I think my theory into contagion would be that There’s been lots of talk about these companies starting to rack up debt, and I think AI is so tied into the US GDP that things like -
If the stock market crashes, there’s lots of talk about how wealth and debt are interlinked. Could the crash be general enough to start calls on debt backed by stocks.
My recollection in 2008 was that we didn’t learn about how bad it was until after. The tech companies have been so desperate for a win, I wonder if some of them are over their skis in some way, and if there are banks that are risking it all on AI. (We know for some tech bros think the bet on AI is a longtermist like bet; closer to religion than reason and that it’s worth risking everything because the payback could be in the hundreds of trillions)
Combine this with the fact that AI is like what - 30% of the US economy? Magnificent 7 are 60%?
What happens if sustainable PE ratios in tech collapse. Does it take out Tesla?
Maybe the contagion is just the impact on the US economy which, classically anyways has been intermingled with everything.
I would bet almost everything that there is some lie at the center of this thing that we aren’t really aware of yet.
> Combine this with the fact that AI is like what - 30% of the US economy? Magnificent 7 are 60%?
Nowhere close. US GDP is like $30 trillion. Open AI revenue is ~$4 billion. All the other AI companies revenue might amount to $10 billion at most, and that is being generous. $10 billion/ $30 trillaion is not even 1%.
You are forgetting all those "boring" sectors that form the basis of economies like agriculture and energy. They have always been bigger than the tech sector at any point, but they aren't "sexy" because there isn't the potential "exponential growth" that tech companies
Small quibble, doesn't challenge your overall point, but as I understand it their revenue is somewhat higher than you say.
The Open AI revenue was ~$4 billion for the first half of the year; Anthropic recently reported a rate (which isn't total revenue, I know) equivalent to about $10 billion/year; NVIDIA's sales are supposed to be up 78% this quarter due to AI sales, reaching $39.33 billion, so plausibly ($39.33/1.78)*0.78 ~= $17 billion from AI in that quarter (rate, again yes I know, of $68 billion/year). So I can believe AI is order-of $100 billion/year economically… to US businesses with customers almost everywhere important except possibly China.
But just to re-iterate, this doesn't change your point. Even 100 B / 30 T is only one third of a percent.
It may well be that an AI bubble burst is the tipping point, but I think that tipping point was coming either way.
The US admin has been (almost desperately) trying to prop up markets and an already struggling economy. If it wasn't AI, it could have been another industry.
I think AI is more of a sideshow in this context. The bigger story is the dollar losing its dominant position , money draining out into Gold/Silver/other stock markets, India buying oil from Russia in Yen, a global economy that has for years been propped up by government spending (US/China/Europe/...), large and lasting geopolitical power balance shifts, ...
These things don't happen overnight, and in fact over many years for USD holdings, but the effects will materialize.
Some of the above (dollar devaluation) is actually what the current admin wanted, which I would see as an admission of global shifts. We might see much larger changes to the whole financial system in the coming decades, which will have a lot of effects.
If the stock market crashes, there’s lots of talk about how wealth and debt are interlinked. Could the crash be general enough to start calls on debt backed by stocks.
My recollection in 2008 was that we didn’t learn about how bad it was until after. The tech companies have been so desperate for a win, I wonder if some of them are over their skis in some way, and if there are banks that are risking it all on AI. (We know for some tech bros think the bet on AI is a longtermist like bet; closer to religion than reason and that it’s worth risking everything because the payback could be in the hundreds of trillions)
Combine this with the fact that AI is like what - 30% of the US economy? Magnificent 7 are 60%?
What happens if sustainable PE ratios in tech collapse. Does it take out Tesla?
Maybe the contagion is just the impact on the US economy which, classically anyways has been intermingled with everything.
I would bet almost everything that there is some lie at the center of this thing that we aren’t really aware of yet.