There is at least a chance that the present boom in the AI craze will like the dot.com bust of 2000 destroy most of the value of the money invested in it. At this point we all remember the winners, Amazon and such. We vaguely remember the losers but that was 25 years ago and many of the big losers are either dead or have moved on in the easy money growth of the last 15 years. The dot,com bust destroyed about 5 or so trillion dollars in stock and investors equity. It is interesting to read an after the crash study of the Dot.com boom and bust and look at the things that are happening now. Understanding the Dotcom Bubble: Causes, Impact, and Lessons This time the big players are in the most case being much more risk aware and reducing those risks by creating other holdings and limiting their investments in those holdings. While it limits their profits, it also limits their losses to a level that will let the major players survive. This tool takes the risks of the dot,com era and weds it to the tools used to create the 2008 bust. The following article discusses those tools. Something Ominous Is Happening in the AI Economy The AI Bubble Is Bigger Than You Think - The American Prospect While there has been in effect no real profits in AI, the present and planned expenditures for the physical facilities, and power for them, is in the trillions of dollars. Most, as in the dot.com bust have little value in other uses. One such estimate is in the 3 to 5 trillion dollar range. https://www.gurufocus.com/news/8573...onts-3-trillion-bill-as-debt-markets-step-in? https://www.gurufocus.com/news/8573...=headlines&r=caf6fe0e0db70d936033da5461e60141 Might not be a SHTF event, but back in the 1980's I lost my entire 401k balance in one of those firms that was regulated by the state. When the money was gone, the agency that regulated it said it was lost fairly and that they had not exceeded any practices that a business could be expected to do. At that point it was about a years wages and I would have enjoyed a "normal" 7 % return on it for 40 years and spending it in retirement. My pension was invested in a fund that had a lot of real estate as collateral. The fund owned about 25 % of the real estate and the other 76 % was borrowed. Returns were good as write off for interest, operating costs and payment on principal gave some tax breaks and the value of the real estate, It was highly centered in the area of West Texas that was in rapid growth due to the high oil prices of the early 1980's. When the oil price dropped, they quit drilling new wells and investing money. People had no jobs and left. The apartments were empty and the shopping centers lost their stores. The pension costs however continued. As the amount of the mortgage now exceeded the value of the property, the banks called the loans and none of us were willing to put more money in to pay for a dead horse, so they were sold off and there wasn't even enough left over to pay 1 penny on a dollar. Same thing can happen if your 401k or retirement plan is invested in a plan that is investing in these AI data centers. Not saying it will happen, but there is a risk in that investment and that is why it is paying a return. May make a lot of money or lose it all. I know for sure though that as was in my case, the institution operating the plan took out its management fees and the lawyers representing it got paid. I however lost every cent that both I and my employer had put into the plan. YMMV I am an old dog and tend to rather have the bone in my jaw, rather than the promise of two tomorrow. Comments by one of the "Bears". As everything in the stock market, it is just a view point. Could just as easy find one who says its the greatest time to buy. The Cracks In Private Credit Are Now Visible<!-- --> | ZeroHedge
I think this is a very real possibility. There are many that will make it, some that won't and some that will be sucked up by the ones that do make it and become the giants. Such is Capitalism. I have thought about getting into it a bit, invest a bit but it is so risky and at my age - well - I simply don't have the time to recoup losses and let's be frank, the odds are very good you will lose. So, no. I will pass. Maybe that is a mistake but... I do believe we are on the cusp of seeing the AI Revolution. I didn't think I would see it, but it is moving much, much faster than anyone thought possible.
