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Up until this point, the potential for an AI bust blast radius was limited to corporate investors, but this is going to cause regular retail/401k investors to g
by pseudosavant 4mo ago
Up until this point, the potential for an AI bust blast radius was limited to corporate investors, but this is going to cause regular retail/401k investors to get exposure, which could have far bigger impacts on a downturn.
Not to mention the insane wake-up call it is going to be for these AI stocks when 3 months after they launch they have to start making earnings calls and showing their financials. That quarter-by-quarter pressure and scrutiny is no joke, and probably the biggest downside of going public.
I'm bullish on AI, but kind of bearish on any specific AI company. None of the initial big dotcom companies like AOL or Yahoo survived at the scale they briefly had.
- anukin 4mo agoI thought you could intelligently allocate 401k. I don’t think mine was etfs of nasdaq or s&p for some time now. Ever since Tesla got in
- arrowleaf 4mo agoMost (all?) 401k plans limit you to a pre-picked list of ETFs and mutual funds you can invest in. Not to mention the standard advice for decades has been 'broad market index fund'.
- dsp 4mo agoDefinitely not all. Look into 401(k) self-directed brokerage accounts.
- Dig1t 4mo agoIf your plan uses Fidelity you can move your 401k into Brokeragelink and that lets you pick individual stocks. Schwab, TIAA, Alight and some others also have something similar.
- qznc 4mo agoAfaik this is the first time that an IPO is big that it immediately gets a significant share of a broad market index fund. The rules among the providers are actually quite diverse, so it's complicated. The Rational Reminder podcast discussed it in April: https://rationalreminder.ca/podcast/406 https://rationalreminder.ca/podcast/406 Their conclusion: It might be bad, but so be it. No need to change strategy.
- lanthissa 4mo agoif you want to personally manage your risk you can by taking a small short position or buying long dated puts. It being in the public markets is something you can deal with if you want. It being in private markets means you cannot choose to participate in the upside if you want.
- nothercastle 4mo agoThe episode was excellent
- mnicky 4mo agoGood thing is that index funds don't hold stocks at market capitalization but only at free float value. So a company whose shares are mostly held by founders, employees, and strategic investors gets a weight well below its headline valuation.
- BoggleOhYeah 4mo agoMost don’t. The one that is the center of much of the controversy around these IPOs, NASDAQ-100, doesn’t use float adjustments. A lot of people have been using it to passively invest in AI (via QQQ). It’s nonsensical for a variety of reasons but we live an era of the stock market just being another casino…
- mnicky 4mo agoI believe it's the opposite :) All major indices (S&P500, MSCI, FTSE...) use free-float adjustments. And recently also NASDAQ - they've changed to cap of 3x the value of free-floating shares.
- BoggleOhYeah 4mo agoYou are correct. That’s what I intended to say but I see that worded that comment unclearly.
- ai_fry_ur_brain 4mo ago95% of people do not bother and just park everything in S&P 50/100
- derwiki 4mo agoWith BrokerageLink you can invest in anything
- huflungdung 4mo ago[dead]
- bwhiting2356 4mo agoAmazon was founded in 1994
- radlad 4mo agoAs I recall, Amazon also famously didn't turn a profit for ages - but they were also capable of turning one much earlier than they did. Are AI companies capable of turning a profit today if they turn some knobs?
- acdha 4mo agoYes - IIRC, Amazon was profitable on books by 1996, with other sectors following as they expanded and it was clear that they could post profits any time they wanted by slowing expansion. It was surreal through the bubble years to see “analysts” equating them with companies which were losing money on every sale with no clear way to change that.
- madars 4mo agoExactly right. Even though ride sharing industry lost money in subsidy arms race and side bets it was likewise fundamentally sound in major metros since early on. Popular "analyses" kept equating Uber/Lyft with firms losing money on every sale with no path to fix it but the demand was always there as riders had already left taxis and transit on reliability and convenience grounds.
- ashdksnndck 4mo agoThe narrative is that inference on existing models is profitable. All of the profits and many billions of additional capital invested go into training the next model, which is some multiple more expensive to train than the last. Each new model generation also leads to more revenue growth. Newer models are more compute-efficient when distilled (so could possibly be higher margin) but also they work on longer time-horizon tasks and can make greater use of test-time compute which increases token counts. So the inference ROI on each model can pay back the cost of training it, but future growth demands put all that money and more into training the next model. The numbers we’d need to prove whether this is true are not public, but it makes sense and fits what info we do have. Theoretically, if training more expensive models stops resulting in better capabilities or isn’t economically viable, the labs can shift gears into making profit on old models. A lot of future growth is priced in so this would lead to a collapse in share price if it happens anytime soon. There’s a story out that Anthropic might be profitable this quarter. This is in one sense bad news - it means that the company wasn’t aggressive enough about acquiring capacity last year, because they didn’t foresee how fast their inference business would grow. Anthropic is now forced to make suboptimal choices about serving existing users vs. training the next model (need to scrounge for capacity by paying other players like SpaceX). And as a Claude Code user I feel like I’ve been affected by that, what with the random outages and performance degradations.
- panarky 4mo agoIf we're doing historical comparisons, there was so much hype for AOL and Yahoo that drove valuations far beyond the economics. In time, the hypesters were proved wrong. In contrast, there was overwhelming doom and gloom for Google's IPO, in spite of their incredible growth and margin economics. In time, the doomers were proved wrong. There's so much doom and gloom about Anthropic that directly contradicts their astounding growth and margins. For a long-term investor, Anthropic is looking a lot more like Google not AOL. I can only hope the doomer narrative dominates until I can get a few shares at a reasonable valuation. Vibes are almost always wrong. Ignore the vibes and focus on revenue growth rates and inference margins.
- ifwinterco 4mo agoI don't think it's really doom and gloom, that's mostly on here. The normies are all still excited/scared and the valuation based on secondary trading is going up and up. Maybe not quite as crazy as the dot com boom but I'd say the current environment for AI and related equities is a lot closer to the mid/late 90s than 2004
- panarky 4mo agoNormies are on fire for SpaceX, where the economics are horrible and the hype is off the charts. Normies have never heard of Anthropic, where the economics are incredible and doom vibes are pervasive.
- boelboel 4mo agoI think both have a similar amount of people who know about it. But it might just be my circle which is mostly in finance and some in engineering/medicine. These are also the type of people who actually invest. There's little doom vibes among those who're older if anything they're the one who think we'll get to some agi type situation.
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- lanthissa 4mo agoyou cant have it both ways, the public can either have exposure and capture the upside or not. there are ways for you to manage your risk if it in public markets, theres nothing you can do if its in private.
- JumpCrisscross 4mo ago> corporate investors What? No. VCs, pensions, etc aren’t corporate investors in any common terminology.
- EugeneG 4mo agoReminds me of this... During Apple's 1980 Initial Public Offering (IPO), Massachusetts regulators banned residents from purchasing the stock. The state's securities regulators deemed the offering "too risky" and "over-valued," enforcing a state rule that prohibited IPOs with a price exceeding 25 times earnings.
- groundzeros2015 4mo agoAnd it was probably prudent to wait. The investors who wanted to take more risk could do that. Retroactive reasoning with investments (if I just bought X) is insane.
- cj 4mo agoIndeed. They IPO'd in 1980, yet their stock price was below the IPO price for the majority of 1980-1987. It also fell to its IPO price for an extended period of time between 1996-1998. You hypothetically could have waited 20 years after the IPO before investing without giving up theoretical gains.
- lmm 4mo ago> The investors who wanted to take more risk could do that. What? How? By moving out of Massachusetts? I could understand banning such a speculative stock for e.g. pension funds or whatever, but blocking private individuals from buying with their own money seems insane.
- deleted 4mo ago[deleted]
- groundzeros2015 4mo agoYou’re right. I read this as banned the state from buying it (pensions etc). I agree that’s absurd if you were not allowed to buy through a broker.
- ai_fry_ur_brain 4mo agoWell we are far more corrupt and in the last stages of late stage capitalism. 15 day waiting period for Nasdaq 100. Your 401k is now the exit liquidty for the country's 5k richest people. I really dont see how America doesnt collapse on the weight of its own corruption. But maybe the was the plan all along....
- sigmar 4mo agoimho Anthropic publicly posting accurate information about their revenue and operations would be a step in a healthy direction for the economy/markets if there's an "AI bust blast" coming. This filing is movement towards that
- groundzeros2015 4mo agoThe filing isn’t the problem. The indices dumping into them is.
- hellojesus 4mo agoAgreed. Ben Felix has a video about this, I think he focused on SpaceX in it. The problem with the standard total market funds is they gobble it up right away. There are funds that do wait some period of time to purchase new ipos to let them smooth out, but I'm not sure those are typically available in 401k plans. Hedge funds already know broad based mutuals will have to purchase these so can sneak in before them and then sell to them for a marginal gain. Mayhaps the newest strategy for exiting is generating so much hype that you're guaranteed an exit by retail retirement funds?
- m3kw9 4mo agoAI seem hard to go bust from the potential, but there is a point where it always can if numbers grow just right.
- rockemsockem 4mo agoIf your 401k is in QQQ then I'm not sure you're going for a low risk portfolio
- ransom1538 4mo agoYeah. Sure. But, If you are charging for intelligence, I want in.
- xyst 4mo agoSo big banks and Wall Street are about to get another bailout paid by taxpayers? Great.
- nelox 4mo agoLook at the P/E ratio Amazon has had for years and come back with a better argument. [edit:typo]
- dogwalker5000 4mo agoAmazon has assets in the form of warehouses though. What assets do these AI companies have other than rapidly depreciating GPUs.
- munk-a 4mo agoIt's the indices we need to be concerned about and it's especially the bloated carcass of xAI hanging onto SpaceX. SpaceX was a profitable company, it was heavily invested into R&D and had managed to build a tidily profitable connectivity business in Starlink. Now the company is being burdened with all the worthless debt of X and xAI with a likely merger with Tesla following launch just to hand Musk a big check when he hits the valuation targets. IPO inclusion on indices should be illegal, the price discovery simply hasn't happened yet and it's a direct grab at the most vulnerable retail investors - the passive index huggers that were told that if they just buy an index it'll never be spectacular and it might dip but it'll steadily go up. I would not be surprised if the US Government ends up bailing out retirees over this and cements the country's descent into debt. Pretty much everyone can see it coming, but we have to act as if Elon is valuing his companies in good faith and not just trying to rob a payday.
- martinald 4mo agoLet's get it in perspective though. The S&P500 market cap is currently $70T. Assume that Anthropic, OpenAI and SpaceX all IPO and get included in SPY with the new fast listing rules. They are likely to be worth $3-4T combined, which means 'retail' investors are going to have perhaps 5% of their portfolio in it. _Arugably_ that's a pretty fair allocation for retail investors to have to these "moonshot" style companies. Also - if any one of these IPOs don't go well; I suspect the other(s) will have to postpone, further reducing exposure.
- xracy 4mo agoWho invests in an index fund for "moonshots"? Everyone I know who invests in an index fund is doing so to mitigate the risks of things like "moonshots" which are typically much riskier investments.
- martinald 4mo agoIs it? I thought the idea was diversity of risk, not "mitigating risk". You clearly don't want 100% of your 401k in OpenAI or Anthropic. But you probably do want 1 or 2% of it in, to give you the long term growth potential? Regardless SPY is actually a pretty "risky" index fund on some measures - it pays a (very) low dividend compared to many other intl/ETF funds and is weighted very heavily towards tech stocks (atm). If you genuinely wanted to mitigate risk you would probably not choose SPY.
- xracy 4mo ago> Is it? Given that they've had to change the rules of index funds to allow for this, yes, this is not what people expect.
- martinald 4mo agoBut the US has never had $1T+ IPOs before. And also a huge amount of enormous private companies that don't want to go public for various reasons. Also, the rules have changed before. It's not the first time these rules have changed. I see both sides of the argument (it's definitely _not_ good for 401k investors if Anthropic/OpenAI/SpaceX make huge leaps in technology that allow for far higher earnings that they aren't able to access, for example). But my main point is that these investors regardless would "only" have 5% exposure to these. That surely cannot be considered a systemic risk that the OP is inferring.
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- softwaredoug 4mo agoOTOH it’s pretty bad if the the general public can’t participate in the upside of AI and it’s only concentrated in a few private investors.
- neonstatic 4mo ago> I'm bullish on AI I started as being very skeptical circa 2024, became more open minded towards the end of 2025, and am becoming skeptical again now. Reason being, I interact with entrepreneurs now and I see what they hope for in AI. The universal desire seems to be "people will just talk to AI instead of me while paying me the same as before or more". This is typically covered with coping mechanisms (e.g. "I am not building a chat bot, I am building..." after which they describe a chat bot). I think the crash is getting more likely because the disconnect between what the technology can be used for does not match what people want it to do.
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- claudenm 4mo agoI don’t think your first sentence is true. The hyperscalers have spent north of 1 trillion in the capex boom as a direct response to AI demand, If you’re a retail investor, you’re already quite exposed.
- elzbardico 4mo agoMyself, I am preparing to bet on the short of my lifetime.