megopie comments on 'It's going to be really bad': Fears over AI bubble bursting grow in Silicon Valley

[–] megopie@beehaw.org 12 points 1 year ago (2 children)

I mean, given that 1/3rd of the s&P 500s value is in 7 companies who are all heavily invested in AI compute.

I’m sure that the 10% wealthiest who’s consumption makes up over half of consumer spending won’t drastically cut back their spending if they lose a third of their wealth that’s in index funds.

And I’m sure private equity firms that are also heavily invested won’t start trying to liquidate their other assets at the same time.

No way this could see a massive decrease in consumer spending.

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[–] teawrecks@sopuli.xyz 2 points 1 year ago (1 child)

The mag 7 is 1/3 of the S&P500, but that doesn't mean the loss will be limited to 1/3. A those other companies are also dependent on AI and the success of those 7.

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[–] megopie@beehaw.org 3 points 1 year ago

They’re dependent on it indirectly. Like, most of the rest of the economic growth that has gone on in recent years has been from the wealthiest 10% of Americans increasing their consumption of various goods, or continuing consumption even as prices rise while wages stay stagnant.

That 10% has felt comfortable spending money due to the value of their assets growing, being able to liquidate some here and there or using them as collateral for loans.

If they lose a significant portion of 1/3rd of their assets in stock, and no other investments are showing rapid growth, they’ll probably pull back on their spending, which will in turn hurt the rest of the market. That won’t be as quick as the panic around “AI” companies, nor as disastrous.

It will be a slow thing, as companies that have moved towards the high margin premium side of the market see sales dry up on their most profitable products.

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