Crypto -> LLM -> Repurpose Crypto Power Contracts to Feed LLM Datacenters -> AI crash -> Repurpose LLM Hardware/Power for Crypto ?
Would be curious if anyone has run the numbers on what LLM hardware capacity (including upcoming) would do to blockchains, if a big chunk were reallocated.
If you're in a "selling stock" part of your life I understand, but if you're in a "buying stock" part of your life it's worth reflecting on the quote until you can shake the "recent price action IS investor psychology" out of your head.
Even when people are only buying with no intent to sell, they'll often complain if prices fall right after they've bought an item, and ask for a rebate for the difference, because they feel they deserve the new lower price. Many retailers are aware of this psychology and do offer some sort of forward-looking price match, both to help buyers overcome that hesitation, and to avoid going through the paperwork of returning and refunding a used item just to sell the same thing again anyway. But the stock market offers no such buyer protections.
Globally, pension funds hold approximately $5–7 trillion directly in the top US tech stocks (the "Magnificent Seven" and adjacent AI infrastructure).
Also in the last couple of years many pension funds have moved money into Private Equity and Private Credit to chase higher returns and they're the backstop for all the off-books AI datacenter buildout debt?
- A rule of thumb suggested by one study is that every $100 drop in stock market wealth leads, on average, to a $3.20 drop in consumer spending. Under such an assumption, a dotcom-style crash would cut American consumption by about $890bn, or 2.9% of GDP.
Is roulette wealth creation and destruction?
You have exactly same assets as before. The businesses of which you are a fractional owner have the same fundamentals.
But other people won't trade other assets for yours at the same rate.
More important for the wider economy is how much liquidity it destroyed and the mayhem it will do in the bond markets.
But, since the top 10% of American savers (including almost all of US Congress) put most of their savings in stocks they will get a massive bailout. It will make the 2008 Wall Street bailouts look like pocket change. I bet they will say it's for national security or some other lame excuse.
lotta people buying houses and cars with AI seed company money that funds their 400k salary.
AI has a lot of rich people riding on its success, and this time's different for, IMO, two major reasons...
- First, the companies most invested in AI are perfusing it everywhere. Many parts of these big businesses, if not the business as a whole, is invested heavily in the success of LLM-based products. Microsoft is probably the poster child for this, where you can't use practically any of their modern products without copilot or some such being shoved in your face. OpenAI and Anthropic are both companies whose existence is predicated only by a viable LLM-based product. Nvidia and (as of their last-week's announcement) Micron are both now also heavily invested in the success of this technology, though they're also surely not the only companies in the hardware sector to be following this path to some degree.
- Second, the actual individuals behind these companies are the world's richest people, and much of their fortune comes from stock in these companies, and loans taken out against that stock.
They stand to *personally* lose a significant-even-to-them sum of money if the bottom falls out of this thing. If this weren't the case, I'm absolutely certain we wouldn't be seeing as much reporting about how an AI crash would hurt the average household. When smaller crashes happen (even those that affect more average households), it's inevitable, or it's good for the economy in the long-term (it's a correction, after all -- how could that possibly be bad?), or it's the consequence of people's personal choice to invest one way or another, but because the uber-rich were spared, it's *not really that bad.*
Tech CEOs are not as special as they think they are, one day they too will be there begging, like a dog.
- A drop in nominal values on the same scale as the dotcom bust would wipe out $16T, or 8% of American household wealth. Foreign investors would lose $7T.
> The richest Americans own the vast majority of the US stock market, according to Fed data. The top 10% of Americans held 93% of all stocks, the highest level ever recorded. Meanwhile, the bottom 50% of Americans held just 1% of all stocks in the third quarter of 2023.
(the vast majority of wealth for the non wealthy in the US is someone's primary residence real estate)
https://www2.census.gov/library/publications/2024/demo/p70br...
But this is not solely on the top 10% to be maligned. We should force everyone to save.... even $5-10/month adds up for the least privileged over time. We force everyone to immediately pay taxes because the money would not be there year end - we should do the same for saving because it is easier than changing human behaviour.
A lack of education at most societal levels to: be taught the impacts of forgoing now for later, think long term, act long term, resist impulse to spend on consumer or ego level goods for societal "approval" or mating.
Home are the primary source of wealth for families because it is forced payment.
It is what a good parent would do - and every person needs a "parent" for some aspect of our lives (we're all bad at something).
Unfortunately, any market dip means jobs lost, at least temporarily.
I personally stay all-market, and long-term, so if anything it would be a buy opportunity for me.
You also need a lot of money to purchase land, so this effectively allows banks to make a lot of money on overly inflated price of land.
Land by itself doesn't generate wealth, only improvements on top of it does. Only problem is that we tax improvement along with the land, leading to the perverse incentive that building anything increases your tax burden. We call them property tax.
Money isn't some fixed object, like the amount of bills in circulation. It's the gross valuation of all sales, whether you trade a dollar bill or swipe a debit card or take out a small loan with a credit card tap.
And money can disappear, if something valued at $10 only sells for $9.
Costs to the elderly would be socialized (we'd pay for medicare for more people); the youngest don't own stocks.
But you can imagine seeing knock on effects in housing prices, and massive increases in credit defaults as people who bought things thinking their portfolio was worth X, all of a sudden can't afford them when their portfolio is worth .5x
It's going to be bad when it happens - think DotCom crash. But if then crypto and other asset classes crash on top of that, you could have a real crisis.
We will leave the bill for some teacher pension fund in Minnesota.
1) Can just pick and choose buying parts of the best, most well functioning companies without having to figure out anything or do anything, what a life.
2) Kinda hate on people who run those companies
3) Also kinda hate on big companies in general
4) Owning stocks is somewhat cool though. Unless it's not, then it's destruction of wealth.
Just make a truly diverse portfolio and never worry. Lots of efficient portfolios explored here.
https://portfoliocharts.com/2021/12/16/three-secret-ingredie...
The only way an adjustment to such stock prices would come is if US power and dollar vanes. There is a chance now this will happen, but I guess it will still take a long time.
You don't think anyone had ever tried that prior to past crashes?
Case in point: The dot-com crash came only after the web matured and reality finally hit the limits of its potential.
By that logic, an AI crash would likely come only once AGI arrives and the true boundaries of its impact become visible. Or, the progress towards AGI seems to stall.
Apple is in the "AI-related companies in the SP500" group? Microsoft too? Tesla too? Amazon too? But... if these companies' AI efforts fail, 95%+ of their revenues would be unaffected. So big stretch to paint them with that brush.
Nvidia, OK that one is obvious. Meta, Alphabet, OK.
But MOST of the companies listed in that chart are only "AI companies" in the sense that EVERY tech company building peripheral AI into their products is an AI company.
Case in point: if Apple stock goes 'on sale' as part of an AI-bubble sell-off, are you really deciding whether or not to buy based on their AI-ness?
Tesla for example: its stock price has fluctuated down 50%, then up 100% (relative to the dip), in this year alone. Clearly, that's market speculation, not capital + earnings. So how much of that speculation is AI-dependent? Depends on how much coffee investors drink before reading Musk's latest tweets, I guess.
Apple is HEAVILY invested in AI, but you're right: it's earnings are dependent more on iPads than AI right now.
> ...are you really deciding whether or not to buy based on their AI-ness?
Buy APL stock, or buy an iPhone?
Also, debt market is not the same as it was 5 years ago, Japan now has inflation (and they hold the biggest bag of US debt).
To add to this, USD lost 10% of its value this 2025 according to the DXY index. To be fair, it pretty much went to what it was worth before 2022, but the Fed has to be careful anyway.
Many things happened since 2020. It's almost 2026.
Japan is facing real inflation in the last 3 years, at rates not seen since the 1990s. https://www.statista.com/statistics/270095/inflation-rate-in...
However, it only owns 3% of US debt; they are the largest non-US holder, but still a marginal holder. Basically, they deseated China for that spot of "Biggest But Still Small US 'Lender'". Both together are dwarfed by pensions, 401ks, and other US buyers and institutions. https://www.visualcapitalist.com/charted-heres-who-owns-u-s-...
https://bipartisanpolicy.org/article/the-deficit-in-a-downtu...
https://www.frbsf.org/research-and-insights/publications/eco...
The hard part is reigning that spending in during non-crash years (see the uproar over removing the temporary COVID subsidies) in a way that is not political suicide. At the Federal level, there is zero incentive to not run a deficit.
I have a buddy who has been an entrepeneur all his life. He renamed his first company to Name-Dot-Com just before the Dot-Com Crash; a short jump in investment followed by a period where he couldn't get his calls returned, and he was forced to sell.
So my point is: "angel investors" in startups seem to be a really "ADHD", shiny-distraction-oriented bunch. And that has a huge impact for smaller companies.
Excerpts:
In the 1990s and early 2000s, many of the companies leading the stock rally were not making much money, if any. This led to very high P/E ratios for some companies because share prices kept going higher, even when earnings were lagging well behind.
While Nvidia’s stock price has risen roughly 1,000 percent over the past three years, from $17 to $180, its earnings — the actual money it is making — have increased even faster. This means the stock is arguably cheaper today than it was three years ago, said Stacy Rasgon, a stock analyst at AB Bernstein.
But Nvidia also has some less than transparent arrangements to support their customers in buying their goodies.
Which is not to say they aren't making money, it's more that in hindsight we may discover that the p/e ratios were not the primary measure we should have paid attention to...
* You can't generalize from Nvidia to companies spending all the money on hardware, electricity, and labor without making a profit.
* It's also worth asking if Nvidia will keep having those earnings if all the AI companies crash. Unsure about this. At least there's a bunch of pent-up demand from people wanting GPUs for other reasons.
* Also, there's the $100B they invested in OpenAI...
Edit: Just read a related WSJ [3] article.
[1] https://pdub.click/2511242 [2] https://pdub.click/251210e [3] https://www.wsj.com/personal-finance/the-everyday-investors-...
Also what a shit headline. There’s no wealth destroyed, it’s all just numbers go up and down. But until you sell you haven’t lost any money, have you?
I have no sympathy for the uber-wealthy, but claiming no one's wealth will be affected is ridiculous.
I'm not convinced it's not someone in the background choosing wrong (greed) that's the problem.
If you're a normal person, planning on buying and holding broad market ETFs for the next 20 years, we're just gonna ride it out, right? Right?