The most optimistic take I've seen: AI is a drain on the entire economy that sucks up all investment and this is why the rest of the economy is basically in a recession. Once the bubble pops, investors will flood back into the real economy and correct the problem.

I'm not optimistic.

Specially when those companies are valued in TRILLIONS. Nothing is worth trillions, somehow these surreal numbers have been accepted as hard fact.

Hahaha this is fine, I am fine with this, what could possibly go wrong

Basically, Dutch Disease.

Yep it's such a fragile situation

Yes! The problem is that we won't accept the full correction that is actually required. We print money, we buy securities, we find ways to prop to reduce the pain but we end up shifting the weakness to other areas of the economy.

Is it just me, or are the bubbles coming closer together these days?

Yes and no.

Yes in the sense that we have a lot more "fad" economies. There is something new so that needs to be EVERYTHING and the market course corrects, often at the cost of hardship for many.

But "no" in the sense of what "bubbles" tend to refer to. Things like the Japanese Bubble Economy where it causes (I forget if it is officially one but) recessions and even depressions.

The AI Bubble is not going to do that (on its own...). Yeah, a LOT of companies are going to be left holding the bag when they realize LLMs can't solve all problems for them AND manifest a Cyber Stana Katic to give them a blowie while it does that. But what will they be left with?

1. A LOT of "prompt engineers": This is bad because that is going to be a LOT of people who, increasingly, went to school to get a degree in something with very little utility. That said... Art History majors have been showing us how to do that for decades and at least they did something they loved on their way to service industry jobs.
2. For the companies that gutted their workforce over the past few years: A need to rapidly hire talented workers who don't require ChatGPT to do their job: This is REALLY good for the people who have been hurting and should actually lead to a lot of job mobility... for the old hats who predated this fad
3. For the companies that purchased hardware: A lot of edge computing devices are going to be of questionable value. But for the folk who "just" bought a shit ton of GPUs from Daddy Jensen? They have a shit ton of GPUs they can either sell for cheap (not horrible) or repurpose (good)

Don't get me wrong. There is going to be upheaval and it is going to be bad. But it is also important to remember that drawings like the above are actively misleading and bordering on manipulative. Because basically all the biggies, except OpenAI, have non-AI uses. Oracle ballooned massively because of the OpenAI injection but... they are still god damned Oracle. Same with nVidia who, when they aren't powering every LLM on the planet, are also one of the companies that makes all the cards that power stuff like computer vision and the like in cars and what not.

Because... remember the dot com bubble? Remember how basically the entire world still runs on The Internet? It was just a case of rebalancing and pivoting for the most part.

All that said... the US is in a really bad way because the fascists have been increasingly gutting the economy and stopping basically any industry that involves manufacturing or communicating with external countries. We are gonna have a massive stock market crash when OpenAI et al pops...

Global economy has inflation since what, middle of the last century? Since slavery and colonies stopped being a thing?

I think it's hard to definitely call something a bubble until it pops.

The definition of a bubble goes something along the lines of market prices exceeding the intrinsic value of the investment they represent, which may be true here?

If you want to read more about this the rough name for these companies was "the magnificent seven" a year or so ago when I last looked at this. A quick Google suggests represent about a third of the SNP 500's value now and have a cape ratio (cyclicly adjusted price to earnings) of ~37 compared to 15-20 being normal.

Edit: the above baseline is incorrect; see sugar_in_tea's comment for a more accurate baseline and some interesting counterpoints

I can't find a good numerical source for the correlated risk within this group, and I suspect analyzing it is very difficult. Given they all used to be a lot more diversified in the past but now a large % of their valuation is predicated on AI historical correlation analysis probably fails. But the diagram linked here suggests it's probably bad to put all your money in these companies. (Or even a 3rd if you are in an s&p 500 index tracker 😶)

Like, none of this definitively says this is a bubble, since if it were possible to divine that the bubble would immediately pop, but it does suggest there is a strong likelihood we are seeing a bubble.

All the economy is a big circle if you draw the circle big enough.

Actually scratch that. There is an economy that is not just one big circle jerk, such as the development of new technologies or the terraforming of deserts into fertile land; as neither of these things ends the way it started; it brought lasting change, and that is true progress.

Actually did you see my presentation that i made about this recently?

The point is to convince the americans to invest in new technologies.

To all those who say that human spaceflight is impossible:

I know right? It’s not a bubble if there are transactions between the different companies in an industry. Nothing here shows that these investments are self-supporting circular, nor that all of this is propping up the economy.

Circle != bubble

Ai will be the best tool to keep the masses stupid since television.

but the circles

I suppose similar in the sense that the housing bubble involved a bunch of rich idiots speculating on bad debt that had been vaguely washed to make it look good and now we have a bunch of rich idiots speculating on AI based on vague promises that it'll be good.

More like the .com bubble but much worse.

Goldman Sachs also though NINA mortgages were a good idea, and they also thought it was a good idea to bundle bad mortgages in with good mortgages, and find a rater to mark them AAA investments.

And then we saw how that worked out.

I wonder what the people over at Bear Stearns think oh wait they gone.

I mean, what's he gonna say?