This will break, sooner or later.
When external buyers stop buying treasuries US will have to massively inflate its money supply, taking bondholders and a bunch of other groups to the cleaners. Such events have a lot of collateral damage, which may fit the definition of financial blow up. But I would place us much further away than 6-12 months, likely at 5-10 years. If there is a viable alternative to US treasuries, potentially sooner, but still not in 12 months. My 2c.
In the shorter term...
NVIDIA is 8% of the US stock market.
88% of NVIDIA’s revenue comes from enterprise-scale GPUs primarily used for generative AI, and half of that is purchased by only 4 companies, Amazon, Google, Microsoft and Meta.
By the end of 2025, these 4 companies will have spent over $560 billion in capital expenditures on AI in the last two years. Their AI revenues? Around $35 billion.
And then there's Tesla, which is 'worth' more than Ford, GM, VW and Toyota combined.
So, 6 out of the 7 largest companies in the US are in a strange position.
Only Apple, the laggard in AI, seems relatively safe to me.
Yes. When I said 5-10 years it wasn't to say that the effects would start then. That was my WAG at the time when normal, mild methods like localized YCC stop working and we should expect significant system-level problems.
For investments, I think now "buying index" will stop working well and buying chosen quality, profitable companies will work much better. My 2c.
Eh, that's what the index should be comprised of anyway, with some lags.
Or, to put it differently, nothing new: it was always much better, if you knew which companies will exceed expectations. After they do so consistently, they get included in the index eventually.
