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Timing sure is hard. I managed to buy Micron at the top and so lost out there, it then recovered but it took a while.
Nevertheless, you can make money shorting if you're actually right. If you know things that others don't know, you can use this to your advantage. Don't blow your whole load in one year, keep some powder left for if the ponzi goes higher. There are ways to position yourself to profit from this, if the thesis is true.
It might be worth moving this over into the finance thread, but I am at least partially putting my money where my mouth is.
I'm of the opinion that the current LLM hype is starting to hit the second knee of the S-curve, both financially and technically.
Technically, exponential growth leads to exponential friction, and it looks to me like the real-world improvements in model capabilities are slowing down between generations. Anecdotally, it feels like the models are increasingly fungible and most of the ostensible improvements have come from harnesses, which are regular old software engineering. I think there's something there, but I think LLM tech represents a local maximum. I'm eagerly watching whatever Yann Lecun is cooking up at AMIL, because the general concept of a world model seems to map better to what we think of as "intelligence". His paper on energy models, specifically, is fascinating.
Financially, I think a lot about the "during a gold rush, sell shovels" aphorism. I also think about Buffett and Munger's rules of investing. Meta and Oracle are buying shovels, but using them to dig their own graves, so far as I can tell. I don't think Anthropic and OpenAI are ever going to be able to support their valuations, and per their S-1, xAI has already pretty much given up. If Google dies, it'll be for reasons other than AI spending. Nvidia has a good product and a good moat for now, but various specialized competitors are nipping at their heels while Chinese cards may develop into direct competitors.
In other words, I think the tech is going to continue developing, but I think a lot of the current players are in for a rude reminder of market on market fundamentals by 2H 2027 or so. I know you've bemoaned "financialization" in the past, but at the end or the day the economy is just people buying and selling things, and fuck me if it doesn't seem like some of these companies are trying to act like that's not true.
Where does that leave me? I'm moving down the stack. If the tech is going somewhere, it has to run on real things and interact with the real world eventually. Companies doing physical things are riskier to start than pure software, but they're less likely to get disrupted of they establish themselves. I've largely stopped investing in funds that hold significant amounts of meta, oracle, Tesla (because I think they may absorb SpaceX), and even Nvidia. On the other hand, I'm expanding my positions in funds that hold TSMC, ASML, and Lam Research. I am watching Cerebras, but I won't invest until I better understand how they're using software to get around defects on their enormous chips.
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