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I would really hope that nobody considers AI companies to be foundational to the economy the way the housing market is. I know there is going to be people cryi

I would really hope that nobody considers AI companies to be foundational to the economy the way the housing market is. I know there is going to be people crying in Congress with "Think of the 401ks!" but I really want the hype men to feel some pain this time. It's really a shame that it's really the regular people who are going to suffer the majority of the harm when this bubble pops, as the Wall Street insiders get off mostly scot free yet again but I really don't want the government trying to prop up these assholes again.

zerosizedweasle 1y ago
https://www.derekthompson.org/p/this-is-how-the-ai-bubble-will-pop https://www.derekthompson.org/p/this-is-how-the-ai-bubble-wi... Goes into good detail on how the bubble has infiltrated everywhere. Like if you went into a REIT thinking it was safe from the bubble, nope a significant portion of your investment is in the data center buildout
- ambicapter 1y ago
  It seems like an (ugly?) truth that if you don't want to be exposed to bubbles, you have to take lower-return investments, by definition. Because the bubble is raising the high bar of what kind of return people expect on investment, so if you try to get close to that, you're going to end up affected by the bubble. The problem, of course, that no one wants to take a lower return on investment.
  - zerosizedweasle 1y ago
    Yeah, but I guess the point is that it is so big you can't escape it, it's everywhere. So the fallout will not be limited to a segment of the economy, it's going to hurt everywhere.
  - BobaFloutist 1y ago
    And the reason nobody wants to take a lower return on investment is that doing so is trying to time the market. Let's say you heard Trump's talk of tariffs, got spooked when he won the election, and moved your investments. The S&P 500 has gone up ~33% since election day. How much growth can you realistically miss before correctly hedging against a crash still net loses you money? And that's assuming you pick the correct hedge. If the US economy well and truly crashes beyond return, to the point where the S&P 500 is actual garbage that will not recover in the next 5-10 years, that might bode poorly for the dollar, so that's it for your treasuries, money market funds, CDs, etc. Gold is always an option, until it's at an all time high because just as the economy is roaring along a ton of people are nervous. So, you can invest in gold, but it's expensive, which means it could actually dip if we get stability. Ok, so you invest in foreign markets - but the Global Financial Crisis was global, the Great Depression was global, everything was global. What do you actually hedge in? Oil? Well, the rapid development of green energy might actually, finally render that an unsafe investment. Green energy? Think again, the president is on a crusade against it. There's literally nothing that's actually a safe investment, and even if you did find a safe investment, the big crash might not happen until everyone else riding the wave has doubled or tripled their investment, by which point they'll be on par or even above you post crash. I'm actually very happy I'm nowhere near retiring, since regardless of how else you feel of the current governing of the US, I think it would be hard to argue that they're fighting a war against conventional wisdom, and that makes investing very scary.
- scarface_74 1y ago
  I can’t see the case where we won’t need more data centers in the future even if AI is a bubble as more work load is generated and even if it is a bubble. There are real world use cases where you will need ML and inference even if you don’t need to spend money on training.
- triceratops 1y ago
  I thought data centers were always a part of commercial REITs though. Is it just that they've grown as a proportion of REITs?
sidewndr46 1y ago
If the economy is built on growth then AI is absolutely foundational to the economy. It is presently the fastest growing sector of the economy
- jandrese 1y ago
  That's true of every bubble. It's the best thing around until it suddenly isn't. Don't forget that bubble popping doesn't necessarily mean that the sector is dead. The Dot Com bubble popped but people are still selling things on websites. It just means the hype and unrealistic expectations come crashing down to Earth. AI is going to be with us from now on, but it won't become a God with unlimited productivity next year.
marcosdumay 1y ago
> I would really hope that nobody considers AI companies to be foundational to the economy The way people in the US government has been speaking and acting goes against that hope. Instead, it seems to be unanimous that AI will be the foundation of the economy, the US can't lose its leadership on it for even a second (because when it takes over, it will take over in a second), and it's worth breaking every rule, spending every cent to keep, and cannibalizing every other industry if necessary. Honestly, you have to deal with the delusional con-man in power ASAP.
tim333 1y ago
The bailouts are never really for those reasons, propping up AI cos or 401ks or house prices. They are no1 to stop banks collapsing and no2 sometimes to try to stop unemployment going up too much.

zerosizedweasle 1y ago

https://www.derekthompson.org/p/this-is-how-the-ai-bubble-will-pop https://www.derekthompson.org/p/this-is-how-the-ai-bubble-wi... Goes into good detail on how the bubble has infiltrated everywhere. Like if you went into a REIT thinking it was safe from the bubble, nope a significant portion of your investment is in the data center buildout

ambicapter 1y ago
It seems like an (ugly?) truth that if you don't want to be exposed to bubbles, you have to take lower-return investments, by definition. Because the bubble is raising the high bar of what kind of return people expect on investment, so if you try to get close to that, you're going to end up affected by the bubble. The problem, of course, that no one wants to take a lower return on investment.
- zerosizedweasle 1y ago
  Yeah, but I guess the point is that it is so big you can't escape it, it's everywhere. So the fallout will not be limited to a segment of the economy, it's going to hurt everywhere.
- BobaFloutist 1y ago
  And the reason nobody wants to take a lower return on investment is that doing so is trying to time the market. Let's say you heard Trump's talk of tariffs, got spooked when he won the election, and moved your investments. The S&P 500 has gone up ~33% since election day. How much growth can you realistically miss before correctly hedging against a crash still net loses you money? And that's assuming you pick the correct hedge. If the US economy well and truly crashes beyond return, to the point where the S&P 500 is actual garbage that will not recover in the next 5-10 years, that might bode poorly for the dollar, so that's it for your treasuries, money market funds, CDs, etc. Gold is always an option, until it's at an all time high because just as the economy is roaring along a ton of people are nervous. So, you can invest in gold, but it's expensive, which means it could actually dip if we get stability. Ok, so you invest in foreign markets - but the Global Financial Crisis was global, the Great Depression was global, everything was global. What do you actually hedge in? Oil? Well, the rapid development of green energy might actually, finally render that an unsafe investment. Green energy? Think again, the president is on a crusade against it. There's literally nothing that's actually a safe investment, and even if you did find a safe investment, the big crash might not happen until everyone else riding the wave has doubled or tripled their investment, by which point they'll be on par or even above you post crash. I'm actually very happy I'm nowhere near retiring, since regardless of how else you feel of the current governing of the US, I think it would be hard to argue that they're fighting a war against conventional wisdom, and that makes investing very scary.
scarface_74 1y ago
I can’t see the case where we won’t need more data centers in the future even if AI is a bubble as more work load is generated and even if it is a bubble. There are real world use cases where you will need ML and inference even if you don’t need to spend money on training.
triceratops 1y ago
I thought data centers were always a part of commercial REITs though. Is it just that they've grown as a proportion of REITs?

sidewndr46 1y ago

If the economy is built on growth then AI is absolutely foundational to the economy. It is presently the fastest growing sector of the economy

jandrese 1y ago
That's true of every bubble. It's the best thing around until it suddenly isn't. Don't forget that bubble popping doesn't necessarily mean that the sector is dead. The Dot Com bubble popped but people are still selling things on websites. It just means the hype and unrealistic expectations come crashing down to Earth. AI is going to be with us from now on, but it won't become a God with unlimited productivity next year.

marcosdumay 1y ago

> I would really hope that nobody considers AI companies to be foundational to the economy The way people in the US government has been speaking and acting goes against that hope. Instead, it seems to be unanimous that AI will be the foundation of the economy, the US can't lose its leadership on it for even a second (because when it takes over, it will take over in a second), and it's worth breaking every rule, spending every cent to keep, and cannibalizing every other industry if necessary. Honestly, you have to deal with the delusional con-man in power ASAP.

tim333 1y ago

The bailouts are never really for those reasons, propping up AI cos or 401ks or house prices. They are no1 to stop banks collapsing and no2 sometimes to try to stop unemployment going up too much.