alt Hacker NewsRetirement Savings Are Fueling the AI Bubble
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This is why putting general people's retirement into markets by default is stupid.
And pension funds almost certainly are in the VC funds getting huge windfalls from Anthropic and OpenAI exits.
Also, one can imagine the opposite situation creating the same outcry: "retirees are being frozen out of AI returns".
People always say, "maximizing shareholder value" like it's obviously a bad thing, when actually every retiree and prospective retiree is a shareholder.
Somebody explain:
AI companies and hyperscalers' kamikaze spending on data centers may not be profitable. But they seemingly have no choice because everyone else is doing it.
Would anti-data center measures be like an arms control treaty in this arms race? Maybe if they force companies to spend slower it'll actually be good for everyone's finances.
If you see this as a problem to be solved, please don't do anything. This is how the normal healthy market works. Leave it alone.
The risk of all risks today is wether OpenAI will survive. I just watched Zitron is convinced they will not [1]. Eisman said OpenAI flop will cause recession [2].
The key question is (a) whether the risks are really identified and understood; and (b) whether opacity is fueling risk transfer to public markets.
Retirement funds or not, big tech companies have diversified to the point that investors cannot assess their risks (except for Apple).
There's ordinary non-market factors (esp. electric subsidies and their secondary markets), mark-to-market income on cross-equity investments, debt load and contracts off the books, etc.
The cross-investment is usually somewhat stabilizing, since it e.g., aligns nvidia with its customers' success; that's how keiretsu works.
However, Microsoft, Google, and Amazon are at risk of losing a large proportion of their cloud profit-centers, and the threat to Google's ad franchise is already biting deep. Each company's equity would drain if they had no compelling path to take part of the AI proceeds. So they are compelled by both market and capital competition.
As in politics, we used to be able to assume people in power were operating as expected to gain profits or maintain political power in the relatively near term. However, as the advantages of disinformation and dark money (for politics) and the prospects of economy-scale disruption (for AI) both give significant advantages to aggressive and strategic behaviors in the relatively near term, it basically creates moral hazards that are unavoidable, and leader cohorts respond by ousting anyone with doubts. So for voters or investors, the "representative" proxy of leadership character is less useful, and everyone has to fall back to watching the weather and assuming the worst about leadership.
Apple has long decided: (a) equity buy-backs, not peripheral ventures; (b) AI as consumer, local and otherwise, with privacy focus (whatever that can be). However, Apple's also in a tough position: outside of AI, nothing really drives new purchases because even old hardware is plenty for most customers, and memory prices are biting into margins. So Apple is an understandable bet, but not necessarily a great one.
Where's the money to go, in a world where everyone depends not on the red wheel barrow for food but on 8% annually to beat inflation?
the worrying thing is how some AI exposed companies got fast tracked into the indexes or how because of AI some indexes r now overexposed to AI
The owners of existing data centers might make more money if new data centers are blocked, because there is currently plenty of demand and they will have less competition. Or maybe not. There are a zillion other considerations like this. Do you really think you can figure it out?
For retirement savings, index funds are hard to beat, and it's hard to say whether tech stocks should be over- or under-weighted compared to the index. Tech stocks went down recently, but maybe it's a good time to buy? People who invested in 2008 did well.
Reminder that VTSAX, VTBLX and VTIAX are all you need. 50/25/25 split, as per Bogleheads. (FXAIX, FXNAX, FSPSX if your acct is on Fidelity).
(Also a reminder that target funds are expensive and will sometimes be over-allocated towards hot industries depending on the retirement year "target".)
This seems like pure slopulism to me, to be honest. It doesn't back its claim that pensions funds are fueling the supposed bubble, just that pension funds are invested in AI companies. The given solution of completely divesting from index funds (since some AI companies are in the Nasdaq) is also completely unreasonable.
>Are we on the brink of the next financial crisis? Last Thursday, there was a “bloodbath in tech stocks,” as the stock market lost $3.2 trillion in a single day.
Sounds bad, until you take a closer look and see that this was just a 4% decrease.
>In the longer term, with enough political will, we can redirect our retirement savings towards productive investment, such as building out affordable housing and funding the renewable energy transition. For example, NYC Comptroller Mark Levine announced a $4 billion affordable housing initiative in April. Pension fund trustees could follow his lead rather than direct money towards Blackstone, one of the country’s largest landlords and a major fund manager for public pensions.
The slop bells are deafening. I suspect that the author is driven more by political motives than a sincere belief that the AI industry is financially doomed.
Is this really the best argument they can make? A 4.5% correction bringing the S&P500 down to only a 11.5% YTD return? And a quote from a guy who's predicted 14 out of the last 2 bubbles? That's it?
Heh. Don't worry, by the time those missing savings would really have an effect, they won't be needed; AI will be providing all the basics+ for free. Or things will be so bad that they'd be worthless anyway.
Didn't see them complaining when their fund went to the moon tho
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Tech companie have so much money in AI, when the democrats start regulating it, prepare for a depression and massive job loss.
It's almost like they got in to fight the Republicans instead of actually helping the American people.
There's an AI bubble, but it's very clearly not the same as the dot com bubble or the housing bubble. The common thread on both of those was that too many people/companies had no chance in hell of returning either profits or the money lent to them to buy houses. We are not there yet, the AI bubble/euphoria is funded by the biggest cash printing companies in history. Even with ludicrous investing, their cash flow has only now and this barely gone negative. And the demand is still there. We have some ways to go with this.
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Doesn’t retirement savings fuel every bubble?