5 ms·

The current bubble is getting scary. When this thing pops the blast it’s going to be a real mess. The big tech firms will hurt, fire some execs in a show of “ma

by JCM9 1y ago

The current bubble is getting scary. When this thing pops the blast it’s going to be a real mess. The big tech firms will hurt, fire some execs in a show of “making changes,” do a bunch of layoffs across “AI” teams to show the market they’re pivoting and getting costs in order, and move on. The startups ecosystem will suffer extensive and catastrophic damage. The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors. Some of the “AI startups” will be sold in fire sales for parts so investors can at least minimize losses and most of the rest will vaporize, the likes of which we haven’t seen since financial firms imploded in 2008. I hope I’m wrong, but the most experienced trusted folks I know are already repositioning themselves to weather the upcoming storm.

philipwhiuk 1y ago
The real question is if enough fails to cause systemic risk. Hopefully the GSIBs ( https://en.wikipedia.org/wiki/List_of_systemically_important_banks https://en.wikipedia.org/wiki/List_of_systemically_important... ) aren't too badly exposed.
- zerosizedweasle 1y ago
  I think the debt is what makes the risk systemic. Sure it can be overvalued, but alone that won't cause a generationally painful economic meltdown. It's the spending and debt that make something that is a bubble into something truly dangerous. All the exotic private credit and structured finance that is powering this thing along with the lack of any viable revenue stream to keep up with the debt plus interest that make this thing so dangerous. Sure maybe Meta can take a huge hit and limp away (it's still gonna be very painful for them and people who own a lot of its stock) but can OpenAI, can CoreWeave or any of the firms that lent to them? It's a domino effect. The fact that Meta is doing this is a huge red flag. The problem is the market is rewarding this endless cash burn without any way to generate the appropriate revenue. Once reality catches up there are a ton of knock on effects.
diggan 1y ago
> I hope I’m wrong I kind of hope you're right. Any "hyped" industry/sector is bound to eventually needing to get back to reality, and focus on things that actually work, rather than spraying and praying prototypes and over-hyping them. The individuals and companies building real products that actually improve something will stick around, either as they are, or at least as ideas, and most of the interesting stuff tends to happen when the hype dies down, as the builders continue as they were, but all the rest of the riffraff disappears. There will still be a community and the ideas won't magically disappear, just smaller and more focused, which to me sounds like a much needed improvement over the current state of things.
- JCM9 1y ago
  Well we’re gonna get, and need, a big correction. I just hope it’s a “big correction” and not a financial implosion that sets the startup ecosystem back a generation.
- qsort 1y ago
  > I kind of hope you're right. I couldn't care less if big tech gets knocked down a peg, but in many quarters the AI boom is what's keeping the lights on. A market correction of that magnitude would mean a lot of pain for a lot of normal people, it's not exactly something I'm cheering on...
  - Hamuko 1y ago
    If the hype doesn't line up with the fundamentals, then the bubble will have to burst sooner or later.
  - zwnow 1y ago
    But not knocking it down will also mean a lot of pain for the people? Just look at the unsustainable electricity demand and skyrocketing prices big tech is pushing upon the small folk due to their explosive needs for more and more big data centers.
  - diggan 1y ago
    As someone who've jumped on previous hype-trains, most of us who get involved with "frontiers" know it's over-hyped, have more realistic perspective of it and are more-or-less ready for what eventually will come. I'm sure most people heavily invested into AI (energy, money or time-wise) know the consequences of the bet they've done, they're not exactly just trying to earn a living. If the crash/bubble-pop would have change of impacting actual working class folks outside of the AI bubble, I'd agree with you. But I don't think the bubble is so large, the people impacted will be people who willfully made a risky bet.
morninglight 1y ago
No problem. They can use some of that data center compute power to mine bitcoin. https://www.whitehouse.gov/presidential-actions/2025/03/establishment-of-the-strategic-bitcoin-reserve-and-united-states-digital-asset-stockpile/ https://www.whitehouse.gov/presidential-actions/2025/03/esta...
uxhacker 1y ago
It’s pretty scary. According to Barron’s, MicroStrategy, a bitcoin treasury company, alone makes up about 5% of the U.S. convertible bond market. That’s remarkable given that it isn’t a typical tech or biotech growth company issuing convertibles, but essentially a Bitcoin treasury company.
- latchkey 1y ago
  Not even AI!
fhd2 1y ago
What about the rest of the economy? Deutsche Bank recently said that the AI hype is the only thing holding the US stock market together. And if that crashes, it tends to ripple world wide. Scary stuff, at least to someone who doesn't know all that much about market resilience. With what little I know, I'm hoping for a soft pop with slow deflation. But big tech seems to just pump harder right now.
- MarcelOlsz 1y ago
  I hope it all burns. Zero sympathy whatsoever for AI-anything. It's all a heaping pile of trash.
  - techblueberry 1y ago
    You hope the garbage heap surrounding your house burns?
    - MarcelOlsz 1y ago
      [flagged]
      - dotnet00 1y ago
        How about you start by turning off your own computer?
        MarcelOlsz 1y ago
        [flagged]
      - techblueberry 1y ago
        I’m probably more of a Luddite then you, but it would be nice if it would fail without extending into the rest of the economy.
        1y ago
bix6 1y ago
> but the most experienced trusted folks I know are already repositioning themselves to weather the upcoming storm. Repositioning in what way?
- bluGill 1y ago
  The same way they always do every single year: they re balance their portfolio so they are never heavily invested in any one thing. If you believe in AI and want to bet strongly in it - which some experienced folks do - you take 5% of your portfolio and bet that in AI. The other 95% is invested in a diversified portfolio. There are many inexperienced investors. Anyone can ride a bubble up and make a lot of money. There is no reason to think you can call the top of a bubble (or if there is a bubble!) consistently enough to bet on it.
  - bix6 1y ago
    And what about in the private markets? YCs entire recent cohort was AI alongside many of the “top” firms.
    - bluGill 1y ago
      I'm not 100% sure how YC works, but generally places like that are invested in by people who use it as the risk portion of the portfolio. So you while YC might be 100% in AI, the people behind YC or only 5% in and so it works out. If you have 100% in any company then you are diversified and need to fix your portfolio. It is generally best for a company to specialize in something they do well. It is possible that YC has picked winners because their specialize in this, and thus even though the AI bubble collapses they are okay. Who knows - but this is something specialists can do in some cases
maccard 1y ago
> The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors I don’t think this is likely. We’ve seen VCs overextend into social networks, “sharing economy”, B2BSAAS, machine learning, developer tools, video games and crypto, in the last 15 years, and they have very little to show for it. Something new will come along and they’ll invest in that.
- fhd2 1y ago
  VCs typically invest money invested in them, so if that dries up, regardless of what dream they want to chase, they can't. The hypes you list all happened, but I don't think I've seen anything in the last 20 years that even comes close to the current AI hype.
MangoToupe 1y ago
> this wipes out a bunch of VCs and investors Hard to see this as a bad thing.
mbesto 1y ago
> The startups ecosystem will suffer extensive and catastrophic damage. These a feature, not a bug of how the startup ecosystem works. > The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors. Once again, a feature. There's too many VCs and too many funds. > the likes of which we haven’t seen since financial firms imploded in 2008. Institutional financials firms dwarf VC private capital. This alarmist comment makes it sound like a nuke going off in a Nevada desert is going to kill a major US city.
james_marks 1y ago
What you’re describing is my understanding of how VC is designed to work. I don’t even mean that as cynical— the model is designed to spread risk and let winners emerge, both in company leaders and technology. That necessarily means periodic culling.
reaperducer 1y ago
Some of the “AI startups” will be sold in fire sales for parts so investors can at least minimize losses and most of the rest will vaporize Sometimes literally. Every time a tech bubble pops, it's an opportunity to upgrade your work-from-home furniture cheap. I've gotten some nice chairs and even have a nice coffee table that used to grace an office lobby in the old WaMu tower in Seattle. I guess that makes me a home furnishings vulture.
port11 1y ago
The banking sector in the US had assets north of 12 trillion dollars. AI last year had about 100–150 billion dollars of market cap. I think because we hear about AI so much, we tend to exaggerate its importance?

by JCM9 1y ago

philipwhiuk 1y ago

The real question is if enough fails to cause systemic risk. Hopefully the GSIBs ( https://en.wikipedia.org/wiki/List_of_systemically_important_banks https://en.wikipedia.org/wiki/List_of_systemically_important... ) aren't too badly exposed.

zerosizedweasle 1y ago
I think the debt is what makes the risk systemic. Sure it can be overvalued, but alone that won't cause a generationally painful economic meltdown. It's the spending and debt that make something that is a bubble into something truly dangerous. All the exotic private credit and structured finance that is powering this thing along with the lack of any viable revenue stream to keep up with the debt plus interest that make this thing so dangerous. Sure maybe Meta can take a huge hit and limp away (it's still gonna be very painful for them and people who own a lot of its stock) but can OpenAI, can CoreWeave or any of the firms that lent to them? It's a domino effect. The fact that Meta is doing this is a huge red flag. The problem is the market is rewarding this endless cash burn without any way to generate the appropriate revenue. Once reality catches up there are a ton of knock on effects.

diggan 1y ago

> I hope I’m wrong I kind of hope you're right. Any "hyped" industry/sector is bound to eventually needing to get back to reality, and focus on things that actually work, rather than spraying and praying prototypes and over-hyping them. The individuals and companies building real products that actually improve something will stick around, either as they are, or at least as ideas, and most of the interesting stuff tends to happen when the hype dies down, as the builders continue as they were, but all the rest of the riffraff disappears. There will still be a community and the ideas won't magically disappear, just smaller and more focused, which to me sounds like a much needed improvement over the current state of things.

JCM9 1y ago
Well we’re gonna get, and need, a big correction. I just hope it’s a “big correction” and not a financial implosion that sets the startup ecosystem back a generation.
qsort 1y ago
> I kind of hope you're right. I couldn't care less if big tech gets knocked down a peg, but in many quarters the AI boom is what's keeping the lights on. A market correction of that magnitude would mean a lot of pain for a lot of normal people, it's not exactly something I'm cheering on...
- Hamuko 1y ago
  If the hype doesn't line up with the fundamentals, then the bubble will have to burst sooner or later.
- zwnow 1y ago
  But not knocking it down will also mean a lot of pain for the people? Just look at the unsustainable electricity demand and skyrocketing prices big tech is pushing upon the small folk due to their explosive needs for more and more big data centers.
- diggan 1y ago
  As someone who've jumped on previous hype-trains, most of us who get involved with "frontiers" know it's over-hyped, have more realistic perspective of it and are more-or-less ready for what eventually will come. I'm sure most people heavily invested into AI (energy, money or time-wise) know the consequences of the bet they've done, they're not exactly just trying to earn a living. If the crash/bubble-pop would have change of impacting actual working class folks outside of the AI bubble, I'd agree with you. But I don't think the bubble is so large, the people impacted will be people who willfully made a risky bet.

morninglight 1y ago

No problem. They can use some of that data center compute power to mine bitcoin. https://www.whitehouse.gov/presidential-actions/2025/03/establishment-of-the-strategic-bitcoin-reserve-and-united-states-digital-asset-stockpile/ https://www.whitehouse.gov/presidential-actions/2025/03/esta...

uxhacker 1y ago

It’s pretty scary. According to Barron’s, MicroStrategy, a bitcoin treasury company, alone makes up about 5% of the U.S. convertible bond market. That’s remarkable given that it isn’t a typical tech or biotech growth company issuing convertibles, but essentially a Bitcoin treasury company.

latchkey 1y ago
Not even AI!

fhd2 1y ago

What about the rest of the economy? Deutsche Bank recently said that the AI hype is the only thing holding the US stock market together. And if that crashes, it tends to ripple world wide. Scary stuff, at least to someone who doesn't know all that much about market resilience. With what little I know, I'm hoping for a soft pop with slow deflation. But big tech seems to just pump harder right now.

MarcelOlsz 1y ago
I hope it all burns. Zero sympathy whatsoever for AI-anything. It's all a heaping pile of trash.
- techblueberry 1y ago
  You hope the garbage heap surrounding your house burns?
  - MarcelOlsz 1y ago
    [flagged]
    - dotnet00 1y ago
      How about you start by turning off your own computer?
      - MarcelOlsz 1y ago
        [flagged]
    - techblueberry 1y ago
      I’m probably more of a Luddite then you, but it would be nice if it would fail without extending into the rest of the economy.
      - 1y ago

bix6 1y ago

> but the most experienced trusted folks I know are already repositioning themselves to weather the upcoming storm. Repositioning in what way?

bluGill 1y ago
The same way they always do every single year: they re balance their portfolio so they are never heavily invested in any one thing. If you believe in AI and want to bet strongly in it - which some experienced folks do - you take 5% of your portfolio and bet that in AI. The other 95% is invested in a diversified portfolio. There are many inexperienced investors. Anyone can ride a bubble up and make a lot of money. There is no reason to think you can call the top of a bubble (or if there is a bubble!) consistently enough to bet on it.
- bix6 1y ago
  And what about in the private markets? YCs entire recent cohort was AI alongside many of the “top” firms.
  - bluGill 1y ago
    I'm not 100% sure how YC works, but generally places like that are invested in by people who use it as the risk portion of the portfolio. So you while YC might be 100% in AI, the people behind YC or only 5% in and so it works out. If you have 100% in any company then you are diversified and need to fix your portfolio. It is generally best for a company to specialize in something they do well. It is possible that YC has picked winners because their specialize in this, and thus even though the AI bubble collapses they are okay. Who knows - but this is something specialists can do in some cases

maccard 1y ago

> The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors I don’t think this is likely. We’ve seen VCs overextend into social networks, “sharing economy”, B2BSAAS, machine learning, developer tools, video games and crypto, in the last 15 years, and they have very little to show for it. Something new will come along and they’ll invest in that.

fhd2 1y ago
VCs typically invest money invested in them, so if that dries up, regardless of what dream they want to chase, they can't. The hypes you list all happened, but I don't think I've seen anything in the last 20 years that even comes close to the current AI hype.

MangoToupe 1y ago

> this wipes out a bunch of VCs and investors Hard to see this as a bad thing.

mbesto 1y ago

> The startups ecosystem will suffer extensive and catastrophic damage. These a feature, not a bug of how the startup ecosystem works. > The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors. Once again, a feature. There's too many VCs and too many funds. > the likes of which we haven’t seen since financial firms imploded in 2008. Institutional financials firms dwarf VC private capital. This alarmist comment makes it sound like a nuke going off in a Nevada desert is going to kill a major US city.

james_marks 1y ago

What you’re describing is my understanding of how VC is designed to work. I don’t even mean that as cynical— the model is designed to spread risk and let winners emerge, both in company leaders and technology. That necessarily means periodic culling.

reaperducer 1y ago

Some of the “AI startups” will be sold in fire sales for parts so investors can at least minimize losses and most of the rest will vaporize Sometimes literally. Every time a tech bubble pops, it's an opportunity to upgrade your work-from-home furniture cheap. I've gotten some nice chairs and even have a nice coffee table that used to grace an office lobby in the old WaMu tower in Seattle. I guess that makes me a home furnishings vulture.

port11 1y ago

The banking sector in the US had assets north of 12 trillion dollars. AI last year had about 100–150 billion dollars of market cap. I think because we hear about AI so much, we tend to exaggerate its importance?