2008 financial crisis prophet bets against the AI bubble with potential $1 billion payout — Michael Burry reveals put options on Nvidia and Palantir

joeer77 said:

Scare article. Sorry I don't believe it. The S&P 500, 200 day and 50 day moving averages show strong divergence and thus a strong economy. Same for Nvidia. No one has seen what a 5 trillion dollar company like Nvidia can do to the market. The signs were there in 2008. I don't see them this time.

The signs aren't financial, though. AI is very much in "emperor's new clothes" territory now with everyone saying how marvelous it is, but we all know that it's being adopted indiscriminately by companies wanting to save some money regardless of the impact on their customers and staff. Once they realize this is a bad move, like losing customers because of it, they'll drop it like a stone and that's when the crash will start. Either that or AGI will be developed first and then who knows what'll happen?

(Just for the record, I'm not at all anti-AI as such, I use it on a daily basis)

joeer77 said:

Scare article. Sorry I don't believe it. The S&P 500, 200 day and 50 day moving averages show strong divergence and thus a strong economy. Same for Nvidia. No one has seen what a 5 trillion dollar company like Nvidia can do to the market. The signs were there in 2008. I don't see them this time.

If stock market crashes happened exactly the same every time, they wouldn't happen as we could avoid them.

There are some positive signs, but there are also negative signs. The market still has a lot of confidence overall, but when that confidence fades drastically, the ball is likely already too big as it rolls downhill to stop (full recession and not just a market correction phase). Even GDP is largely propped up by AI spending; GDP without AI spending is thought to be barely over 0% according to some estimates.

joeer77 said:

Scare article. Sorry I don't believe it. The S&P 500, 200 day and 50 day moving averages show strong divergence and thus a strong economy. Same for Nvidia. No one has seen what a 5 trillion dollar company like Nvidia can do to the market. The signs were there in 2008. I don't see them this time.

I think you are missing a big part of the picture here. Unlike with the 2008 crash that you mention had signs, this one won't have signs until it already crashes. 2008 was a financial crisis due to bad lending on bad physical properties to people with poor or no credit. The initially banks didn't care because they were selling these bad investments off to other people/corporations and were simply happy with the processing fees and finders fees they were collecting on the deals. These were bad investments because it was assuming that the physical property prices would continue to hold value and/or continue to rise, but there was a bubble in the market for properties in a large part due to the fact that these banks and other financial institutions were offering these loans to so many people who traditionally would not otherwise have received a loan or mortgage approval for such a large amount at any time previously in the history of the country. This let to an artificial increase in the number of buyers looking for homes and properties, which also lead to an increase "house flip" sales because the market could not keep pace with the demand (and as such prices kept rising)... All it took was for the housing bubble to start to pop due to many of the sub-prime loans not being able to be paid back, causing the start of foreclosures, leading to a drop in the prices of homes as the foreclosures caused the prices to begin to fall, leading to many speculators in the realestate market (i.e. house flippers) to also stop payment on their loans as the properties were now worth less than the loans they had taken on them, so best to simply let the banks take them back since it was cheaper to give up the property than it would be to attempt to sell it at a loss....

Anyway, if you look at all that, there are plenty of warning signs to that problem. This AI issue won't really come with warning signs. There are lots of companies investing millions and even billions of dollars in AI, in terms of purchasing hardware, building datacenters, leasing power plants, obtaining researchers and developers from both academia and competitors, sunk costs of training initial AI models, purchasing access rights to training materials, scraping the internet for free training materials, creating interfaces for people to interact with a trained AI model, etc... All these costs on the hopes that there may be a product that can be sold at some point in the future. There currently really isn't much of a commercial product yet. Sure there are some things that are being sold, but the sales are barely enough to pay for the electricity that is being used to train and run the AI model, let alone all the other cost factors. At some point, the investors are going to want to see actual returns. This is much more like the .com bubble than the 2008 bubble. The warning signs of it ending will happen too late to do anything about it and it will have already burst. It is rampant massive spending and investing with no clear end product in sight. Massive amount of investment capital is being thrown at any company that suddenly sticks "AI" in its goals or business statement (just like the .com days of cash thrown at all kinds of places just because they said they were doing it in the internet, or cyperspace...). It starts to pop when some of the smaller firms attempt to get their next series of funding and no one throws money at them like it grew on trees in their backyard... But it is too late then, billions if not trillions will have been spent in almost every case with little to no monitizable product being build or delivered, and the only assets owned by the company will be now-depreciated super-high-end AI/ML computer servers that are 3-5 years old an not worth a penny on the dollar of their initial costs, and high priced leases on datacenters or multi-year aggrements with power companies to purchase utility power at a certain quantity for a certain rate for a set number of years...

joeer77 said:

Scare article. Sorry I don't believe it. The S&P 500, 200 day and 50 day moving averages show strong divergence and thus a strong economy. Same for Nvidia. No one has seen what a 5 trillion dollar company like Nvidia can do to the market. The signs were there in 2008. I don't see them this time.

The stock is massively overinflated based on current demand. Not being able to sell to china and reports of companies having data centers worth of cards they can’t use doesn’t look like a profitable outcome for Nvidia

Once the people's champion leaves office, the LISEP economic metric will climb up to between 35% to 40% over the next decade as the tariffs fall away and mass offshoring to foreign nations/mass outsourcing to foreign firms/mass in-sourcing of foreign replacement labor resumes as before; only this time with a rapid expansion of next generation AI/automation/robotics as well. It will be interesting to see if the general population realizes they've been materially dealt out of their own nation's domestic labor market by an argentocracy. As C. S. Lewis wrote, "Experience: that most brutal of teachers. But you learn, my God do you learn." If they do, the bubble is going to pop not simply deflate over time after it reaches its peak as normally happens when invention/innovation inflates a sector.

LordVile said:

The stock is massively overinflated based on current demand. Not being able to sell to china and reports of companies having data centers worth of cards they can’t use doesn’t look like a profitable outcome for Nvidia

Trying to figure out how other companies owning data centers worth of cards that they can't use causes a problem to Nvidia. Nvidia already made the sale, they already achieved their profits from that hardware. It is the company that has them sitting in their data centers that needs to have figured out a way to receive a profit from their investment in purchasing those cards in the first place. Nvidia already put the money in their own pockets and their investor's pockets, and it is on the other companies to figure out how to get a return on their own investment, as Nvidia already made their return...

The only downside to Nvidia would be if they have overcommitted future manufacturing and investments other sunk costs in manufacturing lines and product lines that they can't either pivot to other products/markets and still cover their own costs. There may also be some lost future sales due to a possible glut of GPU cards in the secondary markets from companies that bought cards that they can not figure out how to use them and sell to other companies that do not mind taking the risk on second-hand products (not all business will take that risk and will insist on buying new and/or ones that have proper warranty).

But that is really it. Nvidia already made it's money off those cards and chips, which is part of the reason the stock is up. Sure the stock may go down some if the market completely pops and Nvidia can no longer project future sales growth the same way it does now, but that is the normal risk to any investor on any stock as the future is not known...