This one will be a lot worse than the sub-prime mortgage crisis, as AI investment has left many major banks, index funds, and most of the top 10 most valuable companies in the world heavily exposed, and the world governments are already at historic levels of debt - meaning a bail-out even if desired by those in power, may not be possible as it was in 2008.
Also there is more than 1 bubble that’s pretty much fully inflated right now: for example, Realestate.
Further, household debt has never been this high and is well beyond 2007.
Then on top if this there’s the record government debts in some countries (most notably, the US) and the weakening of trust in the USD thanks to a certain Mr D. Trump which might result in it losing its Reserve Currency status much faster and event which would be massive, especially for the US Economy (it could very well trigger Hyperinflation).
When the AI bubble blows it will at the very least cause other bubbles to blow.
IMHO, this shit is going to be something of a level of the 2000 crash AND the 2008 Crash put together, possibly worse (especially in the US).
For one, the AI bubble (not necessarily AI as a whole, just the insane bubble around it) seem to be far bigger in the US than the rest of the World.
Also, I’m not so sure there’s quite as many lines of contagion between the US and the rest of the World for it. Granted, when the tide went out in 2008 it turned out there were things like German Landesbanken (regional banks) exposed to the subprime bubble in the US, so who knows who is actually exposed to the bubble in the US via indirect and more obscure channels such as loans to datacenter companies via the money markets.
My gut feeling is that in the US it will be close to Great Depression, in Europe it will be around the Dot-Com crash (possibly worse since most countries in Europe are deep in a housing bubble, though it depends of Europe’s exposure to the AI bubble in the US) and in places like China it will be more towards the Covid end of it (China’s investment in AI hasn’t been at all following the same Financial model as in the US).
That said, this is all a bit of guessing. I was in Tech in the DotCom crash and in Finance in the 2008 Crash so I like to think I’m a little better informed than average, but I’m still guesstimating:
The fundamentals look very bad (high consumer debt, overvalued USD juding by US prices, horrible P/E rations of most of the companies involved in the AI bubble, insane IPO valuations for the upcoming big AI IPOs and the whole shenanigans with indices that will push the losses to index funds and hence retirement funds - things which in turn might trigger a confidence crisis in US Markets - and so on), but who knows how tightly coupled things are or not with the rest of the Economy (especially outside the US, in the US there seems to be tight coupling with a lot of things via things like datacenter building and the impact of AI on corporate risk profiles and job markets), especially after the nasty experience some institutions had back in 2008 from things like recklessly exposing themselves to US Markets? It might very well turn out that by reducing trust in America Donald Trump was good for the rest of the World which won’t be quite as exposed to the US when shit hits the fan than they would otherwise.
Let’s see how many governments will end up with a D rating. The USA are probably a given but this might set a lot of major companies on fire so who knows who else will run out of money.
Of course China is laughing all the way to the bank. Their economy isn’t super healthy right now but they aren’t reliant on semiconductor companies that chained themselves to the AI racket. So they might weather the crash mostly unharmed and we’ll all end up buying Loongson in the future because all of the x64 and ARM companies have folded.
Get ready for GFC #2.
This one will be a lot worse than the sub-prime mortgage crisis, as AI investment has left many major banks, index funds, and most of the top 10 most valuable companies in the world heavily exposed, and the world governments are already at historic levels of debt - meaning a bail-out even if desired by those in power, may not be possible as it was in 2008.
Also there is more than 1 bubble that’s pretty much fully inflated right now: for example, Realestate.
Further, household debt has never been this high and is well beyond 2007.
Then on top if this there’s the record government debts in some countries (most notably, the US) and the weakening of trust in the USD thanks to a certain Mr D. Trump which might result in it losing its Reserve Currency status much faster and event which would be massive, especially for the US Economy (it could very well trigger Hyperinflation).
When the AI bubble blows it will at the very least cause other bubbles to blow.
IMHO, this shit is going to be something of a level of the 2000 crash AND the 2008 Crash put together, possibly worse (especially in the US).
So on a scale of Great Depression to Dot-Com to 2008 Housing to Covid, where will this AI bubble burst land?
I would say it depends were in the World you are.
For one, the AI bubble (not necessarily AI as a whole, just the insane bubble around it) seem to be far bigger in the US than the rest of the World.
Also, I’m not so sure there’s quite as many lines of contagion between the US and the rest of the World for it. Granted, when the tide went out in 2008 it turned out there were things like German Landesbanken (regional banks) exposed to the subprime bubble in the US, so who knows who is actually exposed to the bubble in the US via indirect and more obscure channels such as loans to datacenter companies via the money markets.
My gut feeling is that in the US it will be close to Great Depression, in Europe it will be around the Dot-Com crash (possibly worse since most countries in Europe are deep in a housing bubble, though it depends of Europe’s exposure to the AI bubble in the US) and in places like China it will be more towards the Covid end of it (China’s investment in AI hasn’t been at all following the same Financial model as in the US).
That said, this is all a bit of guessing. I was in Tech in the DotCom crash and in Finance in the 2008 Crash so I like to think I’m a little better informed than average, but I’m still guesstimating:
The fundamentals look very bad (high consumer debt, overvalued USD juding by US prices, horrible P/E rations of most of the companies involved in the AI bubble, insane IPO valuations for the upcoming big AI IPOs and the whole shenanigans with indices that will push the losses to index funds and hence retirement funds - things which in turn might trigger a confidence crisis in US Markets - and so on), but who knows how tightly coupled things are or not with the rest of the Economy (especially outside the US, in the US there seems to be tight coupling with a lot of things via things like datacenter building and the impact of AI on corporate risk profiles and job markets), especially after the nasty experience some institutions had back in 2008 from things like recklessly exposing themselves to US Markets? It might very well turn out that by reducing trust in America Donald Trump was good for the rest of the World which won’t be quite as exposed to the US when shit hits the fan than they would otherwise.
Time will surely tell.
Let’s see how many governments will end up with a D rating. The USA are probably a given but this might set a lot of major companies on fire so who knows who else will run out of money.
Of course China is laughing all the way to the bank. Their economy isn’t super healthy right now but they aren’t reliant on semiconductor companies that chained themselves to the AI racket. So they might weather the crash mostly unharmed and we’ll all end up buying Loongson in the future because all of the x64 and ARM companies have folded.