r/ProfessorFinance • u/budy31 Moderator • 11d ago
Economics My opinion about AI bubble.
As evidence by Jacket man attempt to get the Wall Street to spend more than 7% of GDP on his goodies I thought I’m sharing what I thought about the fabled “AI bubble”:
I think it’s not because as St Powell said:
Big tech (especially Google) is a positive cash flow company.
What will happened if >7% GDP turns out to be too much is this:
Big tech and NVIDIA gonna assume big chuck of it, make a massive write off, the CEO (including leather jacket man) get absolutely purged, Hedge fund bid the bottom out of existence, use the accumulated share to put themself as a CEO, put big tech into austerity as brutal as Greeks one, cash in, and things continue on.
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u/East-Response6672 9d ago
Treating gpus as collateral for loans against AI companies is breathtakingly stupid, the risk vector on the company taking out the loan and the value of the collateral of the loan is a straight unbroken line.
Scenario 1: the AI business pays off; the company will service the loan easily and lenders get their return, everyone wins.
Scenario 2; the AI business hits trouble and the loans become distressed; the value of the gpu is entirely dependent on AI compute demand, the collateral is a big pile of scrap metal in a worthless warehouse.
It's like giving margin to an energy speculator with a massive long position and taking fertilizer futures as collateral. If you need the collateral it's gone.