Positive users praise the analysis and stay optimistic that any AI market dip will recover quickly, while negative users fear the terrifying investor leverage could trigger a sudden collapse or margin-driven sell-off.
Based on 18 visible X reactions from 48 accounts; directional sample.
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My take is you’re guess is right: there’s the technology side and the investor side that have to be viewed differently. The technology side is just, I mean, this technology is incredible, the things that it is capable of, we’ve just scratched the surface, and the need for compute is practically infinite – as much as you can imagine things need to be thought about / done. The investor side is that people are going to play games and try to ride the wave and get rich quick and overreact, etc. The difference here, though, from say the 2000s dot-com thing is that the companies investing here have incredible revenues and can afford to invest in compute. And they seem to be doing well revenue and profit wise through this investment cycle. So it’s a weird mix of things I’m not sure we’ve seen before.
@DKThomp This is why you’re the goat economics and culture writer of your generation. You’re like a heat-seeking missile when it comes to finding true signal. Always asking the best questions. Based based based.
@DKThomp The retail margin and brokerage leverage numbers are definitely spooky. A massive sell-off triggered by a bad hardware earnings report feels inevitable, even if the tech itself keeps moving.
@mikemaletic @DKThomp The leveraging going on here is absolutely terrifying. I had no idea. It will take down the good, the bad and the ugly.
Investor margin debt has reached a record $1.4 trillion.
@DKThomp The chance of a crash is v low
@DKThomp Well said
I would love some feedback about my worries of an imminent AI-related market crash: Industrial bubbles are most common when firms get deep into debt. Even with declining free cash flow (chart 1 below), the AI hyperscalers still have less debt as a share of earnings than the typical S&P 500 company (chart 2). But on the institutional/retail investor side... that's a different story. Look at Chart 3 (all from JPM). Investor borrowing is going crazy: - The amount of debt that investors are borrowing from brokerages to buy stocks, bonds, and other securities rose more than 50% in the last year to record $1.4 trillion. - Assets in high-risk leveraged exchange-traded funds have quadrupled in the last four years. Am I wrong, or does this make the odds of a major AI-related market crash getting alarmingly high in the coming months/year? Between leveraged ETF rebalancing and margin calls, I feel like one moderately bad earnings call—eg, which points to less forthcoming semi demand—could create a cascade of sell-offs And what makes this interesting is that you could have a significant market correction due to all this investor leverage, but it might not be a decisive judgment about the state of AI, at all, even if lots of people interpret it as a sign of a bubble.
Operationalizing "stocks only go up" at some point means it makes sense to take out loans to buy stocks, at least on paper. Which increases demand for stocks and makes them go up... https://twitter.com/DKThomp/status/2075977789388308966
I regret using the word “crash” … feel free to insert “scary correction” or “pull back” or whatever
Positive users praise the analysis and stay optimistic that any AI market dip will recover quickly, while negative users fear the terrifying investor leverage could trigger a sudden collapse or margin-driven sell-off.
Based on 18 visible X reactions from 48 accounts; directional sample.
Ask a question below.
Published answers will appear here.
@DKThomp Well said