4 ms·

Can you please summarize his argument?

riffraff 4mo ago
The argument is, as I understand it: * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
- Aerolfos 4mo ago
  > * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there. > * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize This does not reconcile with the large amount of empty datacenters and GPUs which have not been installed: https://www.wheresyoured.at/ais-economics-dont-make-sense-ad-free/#ai-data-centers-are-expensive-to-build-expensive-to-run-and-make-very-little-actual-revenue https://www.wheresyoured.at/ais-economics-dont-make-sense-ad... > * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble OK? It could also mean there is. > I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO. Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.
  - jandrese 4mo ago
    This doesn't even get into nVidia's circular financing deals that artificially inflate its market cap.
- otabdeveloper4 4mo ago
  Oh yes, this time it will be different, of course. (Like the last time.)
  - deleted 4mo ago
    [deleted]
- etempleton 4mo ago
  I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public. Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox. The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.
  - lossyalgo 4mo ago
    > Hyperscalers are in big trouble if the build out suddenly stalls. How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).
    - etempleton 4mo ago
      The checks stop being written.
  - riffraff 4mo ago
    but google, meta, microsoft and amazon were making a ton of money even before the AI boom. OpenAI and Anthropic's can go bust, but ads, windows and cloud hosting would still make a ton of money without them.
    - etempleton 4mo ago
      But the stock market is not priced for what is happening. It is priced for what investors think will happen. And investors think companies are going to make a lot of profit in the next 3-5 years from AI. If investors lose confidence it will happen those stocks could see a 20 - 40 percent pull back. The companies will obviously be fine, but the stock will take a beating.
- siren2026 4mo ago
  * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings Based on earnings that mainly include all the circular tricks to generate business with each other. How much is really left once you remove all of those?

The argument is, as I understand it: * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.

Aerolfos 4mo ago
> * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there. > * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize This does not reconcile with the large amount of empty datacenters and GPUs which have not been installed: https://www.wheresyoured.at/ais-economics-dont-make-sense-ad-free/#ai-data-centers-are-expensive-to-build-expensive-to-run-and-make-very-little-actual-revenue https://www.wheresyoured.at/ais-economics-dont-make-sense-ad... > * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble OK? It could also mean there is. > I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO. Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.
- jandrese 4mo ago
  This doesn't even get into nVidia's circular financing deals that artificially inflate its market cap.
otabdeveloper4 4mo ago
Oh yes, this time it will be different, of course. (Like the last time.)
- deleted 4mo ago
  [deleted]
etempleton 4mo ago
I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public. Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox. The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.
- lossyalgo 4mo ago
  > Hyperscalers are in big trouble if the build out suddenly stalls. How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).
  - etempleton 4mo ago
    The checks stop being written.
- riffraff 4mo ago
  but google, meta, microsoft and amazon were making a ton of money even before the AI boom. OpenAI and Anthropic's can go bust, but ads, windows and cloud hosting would still make a ton of money without them.
  - etempleton 4mo ago
    But the stock market is not priced for what is happening. It is priced for what investors think will happen. And investors think companies are going to make a lot of profit in the next 3-5 years from AI. If investors lose confidence it will happen those stocks could see a 20 - 40 percent pull back. The companies will obviously be fine, but the stock will take a beating.
siren2026 4mo ago
* Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings Based on earnings that mainly include all the circular tricks to generate business with each other. How much is really left once you remove all of those?