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Free newsletter: In July, Apollo Economist Torsten Slok said that "AI better work out, or we have a problem." Facing ever-growing high-interest debt, negative-EBITDA AI labs and $200bn+ in warehoused GPUs, that's exactly what the AI industry has. www.wheresyoured.at/ai-had-bette...

The AI bubble is now a global problem, with the highest ever inflows of foreign capital into US equities in history, at a time when when a handful of AI-exposed stocks account for a terrifying proportion of US stock market's value. www.wheresyoured.at/ai-had-bette...

Unlike previous bubbles, equities/stocks now account for the majority of household wealth (ahead of real estate), with economist Paul Kedrosky estimating that Americans hold over 60% of their liquid net work in stocks. www.wheresyoured.at/ai-had-bette...

Retail investors have an estimated $4.65tn in direct exposure to AI-linked stocks - not including index funds - and account for ten times more of the market's trading volume than the Dot-Com Bubble. I fear the damage will be far worse. www.wheresyoured.at/ai-had-bette...

As I've written extensively in the past, the AI bubble is nothing like the dot com bubble. The scale and concentration is different, and a simple 20% correction across the main AI stocks would be worse than the worst day of the Dot Com crash. www.wheresyoured.at/ai-had-bette...

The AI bubble is sustained by vibes and hype, and both have started to sour, with Gartner saying that we have more compute capacity than demand, and that 80% of neoclouds will go out of business by 2030, adding there's not enough revenue to justify them. www.wheresyoured.at/ai-had-bette...

AI is also concentrated around a handful of companies, most notably NVIDIA, which is forecasting over $670bn in revenue next year, at a time when the debt its customers need to buy its chips is increasingly unaffordable as lenders sour on AI debt. www.wheresyoured.at/ai-had-bette...

It's now confirmed that Amazon has warehouses of GPUs that can’t be installed, with in some cases "no clear path to doing so" despite taking billions in deliveries monthly. The RAM crisis was created by NVIDIA to boost its revenues through early delivery. www.wheresyoured.at/ai-had-bette...

The GPU trade is the irrational core of the bubble, and the argument that hyperscalers are hoarding scarce commodities falls over when you see that *everyone* has billions in dark GPUs. NVIDIA seems to be channel stuffing, and we all suffer as a result. www.wheresyoured.at/ai-had-bette...

The AI bubble "working out" requires everyone to abandon reason and for a bunch of miracles to occur, like hyperscalers adding $1.4 trillion in cashflow by 2028. Analysts have no idea of where that money is coming. www.wheresyoured.at/ai-had-bette...

In fairness, the whole "abandoning reason" has seemingly already happened. This late in the bubble, there is no consensus on how much a gigawatt of capacity should cost, and many of the projections thrown around exceed the limits of profitability. www.wheresyoured.at/ai-had-bette...

Profitability, of course, assumes that the customer for the compute exists, and they have customers. Unfortunately, OpenAI and Anthropic are overwhelmingly dependent on VC-backed startups, at a time when VC's underperforming and running out of cash. www.wheresyoured.at/ai-had-bette...

This piece distills something I've said repeatedly: that AI "working out" requires too many improbable things to happen, and that when the bubble bursts, it'll cause a supernova of pain across markets, economies, and (increasingly retail) investors. www.wheresyoured.at/ai-had-bette...

How perfect? How improbable? Well, if Anthropic is forced to IPO at the lower price of $1.5tn, it'll disappoint investors, reduce the amount of cash it can raise from the market, and it'll increase the amount of debt it takes on. Oh, and it'll screw OpenAI, too. www.wheresyoured.at/ai-had-bette...

Allow me to finish with a question: Does any of this feel like the future? Are you witnessing the next industrial revolution? Or are you watching the spark that ignites the next financial crisis? And are you sufficiently angry at the people responsible? www.wheresyoured.at/ai-had-bette...

Want to know what’s f-ing hard? To have a position cleanly decoupled from the AI trade. Everything is linked through passive instruments. You can get hit less, but you still get hit.

Fortunately in Oz we are allowed to manage our own retirement savings. I direct all my own investments and my portfolio has zero AI exposure. No energy, no resources, no chip makers, no electrical contractors, no data centres, no capital goods companies, no private asset managers.

The problem is they’re linked via index funds. I hold P&G, which has nothing to do with anything AI related. But it’s part of several funds and ETFs that do have AI exposure. When those get sold off that also sells P&G. It’s why hedging this is a true PITA.