The smartest finance folks I know say that this “irrational exuberance” works until it doesn’t. Meaning nobody really thinks it’s sustainable, but companies and VCs chasing the AI hype bubble have backed themselves into a corner where the only way to stop the bubble from bursting is to keep inflating the bubble.
The fate of the bubble will be decided by Wall Street not tech folks in the valley. Wall Street is already positioning itself for the burst and there’s lots of finance types ready to call party over and trigger the chaos that lets them make bank on the bubble’s implosion.
These finance types (family offices, small secret investment funds) eat clueless VCs throwing cash on the fire for lunch… and they’re salivating at what’s ahead. It’s a “Big Short” once in 20-30 years type opportunity.
>These finance types (family offices, small secret investment funds) eat clueless VCs throwing cash on the fire for lunch… and they’re salivating at what’s ahead. It’s a “Big Short” once in 20-30 years type opportunity.
No - it's very hard to successfully bet against anything in finance, and VCs and non-public investments are particularly hard. When you go long, you simply buy something and hold it until you decide to sell. If you short, you have to worry about borrowing shares, paying short fees, and having unlimited risk.
How would you even begin to bet against OpenAI specifically? The closest proxy I can think of is shorting NVDA.
There's also nobody whose job it is to make big one-time shorts. Like you said, it's a once in 20-30 years opportunity, so no one builds a hedge fund dedicated to sitting around for decades waiting for that opportunity. There will certainly be exceptions, and maybe they'll make a Big Short 2 about the scrappy underdogs who saw the opening and timed it perfectly. But the vast majority of Wall Street desperately wants the party to continue.
> have backed themselves into a corner where the only way to stop the bubble from bursting is to keep inflating the bubble.
They are not in any corner. They rightly believe that they won't be allowed to fail. There's zero cost to inflating the bubble. If they tank a loss, it's not their money and they'll go on to somewhere else. If they get lucky (maybe skillful?) they get out of the bubble before anyone else, but get to ride it all the way to the top.
The only way they lose is if they sit by and do nothing. The upside is huge, and the downside is non-existent.
oracle's announcement of a 300b purchase commitment from openai followed soon by a 100B investment into openai.
The pace and size of these announcements is reaching a fever-pitch which seems like an attempt to keep the music playing.
The fate of the bubble will be decided by Wall Street not tech folks in the valley. Wall Street is already positioning itself for the burst and there’s lots of finance types ready to call party over and trigger the chaos that lets them make bank on the bubble’s implosion.
These finance types (family offices, small secret investment funds) eat clueless VCs throwing cash on the fire for lunch… and they’re salivating at what’s ahead. It’s a “Big Short” once in 20-30 years type opportunity.