alt Hacker NewsThis makes the hair rise up on the back of my neck; it reminds me the sub-prime crisis - "they can't all default at once!"
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It does look and feel very similar - particularly the risk shedding and assumptions made there
> "they can't all default at once!"
Narrator: As it turns out, they can.
The difference now is instead of banks holding the risk, they are now the safest portion of the loans. The risk is now moved to private credit, so if this bubble bursts, they will panic sell other assets to cover the AI losses, which will crash unrelated sectors as well.
Since the now bad AI loans can't be sold, they need liquidity form elsewhere to cover. AI bursting means other S&P 500 stocks, treasuries, gold, crypto, commercial real estate will all go down with it.
Yes. And they always start trying to diversify only after they work years forcing everything to be correlated to it...
The .com bubble wasn't like this, but it was a minority between bubbles.