizes with nobody wanting to do anything until the state steps in and takes on all the debt, prints money, and lets the big institutions take advantage of what has become a fire sale.
so we come out in the other side with fewer, larger institutions, owning more and more of the valuable assets and the people being left holding the bag for whatever toxic excrement nobody wanted.
individuals who manage to get through it without losing their income that can continue to save for retirement are deemed “winners”, because if the whole thing doesn’t crater, their retirement investment accounts (if they didn’t have to cash them out / retire in the mean time) will probably recover in valuation over time, especially as they Dollar Cost Average their retirement contributions through the credit crunch/contraction.
its a losers bet, imo, because there is no way to plan or time anything and everybody wants to retire eventually.
hooray for the ‘business cycle’ it gets worse every time but technocratic counter-cyclical tailoring of stimulation and austerity will solve it ‘once and for all’™Tbh, retiring with an income from accrued capital in the stock market is for schmucks. It’s the cushy retirements with 70k annual spending that Americans are striving for. If you just need a house, a bike, good neighbors, and some fruit and nut trees, you can secure that easily in 5-10 years.
The crash will be terrible for people used to finance-borne luxury.
If you just need a house, a bike, good neighbors, and some fruit and nut trees, you can secure that easily in 5-10 years.
well, sure, except people also need healthcare. especially as they age, so that is the saving/working motivator for most because prior to medicare you can lose your house/garden/neighbors & bike before you hit 62 without insurance. and medicare in the US generally fails to pay for any medication unless you pay in premiums.
the simple, low-cost life in the US is increasingly enclosed upon to prevent those of us who would be vagrants from taking full advantage of our modest needs.
if i slip and fall I don’t want to end up unhoused, taking a baton to the head because i fell asleep on a park bench.
Okay, let’s factor that in.
Housing costs maybe 5 years of wages plus 0.05 years of wages per year of retirement if you live alone in a house. Food costs either 0.1 yw/yr if you continue to buy it all, or 0.02 yw/yr plus a bit of gardening labor in retirement. Transportation costs 0.01 years of wages for a baseline, 0.2 yw/yr for lots of travel, 1 year of wages + 0.1 yw/yr for a single-owner car. Health insurance costs up to 0.2 yw/yr on the marketplace, maybe less with Medicare or if you stay healthy into your 70s.
Once you take care of the big hurdle of housing, that’s still as much as 2.5-3 years of retirement per 1 year of working.
there is no “staying healthy maybe” in the US without healthcare. that isn’t a thing you can do your little napkin derivations for… which also don’t include homeowners insurance or property taxes, which are subject to change… sometimes drastic. everything here injures, poisons, or traumatizes people. the only people who think they’re gonna surf above it all by riding their bike (don’t get hit by a car!) and eating kale are the ones not yet noticing what its already done to their bodies and minds.
accidents and diseases don’t care about your choices or plans, especially now that public health has become the latest target of capital formations.
preventative healthcare maintenance and routine access to a physician for diagnosis is the surest way to catch even worse things before they become catastrophies, and that requires insurance + money.
trying to individualize survival in capitalist political economy is playing in their rigged casino, and without insurance you’re going all in on every hand.
also, i dig the idea that a house is 5x wages. real flash back to the 1990s there, unless you’re talking about getting a fracked to shit place in north texas where the groundwater is full of heavy metals and the leafy greens from your garden will let you hear the voices of screaming gods.
which also don’t include homeowners insurance or property taxes
You just glossed over my comment then. 0.05 y~w is 4k on average (using GDPpc), where I am it’s slightly under 2k. This lines up pretty closely with property taxes and homeowners insurance combined. I’m in a location where a 3br house costs less than 5 years of fulltime minimum wage pre-tax income. Also I was using a solo-occupied house as a steelman; anyone socially capable would benefit from having multiple people for each house (and for each car). We’re not trying to mandate retiring in the burbs.
But I guess you’re right. All my experience of living in communes is wrong and illusory.
Guess I’ll go back to plan A of a 40-year standard career and relying on the imperialist economy for my retirement then.
Probably like 70%. The actual bubble is data centers full of GPUs, AI is just the current excuse for them. Maybe they come up with some other use for them, AI investment stops because the ROI is better on the other thing, and this sucks for people investing in OpenAI or whatever, but doesn’t crash the whole system.
How bad if it does? The numbers will dwarf the 2008 crash, but the effects on normal people will be similar - nobody’s hiring, you can’t get a loan, any savings you have won’t go as far as they were supposed to, and if you graduate college during the crash you’re permanently fucked. This one might last longer. The 2008 crash had the dubiously mitigating factor that home prices crashed and people who happened to be buying then made it out okay. This one won’t have anything like that for normal people, just for any startups that need a cheap deal on renting GPUs.
Probably like 70%. The actual bubble is data centers full of GPUs, AI is just the current excuse for them. Maybe they come up with some other use for them, AI investment stops because the ROI is better on the other thing, and this sucks for people investing in OpenAI or whatever, but doesn’t crash the whole system.
They’ve been doing this for a while. Crypto mining at home, followed by all the shit coins and NFT bullshit, for whatever reason the creeps behind GPUs figure out ways to keep the gravy train rolling. like I said below, I think the biggest upshot of this will be massive consolidation by the tech monopolies.
Yeah, they sure have.
The root of all of this is that growth stocks are massively overvalued compared to dividend stocks right now. The big tech companies (all growth stocks) have all maxed out how much money they can actually make in their markets, so they need something to do with their excess profit. The normal thing to do would be to start paying out dividends and cutting costs, but then they’d be dividend stocks, and their stock prices would plummet. So instead they need to find ways to reinvest money in their own business. But they’re mature businesses that don’t actually need all this reinvestment, so they just buy ever more datacenters full of GPUs, because that’s expensive and plausibly something that might be useful to them. But something has to actually use all of these GPUs so it doesn’t look completely stupid, so we’ve had the last few tech bubbles.
But I think it’s going to be hard to pivot again, since the hype machine for AI is that they’re going to do AGI and build god. I don’t know what promise their hype men can come up with that tops that.
It will happen. There isn’t the capacity to produce enough value to offset the market caps of ai related companies.
How bad? When you remove ai numbers from the stock market and gdp were in bad recession. The closest analog is the housing crisis but I think everything’s linked up even more now and the underlying state of the economy is worse.
We also can’t rely on the fed to cut rates because it’s low key facing a crisis of confidence in the veracity of its signals.
The chances are 100%. It is not a matter of if, it is a matter of when.
How bad will it be? Global market crash. 2008 but multiplied by 10.
Will shopping sites still have those cute AI helper buddies?
A lot of people will loose their jobs.
Some people will loose wealth, some rich people will get richer.
AI won’t go away but some applications/providers/services will. Some businesses that went all-in will go under and leave people with hard to transfer skill without a job.
Bad for pensions too I guess.
I know zero about finance other than being constantly crushed under the jackboot of capital so here’s my opinion: It will happen, won’t actually be too bad,l; it will just make it clear that we are I. A recession and this in turn will be used as another excuse for layoffs and worker control measures. Lots of startups won’t be able to raise another round of funding and the founders will move on to whatever the next fraud is. The companies who have been building those awful gpu centers will rent out capacity to mine crypto while spinning up another NFT type way to cheat people.
There will be massive consolidation, OpenAI and Anthropoic will get acquired by monopolies who keep it closed source, and the gvt will sign off on it because it no longer releasing models keeps the tech away from the Chinese.
The upside will be that they will stop shoehorning ai into the app for your smart basketball or whatever.
0 chance. they will continually be bailed out by the federal reserve
The Fed kinda used up all of their ammunition to get out of the GFC and keep this facade afloat.
Not to say they can’t make up some new mechanism but I suspect the next crash is going to dwarf the GFC. Too many cascading events. A lot of regular people’s money is tied up in this shit.
they have infinite money and valuations can be faked
but that would devalue investments and holdings globally which could accelerate the abandonment of the dollar as the reserve currency
Which is a better outcome for the government? A slow but steady acceleration of the end of the US dollar as the primary global reserve currency, or the complete and permanent collapse of the US economy which also results in the end of the US dollar as a reserve currency?
The Fed is between a rock and a hard place and is aware of that fact that the only option moving forward is managed decline and is aware that they need to hold their cards close to their chest to avoid inciting investor panic. I suspect this is part of the reason for the Trump admin’s constant frustration with the Fed.
This actually isn’t that true. The Fed has largely rebuilt their position via interest rates, so there’s lot of room to cut. And as far as their assets, they’re down to a little above $6 trillion, down from a peak of $9 trillion, so again they have a lot of room there to absorb bad assets.
100%. The capitalists will find a way to crash the economy every 10 years.
Yes.
This article is for paid subscribers, but the free intro is so long it pretty much tells the whole story: https://www.wheresyoured.at/openai400bn/
