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Does anyone else feel like we're heading for a good old-fashioned, 2008-tier, financial crash? I recall people bringing up the possibility ever since Covid bucks started rolling out, but even though we were due for one, and even though the money printer was going brrrrr, the crash has so far failed to materialize.
At the time, I was of two minds about this. On one hand, all the libertarian theory I used to subscribe to said money-printing => boom, boom => bust. On the other hand, the problem for me was it never felt like a boom, and I think this is changing now. A key feature of the pre-crash boom is "malinvestment"; capital going into often downright deranged projects, that are later abandoned half-finished. Well, I feel like the datacenter craze qualifies, and with the wave of AI IPOs that are coming just as major indices are changing their rules, to allow for these companies' near-instantaneous inclusion (an investment so good, you can't pass up on it. Literally, if you're American), it seems like we're solidly in the "irrational exuberance" phase.
Add this to the list of things I hope I'm wrong about, because if we get a proper crash, the political fallout is going to be massive. The script writes itself: Trump / tech bros / capitalism bad, even more gay race communism now.
To whitepillers: is there an argument for why I'm wrong that doesn't boil down to "you don't get it, chud, it's the New Economy! The Singularity is just around the corner! All the rules are obsolete!"? This argument is verboten, because this is pretty much what people say with every bubble.
To fellow blackpillers: any ideas on how to brace for impact? Any IT guys here old enough to make it through the dotcom bubble? How did you do it? Any advice you would have given your past self?
So a few things are hitting at once.
US energy production has been basically flat for the past 25 years. Renewables have been replacing coal with the total largely unchanged. Progressives, thanks to funding from China, adopted anti growth strategies and blocked new power plants. Now there's suddenly huge strategic demand for power hungry data centres. They need to find places with enough surplus grid capacity to build them. China has switched to PR campaigns about water usage.
The typical small town mayor will eagerly sell out the towns water and power rights to get his daughter a Google marketing internship. The small town residents are well aware of this. Additionally data centres don't generate many local jobs, so most towns don't see the point.
We're in an era of high interest rates, so companies that need to raise big money to build big computer now need big IPO.
I haven't seen any actual craziness yet. The original dot com bust had things getting just silly... loose money on each sale and make up the difference in ads! SF had a proto door dash that would have someone deliver a single candy bar for no mark up. The 2008 real estate bubble was famous for it's NINJA loans (no income, no job, no assets).
In comparison data centres are genuinely useful and they should be able to pay for themselves with other tasks if AI doesn't pan out like they expect.
I'm not sure how wasteful the current model training is... eg how much each new version carries over from the prior training. It might be possible that they are currently doing too many releases and it'd be more long term efficient to do fewer. But it's R&D, so who knows.
What people tend to miss is that all of the money is being spent on the AI training arms race. It's simple to run a model profitably after it has been produced. The issue is recovering cost of development and funding new development.
So even if all of the AI companies go bust, we're likely going to still be running models in those data centres.
It doesn't exactly feel like a bubble to me because the average Joe isn't getting rich off of it yet. There are no FOMO investors getting into it because their neighbour made a ton of money. That may change with the IPOs.
That's just the thing that pushed me over the ledge and made me post. It's not that it may change, with the IPO, it will. It's mandated by law. Major indices are changing their rules so that these new stocks are included nearly immediately, so anyone doing passive investment - your retirement fund likely included - will be buying them.
Yes, but I think the concern over this is way too overblown. Average indices buyer will have an exposure of something like 0.35% to SpaceX. There's plenty of dogshit companies in the indices. If that's your main signal for predicting imminent financial crash, I think you're wrong.
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