Posted by hubraumhugo 19 hours ago
It wasn't midterms. Everybody expected that the Democrats would take the house and senate, it should have been priced in. The results of the election played out on election night on the futures markets overnight and into the next day. Thursday was something else, perhaps some fund blew up.
Wiener processes aren't a completely terrible model for markets though.
Can you really call it "right" if the market goes up 40% before eventually going down 15%?
If you can’t act on predictions they’re not meaningful.
" Fiscal stimulus during the pandemic contributed to an increase in inflation of about 2.6 percentage points. "
https://reason.com/2023/02/02/covid-stimulus-spending-played...
Market prices being unpredictable random walks doesn't mean that the volatility or shape needs to be constant. To make the notation more precise, you need to talk about (sub-) martingales.
> If they deviated, someone could notice that pattern and trade on it, returning the market back to a random walk.
This is true, but "fairly fixed distribution of different sized crashes." doesn't follow at all.
A small sell-off is just business as usual.
The discussion here is around broader stock market indices.
The title literally has AI in the title, the conversation is centered around an "AI selloff", as its been labeled, that happened this week.
Roughly 40% of stock market gains since 2023 are tied to less than 10 companies with massive AI investments.
The entire conversation is about this sector, and most of the gains in the "broader indices" that nobody was discussing, are largely attributed to AI invesment and speculation.
My intuition is that financial markets seem increasing dissociated from any correlation with street level economy or the financials of traded companies?
A sell-off is required to start a panic-sell and bubble-pop, but not all sell-offs start a panic-sell and bubble-pop.
It's hard to tell in advance what this is.
It's going to take a year or two more. Will the humanoid robots being built be useful? Will Tesla's robotaxi ever work without a huge number of remote monitors? Will the free models start to displace the expensive ones? Will someone figure out a way to do all this at lower cost? We don't know yet. But there are too many huge companies with rather inflated market caps. Some of that has to be air.
There’s no version of the immediate future where this isn’t the case.
Pity you qualified your prediction with "immediate"; a simimlar sentiment was around just before the dot-com crash: "There's no version of the future where we won't be able to use all that extra network infra."
Turned out, in the immediate future, just post-crash, we actually didn't need them. They only got used a decade later.
Will we need every larger compute and RAM?
Sure?
Will we need it in a post-crash scenario?
Nope!
And an RTX5090 is going to drop down to a few hundred dollars is it? Just because the price of stonks is temporarily correcting downwards?
No, but we may have enough GPU (with their RAM) sitting around in datacentres that our AI needs will be taken care off for the foreseeable future.
I mean, RAM is not really fungible - these valuations are not tied to RTX5090s, they are tied to the server GPUs.
The investment was not used to buy RAM sticks for desktop and server m/boards. ANthropic did not use their VC money to buy RTX5090s. The VC money went to power generation, datacentres, and server GPUs with 768GB of RAM.
So, yeah, if the bubble pops, we're well taken care of in the immediate future by the stuff the VC money already bought.
And what about local AI and agentic stuff? We can all stick with 32Gb of ram at home and piddly lil GPUs?
In my opinion this turmoil is hedge funds and market makers flushing out liquidity, same as they always do. Paying Bernie Sanders to tweet “no more datacentres” is pretty cheap to do.
Extreme fear = always a buying opportunity.
That's literally the definition of a bubble-pop. The assets get sold for pennies on the dollar (sometimes even fractions of a penny on the dollar).
> And what about local AI and agentic stuff? We can all stick with 32Gb of ram at home and piddly lil GPUs?
Won't matter if there's demand for that, that specific market can't use the stuff already purchased by VC money. TBH, I won't even care about self-hosting if the bubble pops, because all those things the VC money purchased will get bought up for basically scrap prices, then hosted for cost of hosting + tiny markup.
There's no principle to repay, so prices are going to be opex + markup, not opex + training costs + repayment on loan + commitment penalties + markup.
> Extreme fear = always a buying opportunity.
Which brings me back to your assertion: that all these things already purchased by VC money will still be needed. We found that to be untrue during the dotcom crash: Hardware makers (those that survived) stock took 17 years to get back to where they were pre-crash, the 0.01% software stock that survived the crash took a decade to recover.
The only way this is a buying opportunity is if there is no crash.
These assets aren’t going to get sold for pennies on the dollar. Too many people would be interested in them and they’ll get bid back up to 90 cents on the dollar.
We’re currently in a situation similar to the dot com crash but one that has enough differences for one to not apply the logic of that crash to it. The main difference being hardware companies are making huge amounts of money and cannot keep up with production due to excess of demand compared to supply. Their only approach in your crash scenario would that they would drop prices, but that will lead to yet more demand and prices rising.
I’d happily heat my house on a rack full of GPUs and memory and use all the AI capacity that came with it. But there’s no way hardware prices are going to also crash to allow me to do that.
You're describing exactly what happened during the dot-com crash and calling it different. Sun, Cisco, etc literally could not keep up with demand pre-crash, and yet they still tanked (Sun tanked enough to go under, Cisco took another 17 years to recover).
I mean, you're calling it a main difference, but describing exactly the same thing.
I don’t need a rack of Cisco routers on my desk. I’d happily take a Sun workstation loaded with GPUs though.
The only real question that will come out of this is whether we buy the hardware directly or rent the hardware from Anthropic/OpenAI etc. no doubt we’re seeing the winners and losers get sorted out right now, and the strategy of doing the growth behind the scenes and then doing IPO (instead of IPO on no revenue as in the dotcom era) is proving to be yet another stumbling block. Valuations can come down as much as they need to but the AI genie has been freed now, regardless of how the market is choosing to price it.
Nasdaq will be higher in 12 months than it is today. Democrats or no democrats, no politician is going to vote to crush the primary driver of revenue growth in the S&P. Pooh Pooh it all you like.
https://www.multpl.com/shiller-pe
I think a big bubble pop is plausible.
Everyone either misinterpreting what it says or only reading the headline, because it's pretty clear that the author is arguing that only 1 in 5 sell-offs equivalent to the current one end up being significant.
> The recent AI sell-off brought a lot of fearmongering headlines. Put next to past stock market crashes, it's only a mild correction for the S&P 500, 6% below its record.
https://www.reuters.com/world/china/china-ai-bubble-has-alre...
When the author is right, he will be like, "i told you so", if wrong, "It's hard to predict" and shrug off.
Don't buy into crap post like this.
Maybe. Nobody can see the future, so I agree it's kind of arbitrary to call this the sell-off, but plotting it against these other events over the coming months may be interesting, and you have to start somewhere.