alt Hacker NewsThe market is going to react badly to even the slightest hint of a slowdown on AI. The whole AI space is so heavily leveraged up with debt and VC cash at the moment that even a slight slowdown will cause the whole thing to collapse in a financial $hitstorm the likes of which we’ve not seen in a while.
Theres “big bets” and then there’s heavily leveraged bet the farm with leveraged debt. The first one hurts when it pops. The second one wipes people out.
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The big question is: who's going to get wiped, and what will that mean?
In 2008 the USA managed to export the shit assets generated by the mortgage boom , mostly to Europe. The consequence for the European economy and political setting have been quite sharp. For example it's hard to imagine a Brexit vote if the economic conditions of 2006 had persisted in the UK.
If the AI boom unwinds it's quite hard to see how the USA will export the pain this time. The issue is that the boom is tied to physical infrastructure in the USA and these assets will be stranded. Corporate bonds used to finance it are mostly owned by US pensions and 401k. We are likely to see many US insurance companies liquidated... and that will kill the annuities for many retirees.
The grid expansions that are being created in the USA will mean significant debts on US utility providers as well, if the data centres profitably come on line then this will get paid back. If not then American households are going to have to pay. Chip producers (Tiawan SK) will also get burned.
The USA will forfeit tech leadership, the US bond market will not permit Keynesian expansion. Basically the USA will be looking at a great depression. US hackernews friends need to find a cover story that stops their neighbours realising that they were part of the shit storm, and they also need to sharpen their camping skills and general outdoor hardiness. Alternatively -> try and get a French passport?
There might be more awareness if, rather than the mainstream [people and news] narrative of "Oh no, some giant event is building and about to happen!", these financial schemes and their socialised downfalls were primarily, rightly labelled as simply the latest in a clearly repeating pattern of behaviour that we as a species are enabling.
I'm finding it almost hard to feel much angst about this cycle, not due to a lack of compassion, but because of the learned reality that if I spend all my energy on today's Big Finance misadventure, well it seems there'll be another tomorrow anyway...
What happens if AI is a net loss for the tech industry? It's entirely plausible that AI kills the SaaS business, along with the web and mobile business, alongside large categories of software engineers/tech professionals.
While there might be new stuff, these business's are currently the ones funding AI - if they all get wiped or substantially reduced, then there will be less ai revenue then there is current tech revenue - potentially at reduced margins.
The sooner it happens the better, it seems -- at least if a correction is inevitable. Rather than letting the bubble inflate another year or three.
No hyperscalers are going to get knocked out. Mostly this is short term overreaction to lower profits
Ignoring any technology narrative, just considering Alphabet went from $100 billion free cashflow to negative in months is extremely concerning. Whatever the reason is, the underlying capex has a hell of a catch up to deliver.