It wasn't midterms. Everybody expected that the Democrats would take the house and senate, it should have been priced in. The results of the election played out on election night on the futures markets overnight and into the next day. Thursday was something else, perhaps some fund blew up.
It really is a sell off. that much is obvious. how long it lasts, is the next question. If history is any guide, not much longer. Rebounds tend to be very fast and sudden. See 2020 or 2025 for example.
I think we're overdue for a big correction. There are just too many companies keeping the same "we’re growing so fast, so we’re not profitable yet" line for 10+ years now.
If it takes 10 years then it becomes the new normal.
I definitely hadn’t expected a big correction, and would expect the market recover and recoup the losses soon.
The global events of last few years created a lot of inflation, and the new money has to go somewhere. A large part of stock market gains are the new money disguised as growth.
There are always bears who are predicting the next stock market crash. They always have various reasons that make sense on the surface. They're almost always wrong. But they're always eventually right.
The "race to the bottom" (to devalue fiat currency and drive inflation) is a big reason why stocks, gold, real estate, and bitcoin are valuable to hold. The market will definitely go up ad infinitum, since that is the policy of all central banks.
In the AI era, you just spin up 1024 bots making substack posts prophetizing the future. That's ten binary predictions. Delete the 1023 that fail. Keep the one account that perfectly "predicted" the future.
I rather have one extreme win than 100 smol wins that get evaporated once the market crashes. There’s an expression that goes ”Eating like a chicken, shitting like an elephant”. That’s the beauty of puts.
The derivatives market wouldn’t exist if there wasn’t a legitimate economic need to insure against unexpected crashes. Aka it’s not just bear speculation; crashes happen all the time in markets around the world.
Who said this conversation was about broader stock market indices?
The title literally has AI in the title, the conversation is centered around an "AI selloff", as its been labeled, that happened this week.
Roughly 40% of stock market gains since 2023 are tied to less than 10 companies with massive AI investments.
The entire conversation is about this sector, and most of the gains in the "broader indices" that nobody was discussing, are largely attributed to AI invesment and speculation.
As someone not in finance, what actually leads to this pattern (of smaller blips followed by faster recovery)? Is this a consequence of central banks knowing more than before? Algorithmic trading?
My intuition is that financial markets seem increasing dissociated from any correlation with street level economy or the financials of traded companies?
I think that's just you noticing smaller blips in the market as you pay more attention. Markets are random walks so they exhibit a fairly fixed distribution of different sized crashes. If they deviated, someone could notice that pattern and trade on it, returning the market back to a random walk.
> Markets are random walks so they exhibit a fairly fixed distribution of different sized crashes.
Market prices being unpredictable random walks doesn't mean that the volatility or shape needs to be constant. To make the notation more precise, you need to talk about (sub-) martingales.
> If they deviated, someone could notice that pattern and trade on it, returning the market back to a random walk.
This is true, but "fairly fixed distribution of different sized crashes." doesn't follow at all.
Or it could be a sign of a greater amount of financial intervention to preserve the value of the stock market after crashes, particularly since most people are largely counting on their 401k/IRAs to maintain their value in their retirement years
It's going to take a year or two more. Will the humanoid robots being built be useful? Will Tesla's robotaxi ever work without a huge number of remote monitors? Will the free models start to displace the expensive ones? Will someone figure out a way to do all this at lower cost? We don't know yet. But there are too many huge companies with rather inflated market caps. Some of that has to be air.
Really? I find local models such as Qwen 3.8 and Muse Glimmer to be pretty good. Not Opus or Sol, but.... Close to Sonnet maybe? So if I had to only use the local models from now on, it would not be a huge loss. Granted, I can't work on parallel on multiple tasks locally. But it's still 48 GB of RAM vs 750 GB or what is required for GLM5.3
You’d happily take a TB of RAM if offered though. The fact you can’t get it is evidence that hardware manufacturers have a huge amount of life left in them and the current correction is a buying opportunity.
> There’s no version of the immediate future where this isn’t the case.
Pity you qualified your prediction with "immediate"; a simimlar sentiment was around just before the dot-com crash: "There's no version of the future where we won't be able to use all that extra network infra."
Turned out, in the immediate future, just post-crash, we actually didn't need them. They only got used a decade later.
> So we have enough RAM kicking around in the world today that will suffice for the next 5-10 years?
No, but we may have enough GPU (with their RAM) sitting around in datacentres that our AI needs will be taken care off for the foreseeable future.
I mean, RAM is not really fungible - these valuations are not tied to RTX5090s, they are tied to the server GPUs.
The investment was not used to buy RAM sticks for desktop and server m/boards. ANthropic did not use their VC money to buy RTX5090s. The VC money went to power generation, datacentres, and server GPUs with 768GB of RAM.
So, yeah, if the bubble pops, we're well taken care of in the immediate future by the stuff the VC money already bought.
And they’re gonna let you access that super cheap at fire sale prices yeah? Because of the oversupply. Right.
And what about local AI and agentic stuff? We can all stick with 32Gb of ram at home and piddly lil GPUs?
In my opinion this turmoil is hedge funds and market makers flushing out liquidity, same as they always do. Paying Bernie Sanders to tweet “no more datacentres” is pretty cheap to do.
> And they’re gonna let you access that super cheap at fire sale prices yeah?
That's literally the definition of a bubble-pop. The assets get sold for pennies on the dollar (sometimes even fractions of a penny on the dollar).
> And what about local AI and agentic stuff? We can all stick with 32Gb of ram at home and piddly lil GPUs?
Won't matter if there's demand for that, that specific market can't use the stuff already purchased by VC money. TBH, I won't even care about self-hosting if the bubble pops, because all those things the VC money purchased will get bought up for basically scrap prices, then hosted for cost of hosting + tiny markup.
There's no principle to repay, so prices are going to be opex + markup, not opex + training costs + repayment on loan + commitment penalties + markup.
> Extreme fear = always a buying opportunity.
Which brings me back to your assertion: that all these things already purchased by VC money will still be needed. We found that to be untrue during the dotcom crash: Hardware makers (those that survived) stock took 17 years to get back to where they were pre-crash, the 0.01% software stock that survived the crash took a decade to recover.
The only way this is a buying opportunity is if there is no crash.
These assets aren’t going to get sold for pennies on the dollar. Too many people would be interested in them and they’ll get bid back up to 90 cents on the dollar.
We’re currently in a situation similar to the dot com crash but one that has enough differences for one to not apply the logic of that crash to it. The main difference being hardware companies are making huge amounts of money and cannot keep up with production due to excess of demand compared to supply. Their only approach in your crash scenario would that they would drop prices, but that will lead to yet more demand and prices rising.
I’d happily heat my house on a rack full of GPUs and memory and use all the AI capacity that came with it. But there’s no way hardware prices are going to also crash to allow me to do that.
> The main difference being hardware companies are making huge amounts of money and cannot keep up with production due to excess of demand compared to supply.
You're describing exactly what happened during the dot-com crash and calling it different. Sun, Cisco, etc literally could not keep up with demand pre-crash, and yet they still tanked (Sun tanked enough to go under, Cisco took another 17 years to recover).
I mean, you're calling it a main difference, but describing exactly the same thing.
You’re describing different hardware with drastically different users and use cases calling it exactly the same.
I don’t need a rack of Cisco routers on my desk. I’d happily take a Sun workstation loaded with GPUs though.
The only real question that will come out of this is whether we buy the hardware directly or rent the hardware from Anthropic/OpenAI etc. no doubt we’re seeing the winners and losers get sorted out right now, and the strategy of doing the growth behind the scenes and then doing IPO (instead of IPO on no revenue as in the dotcom era) is proving to be yet another stumbling block. Valuations can come down as much as they need to but the AI genie has been freed now, regardless of how the market is choosing to price it.
Nasdaq will be higher in 12 months than it is today. Democrats or no democrats, no politician is going to vote to crush the primary driver of revenue growth in the S&P. Pooh Pooh it all you like.
Everyone either misinterpreting what it says or only reading the headline, because it's pretty clear that the author is arguing that only 1 in 5 sell-offs equivalent to the current one end up being significant.
> The recent AI sell-off brought a lot of fearmongering headlines. Put next to past stock market crashes, it's only a mild correction for the S&P 500, 6% below its record.
Maybe. Nobody can see the future, so I agree it's kind of arbitrary to call this the sell-off, but plotting it against these other events over the coming months may be interesting, and you have to start somewhere.
That’s also when NVDA’s margins started creeping upwards. Their gross margins are 75% (!!) today, a couple of hedge funds opening multi billion dollar positions isn’t going to inflate a stock like NVDA.
Situational Awareness made the same mistakes Bill Hwang made at Archegos, only they didn’t lie to their prime brokers to get more margin credit like Hwang did.
I have seen a few YouTube Thumbnails declaring the bursting of the AI bubble. It feels like they are so desperate for it to happen that they are not prepared to wait a week or two to actually have some real data to work with.
It's not like people will forget that they were predicting it. If it is inevitable it will happen, if it isn't inevitable it still might happen. If it bounces back it still might happen six months down the track. Declaring it to have already happened seems reckless if your intention was to inform. We will know soon enough. I guess at least they have staked their credibility on something falsifiable. It won't make them retroactively less reckless if they turn out to be right but it'll make them seem particularly foolish if they are wrong.
Between it and the "next housing bubble" getting predicted I almost wonder if there's some kind of stock market psychology to bullheaded resistance in the face of "it will fail" predictions.
That on something big if you have enough people constantly predicting it's upcoming failure people just keep investing anyway keeping it going. Never really sure if something is on life support or not.
Can someone explain how to read this? Since "past performance is not indicative of future results" and "technical analysis is astrology for men"? I'm assuming these data is useful in some way, just don't know what.
The tech oligarchs are certainly panicking, given how they are acting cute now, like "space laser didn't work lol" and "Ram Altman" etc.
But I'm guessing, the market is panicking because it don't know what exactly the democrat would do to AI developments, so maybe some clarity from the party could fix it. More clear than "lowering living costs" that is.
My 2 cents is the whole AI sector is down thanks to a few new, loud voices calling for very strong restrictions on future AI development.
The NASDAQ dropped 5% out of nowhere.
It wasn't midterms. Everybody expected that the Democrats would take the house and senate, it should have been priced in. The results of the election played out on election night on the futures markets overnight and into the next day. Thursday was something else, perhaps some fund blew up.
Everybody expected the House but not the Senate. The way the Senate flipped and by so much was unexpected.
Senate and governorships, which now puts a lot of DC projects at risk.
The day before the midterms the prediction markets gave 78% chance of a senate flip.
I guess we'll see if it's really a sell-off, or if it was normal market volatility around an election.
There's not much normal about the market last 5 years...
I wonder how much of that volatility is directly attributable to SPX 0DTE being a daily thing since circa 2022.
Not much normal about the government in the past year either.
It doesn't fit any normal distribution actually.
Normal as in "typical", not as in "Central Limit Theorem".
Wiener processes aren't a completely terrible model for markets though.
I think it's a fat tail or jump diffusion process. There is a ton of literature about this over the past 30 years.
It really is a sell off. that much is obvious. how long it lasts, is the next question. If history is any guide, not much longer. Rebounds tend to be very fast and sudden. See 2020 or 2025 for example.
2020 isn’t exactly history in market terms
I think we're overdue for a big correction. There are just too many companies keeping the same "we’re growing so fast, so we’re not profitable yet" line for 10+ years now.
If it takes 10 years then it becomes the new normal.
I definitely hadn’t expected a big correction, and would expect the market recover and recoup the losses soon.
The global events of last few years created a lot of inflation, and the new money has to go somewhere. A large part of stock market gains are the new money disguised as growth.
There are always bears who are predicting the next stock market crash. They always have various reasons that make sense on the surface. They're almost always wrong. But they're always eventually right.
> But they're always eventually right.
Can you really call it "right" if the market goes up 40% before eventually going down 15%?
This is why you don't rely on broken clocks to tell you the time!
Are you implying the market will go up ad infinitum?
The "race to the bottom" (to devalue fiat currency and drive inflation) is a big reason why stocks, gold, real estate, and bitcoin are valuable to hold. The market will definitely go up ad infinitum, since that is the policy of all central banks.
It’s just a take on the old, “They predicted twelve of the last three crashes.”
If you can’t act on predictions they’re not meaningful.
or picking the guy with the right prediction is not much easier than making correct predictions
In the AI era, you just spin up 1024 bots making substack posts prophetizing the future. That's ten binary predictions. Delete the 1023 that fail. Keep the one account that perfectly "predicted" the future.
I rather have one extreme win than 100 smol wins that get evaporated once the market crashes. There’s an expression that goes ”Eating like a chicken, shitting like an elephant”. That’s the beauty of puts.
Down 15%... so far
When it comes to finance and fashion there's no difference between being early and being wrong.
Maybe that's true if you sell too early, but if you buy too early then wait you'll generally do okay
What is “buying too early”? Is that even a thing?
Even the Covid crash, as bad as it was, was over in a month. Stocks rocketed to new highs faster than anyone could have ever anticipated.
This stock recovery was so fast because of an external factor, governments injected money into economy, but the price was inflation.
" Fiscal stimulus during the pandemic contributed to an increase in inflation of about 2.6 percentage points. "
https://reason.com/2023/02/02/covid-stimulus-spending-played...
It is also inflation this time. Inflation hasn’t slowed down for a few years now
That’s usually the case when you make borrowing money free, the Fed cut the FFR to 0% on March 2x, 2020.
The derivatives market wouldn’t exist if there wasn’t a legitimate economic need to insure against unexpected crashes. Aka it’s not just bear speculation; crashes happen all the time in markets around the world.
The crashes seem be getting smaller and more frequent
Which would be progress.
A small sell-off is just business as usual.
Who called this small? Datacenter stocks are largely down 50% this month.
The further you narrow down to specific industries/companies the more volatile things get. That’s hardly surprising.
The discussion here is around broader stock market indices.
Who said this conversation was about broader stock market indices?
The title literally has AI in the title, the conversation is centered around an "AI selloff", as its been labeled, that happened this week.
Roughly 40% of stock market gains since 2023 are tied to less than 10 companies with massive AI investments.
The entire conversation is about this sector, and most of the gains in the "broader indices" that nobody was discussing, are largely attributed to AI invesment and speculation.
The article is all about movements in the S&P 500 though. Yes it’s an “AI selloff”, but looked at from the perspective of the broader stock market.
The cheap debt is drying up for neoclouds. New bonds are going to be at payday loan rates.
The beauty of increasingly efficient markets.
I don't think the efficient market hypothesis says anything about the convergence time or the path to convergence, but I'm not an economist.
As someone not in finance, what actually leads to this pattern (of smaller blips followed by faster recovery)? Is this a consequence of central banks knowing more than before? Algorithmic trading?
My intuition is that financial markets seem increasing dissociated from any correlation with street level economy or the financials of traded companies?
If it's so efficient how come we can't seem to build enough houses... or build anything anymore for that matter?
I think that's just you noticing smaller blips in the market as you pay more attention. Markets are random walks so they exhibit a fairly fixed distribution of different sized crashes. If they deviated, someone could notice that pattern and trade on it, returning the market back to a random walk.
> Markets are random walks so they exhibit a fairly fixed distribution of different sized crashes.
Market prices being unpredictable random walks doesn't mean that the volatility or shape needs to be constant. To make the notation more precise, you need to talk about (sub-) martingales.
> If they deviated, someone could notice that pattern and trade on it, returning the market back to a random walk.
This is true, but "fairly fixed distribution of different sized crashes." doesn't follow at all.
Or it could be a sign of a greater amount of financial intervention to preserve the value of the stock market after crashes, particularly since most people are largely counting on their 401k/IRAs to maintain their value in their retirement years
When does it give birth to a new market?
It's a bit early to be calling it, I think.
A sell-off is required to start a panic-sell and bubble-pop, but not all sell-offs start a panic-sell and bubble-pop.
It's hard to tell in advance what this is.
Yes. This is just the first day.
It's going to take a year or two more. Will the humanoid robots being built be useful? Will Tesla's robotaxi ever work without a huge number of remote monitors? Will the free models start to displace the expensive ones? Will someone figure out a way to do all this at lower cost? We don't know yet. But there are too many huge companies with rather inflated market caps. Some of that has to be air.
Will we still need ever-larger GPUs and Memory? Yes.
There’s no version of the immediate future where this isn’t the case.
Really? I find local models such as Qwen 3.8 and Muse Glimmer to be pretty good. Not Opus or Sol, but.... Close to Sonnet maybe? So if I had to only use the local models from now on, it would not be a huge loss. Granted, I can't work on parallel on multiple tasks locally. But it's still 48 GB of RAM vs 750 GB or what is required for GLM5.3
You’d happily take a TB of RAM if offered though. The fact you can’t get it is evidence that hardware manufacturers have a huge amount of life left in them and the current correction is a buying opportunity.
> There’s no version of the immediate future where this isn’t the case.
Pity you qualified your prediction with "immediate"; a simimlar sentiment was around just before the dot-com crash: "There's no version of the future where we won't be able to use all that extra network infra."
Turned out, in the immediate future, just post-crash, we actually didn't need them. They only got used a decade later.
Will we need every larger compute and RAM?
Sure?
Will we need it in a post-crash scenario?
Nope!
So we have enough RAM kicking around in the world today that will suffice for the next 5-10 years?
And an RTX5090 is going to drop down to a few hundred dollars is it? Just because the price of stonks is temporarily correcting downwards?
> So we have enough RAM kicking around in the world today that will suffice for the next 5-10 years?
No, but we may have enough GPU (with their RAM) sitting around in datacentres that our AI needs will be taken care off for the foreseeable future.
I mean, RAM is not really fungible - these valuations are not tied to RTX5090s, they are tied to the server GPUs.
The investment was not used to buy RAM sticks for desktop and server m/boards. ANthropic did not use their VC money to buy RTX5090s. The VC money went to power generation, datacentres, and server GPUs with 768GB of RAM.
So, yeah, if the bubble pops, we're well taken care of in the immediate future by the stuff the VC money already bought.
And they’re gonna let you access that super cheap at fire sale prices yeah? Because of the oversupply. Right.
And what about local AI and agentic stuff? We can all stick with 32Gb of ram at home and piddly lil GPUs?
In my opinion this turmoil is hedge funds and market makers flushing out liquidity, same as they always do. Paying Bernie Sanders to tweet “no more datacentres” is pretty cheap to do.
Extreme fear = always a buying opportunity.
> And they’re gonna let you access that super cheap at fire sale prices yeah?
That's literally the definition of a bubble-pop. The assets get sold for pennies on the dollar (sometimes even fractions of a penny on the dollar).
> And what about local AI and agentic stuff? We can all stick with 32Gb of ram at home and piddly lil GPUs?
Won't matter if there's demand for that, that specific market can't use the stuff already purchased by VC money. TBH, I won't even care about self-hosting if the bubble pops, because all those things the VC money purchased will get bought up for basically scrap prices, then hosted for cost of hosting + tiny markup.
There's no principle to repay, so prices are going to be opex + markup, not opex + training costs + repayment on loan + commitment penalties + markup.
> Extreme fear = always a buying opportunity.
Which brings me back to your assertion: that all these things already purchased by VC money will still be needed. We found that to be untrue during the dotcom crash: Hardware makers (those that survived) stock took 17 years to get back to where they were pre-crash, the 0.01% software stock that survived the crash took a decade to recover.
The only way this is a buying opportunity is if there is no crash.
Don’t buy then.
These assets aren’t going to get sold for pennies on the dollar. Too many people would be interested in them and they’ll get bid back up to 90 cents on the dollar.
We’re currently in a situation similar to the dot com crash but one that has enough differences for one to not apply the logic of that crash to it. The main difference being hardware companies are making huge amounts of money and cannot keep up with production due to excess of demand compared to supply. Their only approach in your crash scenario would that they would drop prices, but that will lead to yet more demand and prices rising.
I’d happily heat my house on a rack full of GPUs and memory and use all the AI capacity that came with it. But there’s no way hardware prices are going to also crash to allow me to do that.
> The main difference being hardware companies are making huge amounts of money and cannot keep up with production due to excess of demand compared to supply.
You're describing exactly what happened during the dot-com crash and calling it different. Sun, Cisco, etc literally could not keep up with demand pre-crash, and yet they still tanked (Sun tanked enough to go under, Cisco took another 17 years to recover).
I mean, you're calling it a main difference, but describing exactly the same thing.
You’re describing different hardware with drastically different users and use cases calling it exactly the same.
I don’t need a rack of Cisco routers on my desk. I’d happily take a Sun workstation loaded with GPUs though.
The only real question that will come out of this is whether we buy the hardware directly or rent the hardware from Anthropic/OpenAI etc. no doubt we’re seeing the winners and losers get sorted out right now, and the strategy of doing the growth behind the scenes and then doing IPO (instead of IPO on no revenue as in the dotcom era) is proving to be yet another stumbling block. Valuations can come down as much as they need to but the AI genie has been freed now, regardless of how the market is choosing to price it.
Nasdaq will be higher in 12 months than it is today. Democrats or no democrats, no politician is going to vote to crush the primary driver of revenue growth in the S&P. Pooh Pooh it all you like.
> Will Tesla's robotaxi ever work without a huge number of remote monitors?
Tesla? Waymo is operating in American cities right now. I've taken them.
That seems to be the entire point of this page.
Everyone either misinterpreting what it says or only reading the headline, because it's pretty clear that the author is arguing that only 1 in 5 sell-offs equivalent to the current one end up being significant.
> The recent AI sell-off brought a lot of fearmongering headlines. Put next to past stock market crashes, it's only a mild correction for the S&P 500, 6% below its record.
Shiller P/E was approaching dot-com levels:
https://www.multpl.com/shiller-pe
I think a big bubble pop is plausible.
Or this is a correction that has already happened in other markets, and is now unwinding here:
https://www.reuters.com/world/china/china-ai-bubble-has-alre...
both the media and the post is making a deal out of nothing.
When the author is right, he will be like, "i told you so", if wrong, "It's hard to predict" and shrug off.
Don't buy into crap post like this.
The posts entire point is that it is too early to tell.
Isn't it overly bullish plus quite early to refer to this as "The AI sell-off"?
Do you mean bearish?
Maybe. Nobody can see the future, so I agree it's kind of arbitrary to call this the sell-off, but plotting it against these other events over the coming months may be interesting, and you have to start somewhere.
The bullish part is assuming it's over. Which the post kinda implies.
Maybe it’s because a behemoth ipo is coming and investment bankers are at work.
Reminder NVDA market capitalization skyrocketed around the time Brett Harrison and Leopold Aschenbrenner exited from FTX.
Correlation /= causation
That’s also when NVDA’s margins started creeping upwards. Their gross margins are 75% (!!) today, a couple of hedge funds opening multi billion dollar positions isn’t going to inflate a stock like NVDA.
Situational Awareness made the same mistakes Bill Hwang made at Archegos, only they didn’t lie to their prime brokers to get more margin credit like Hwang did.
Burry recommended me to buy Build-A-Bear, and it’s actually up! Where are your gods now, bulls of HN?
I have seen a few YouTube Thumbnails declaring the bursting of the AI bubble. It feels like they are so desperate for it to happen that they are not prepared to wait a week or two to actually have some real data to work with.
It's not like people will forget that they were predicting it. If it is inevitable it will happen, if it isn't inevitable it still might happen. If it bounces back it still might happen six months down the track. Declaring it to have already happened seems reckless if your intention was to inform. We will know soon enough. I guess at least they have staked their credibility on something falsifiable. It won't make them retroactively less reckless if they turn out to be right but it'll make them seem particularly foolish if they are wrong.
Between it and the "next housing bubble" getting predicted I almost wonder if there's some kind of stock market psychology to bullheaded resistance in the face of "it will fail" predictions.
That on something big if you have enough people constantly predicting it's upcoming failure people just keep investing anyway keeping it going. Never really sure if something is on life support or not.
Can someone explain how to read this? Since "past performance is not indicative of future results" and "technical analysis is astrology for men"? I'm assuming these data is useful in some way, just don't know what.
The tech oligarchs are certainly panicking, given how they are acting cute now, like "space laser didn't work lol" and "Ram Altman" etc.
But I'm guessing, the market is panicking because it don't know what exactly the democrat would do to AI developments, so maybe some clarity from the party could fix it. More clear than "lowering living costs" that is.
My “AI sell off is nothing compared to the 2008 financial crisis” website has a lot of people asking questions already answered by my site.