So I'm reading the actual IMF reports itself [1] and I come across this on the first page:
"First, although core firms in the AI ecosystem have been profitable so far—easing pressure on AI-related equity valuations—weaker or less durable investment and profitability in AI could trigger a correction"
Is that correct - that the AI firms have been "profitable"?
They are talking about Meta, AWS, Microsoft, Google, Nvidia and so on.
Although Anthropic supposedly has a good margin on each token, so the inference is substantially less expensive than what they charge customers. Training is eating into that.
Maybe - though they refer to hyperscalers explicitly in other parts of the report, and then there is this:
"Hyperscalers have strong earnings from their core businesses. Yet, free cash flows are rapidly declining as hyperscalers try to sustain large AI investment needs, leaving debt financing increasingly necessary"
Reading the comments here makes me feel this is such an interesting blip of time we're living through right now.
On the one hand it's treated like an open secret that we're nearing the end of an AI bubble that even the IMF is flagging as a risk as reality doesn't live up to the hype.
On the other hand the capability of systems in just the last two months has improved so much that it feels like the average hype undersells what's happening right now but that knowledge is extremely unequally distributed as the greatest capabilities are most familiar to software engineers that have fully embraced agentic coding, which even earlier this year was still somewhat questionable but now is too highly productive to avoid.
The question I have is if everyone is this bearish on AI stocks are they not more likely than not to move against consensus much higher?
With an AI bubble implosion now all but inevitable, the shift of the key players behind the scenes has focused on making this seem too big to fail and thus needing a bailout.
The “it’s dangerous, regulate us please” angle as an out for explaining terrible financial performance doesn’t seem to be working. The final Hail Mary pass is the “if we fail you fail” play.
However all data indicates the risk here is fairly concentrated in private markets. It will be painful but it’s unlikely to take the whole economy out with it. Some VCs are in for a world of hurt and private credit markets will lose their shirts, but the average person would see limited direct impact.
With everything going on in the datacenter space a bailout for AI seems incredibly unlikely. The general sentiment amongst the masses seems to be “let it burn.”
The problem is that private credit agencies also asked for loans from banks and therefore they are exposed to this as well. I believe the current estimate is that 11% of outstanding loans from the big 4 US banks were issues to private credit firms which then very likely lent themselves to the AI industry complex.
Additionally, by the Fed's own admission, they will never let another "Great Depression" happen again. So they intervened in 2008 and they will intervene again by buying up those worthless assets. And the average person will see their savings real value plummet without even mentioning that a lot of private credits come from pension funds...
Finally, if private credit really goes belly up, private investors will likely lose a good portion of their purchasing power, meaning that the economy will at best correct and at worst crash only because of that. And this effect will be in addition to the AI economy grinding to a halt which will already hit the worldwide economy HARD (also IMHO).
A reckoning is coming. I believe the "let it burn" is not doable as it will take a few banks and the economy with it. A more measured slow bleed with the Fed printing money to buy these junk assets will be more likely.
Some banks will suffer losses but there isn’t data to say the banks will fail en mass. This is bad, but not 2008 bad in so far as the stability of the financial system.
You underestimate the corruption of the White House. I've no doubt there will be a massive bailout of the guys who sat up there on the dais during his inauguration. Zuck, Musk, Pichar... He's hosted Altman and Amodei recently, too, right?
As many have commented, not really. Shorting is about exact timing as much as knowing the inevitable outcome. Get the timing just a bit wrong and you can be right and broke. The Big Short portrays that quite well.
Credit default swaps. Basically an insurance that pays if a stock/asset value plummets. The problem is that you have to pay for this insurance coverage, and currently the prices are really really high
[1], meaning that the market is expecting a failure soon, especially with interest rates/bonds yields going up.
> Some VCs are in for a world of hurt and private credit markets will lose their shirts,
They will walk out only rich rather then super rich. They will talk about it as if they were poor, but nope, they will still have toms of power and money.
If AI share crashes, that’s actually good for the public because all the value is now captured by them instead of companies. This is because a crash can only happen if prices go down (which is good) or Chinese models become as good as frontier (which is also good).
The question is, if this happens then how do you incentivise more R and D? Which investor would invest without the returns?
Edit: not surprisingly people don’t understand the point.
Would you rather NVIDIA and OpenAI get rich and capture the value or the public? Such a strange thing to see people rooting for the big companies.
In the short term things tend to freeze up as those with funds to invest lock down the hatches and weather the storm. But fairly quickly after yes funds start flowing elsewhere as money chases the next big thing.
AI is here to stay, but the market needs a big forest fire to wipe most things out. A few strong plants survive to build a better future.
It’s a cycle that keeps repeating, and we’re overdue for a big forest fire in tech.
> This is because a crash can only happen if prices go down (which is good) or Chinese models become as good as frontier (which is also good).
No... This is not accurate at all. AI valuations are based on high future growth. Prices could stay the same but growth slows and that could cause a crash by itself.
Right. AI companies have P/E ratios rarely seen for very large companies. Except for TSLA, which has a P/E ratio of 383, unheard of at that scale. No other large-cap company is much over 40.
TSLA should have crashed by now, but the hype just keeps on coming. Eventually reality will set in, but the market can remain irrational for longer than you can remain solvent. Big AI may be like that.
Investors like a story that lets their imagination run wild. TSLA offers that. AI / NVIDIA has that 10-fold. It’s “man’s last invention” - you couldn’t come up with a better hook to raise capital.
Short of an emergency rate hike to 10%, nothing stops this bubble.
False. They are based on future revenues that companies can capture. If the companies can’t capture the value and there’s no moat, then the public stands to gain from it.
Every crisis is an opportunity. Maybe we could build something where we don't have ridiculous power and wealth concentration at the expense of the public - to the point where the world's richest man literally took over the US government to cut aid to the world's poorest.
Most people who are currently enjoying the benefits generative AI don't even have pensions, let alone ones that are heavy into AI stocks. Wtf are you even talking about?
This comment shows the exact problem with the incoherent ideology prevalent in some bubbles.
You fundamentally believe that AI is useless and that it wastes energy and hardware. Shouldn't you then want the bubble to burst even faster? If not, you are just delaying the bubble.. but to what end? So that you personally won't be affected? This is a morally bankrupt stance to take.
My ideology is at least more coherent in this context. I think AI is useful, and AI being cheaper for the masses is good for them rather than the value being captured by a few companies.
They can't properly meet the current demand. A crash will primarily hit NVIDIA, AMD and other AI chip makers as they have oversold already and the cards are sitting in storage waiting for the needed data centers and the power needed to run them.
Its like a gold rush where half of the picks are sitting in storage because there are not enough miners to wield them.
So I'm reading the actual IMF reports itself [1] and I come across this on the first page:
"First, although core firms in the AI ecosystem have been profitable so far—easing pressure on AI-related equity valuations—weaker or less durable investment and profitability in AI could trigger a correction"
Is that correct - that the AI firms have been "profitable"?
[1] https://www.imf.org/-/media/files/publications/gfsr/2026/oct...
They are talking about Meta, AWS, Microsoft, Google, Nvidia and so on.
Although Anthropic supposedly has a good margin on each token, so the inference is substantially less expensive than what they charge customers. Training is eating into that.
> Anthropic supposedly has a good margin on each token
Genuine question: why are people still saying the plans are heavily subsidised?
I guess they mean the hyperscalers rather than OpenAI/Anthropic.
Firms profit from others' investments.
Might be referring to infrastructure.
Maybe - though they refer to hyperscalers explicitly in other parts of the report, and then there is this:
"Hyperscalers have strong earnings from their core businesses. Yet, free cash flows are rapidly declining as hyperscalers try to sustain large AI investment needs, leaving debt financing increasingly necessary"
surely the working man won't pay the price for this one too, like every other crash
Working man? You can replace them with agents!
Then you somehow still need to get rid of the working man, though...
Honestly a crash upward is more devastating for the working man
Reading the comments here makes me feel this is such an interesting blip of time we're living through right now.
On the one hand it's treated like an open secret that we're nearing the end of an AI bubble that even the IMF is flagging as a risk as reality doesn't live up to the hype.
On the other hand the capability of systems in just the last two months has improved so much that it feels like the average hype undersells what's happening right now but that knowledge is extremely unequally distributed as the greatest capabilities are most familiar to software engineers that have fully embraced agentic coding, which even earlier this year was still somewhat questionable but now is too highly productive to avoid.
The question I have is if everyone is this bearish on AI stocks are they not more likely than not to move against consensus much higher?
The only business model left: grow so big you need a bailout.
Who would have guessed ?
Too big to fail, by intention
As I predicted, it shall crash right after midterm election.
Pretty much everyone knows this is going to crash and make life difficult for everyday people. It’s a cash grab by desperate liars.
With an AI bubble implosion now all but inevitable, the shift of the key players behind the scenes has focused on making this seem too big to fail and thus needing a bailout.
The “it’s dangerous, regulate us please” angle as an out for explaining terrible financial performance doesn’t seem to be working. The final Hail Mary pass is the “if we fail you fail” play.
However all data indicates the risk here is fairly concentrated in private markets. It will be painful but it’s unlikely to take the whole economy out with it. Some VCs are in for a world of hurt and private credit markets will lose their shirts, but the average person would see limited direct impact.
With everything going on in the datacenter space a bailout for AI seems incredibly unlikely. The general sentiment amongst the masses seems to be “let it burn.”
Yes, but you are partially wrong IMHO.
The problem is that private credit agencies also asked for loans from banks and therefore they are exposed to this as well. I believe the current estimate is that 11% of outstanding loans from the big 4 US banks were issues to private credit firms which then very likely lent themselves to the AI industry complex.
Additionally, by the Fed's own admission, they will never let another "Great Depression" happen again. So they intervened in 2008 and they will intervene again by buying up those worthless assets. And the average person will see their savings real value plummet without even mentioning that a lot of private credits come from pension funds...
Finally, if private credit really goes belly up, private investors will likely lose a good portion of their purchasing power, meaning that the economy will at best correct and at worst crash only because of that. And this effect will be in addition to the AI economy grinding to a halt which will already hit the worldwide economy HARD (also IMHO).
A reckoning is coming. I believe the "let it burn" is not doable as it will take a few banks and the economy with it. A more measured slow bleed with the Fed printing money to buy these junk assets will be more likely.
You’re not wrong but this is not 2008 2.0 either.
Some banks will suffer losses but there isn’t data to say the banks will fail en mass. This is bad, but not 2008 bad in so far as the stability of the financial system.
You underestimate the corruption of the White House. I've no doubt there will be a massive bailout of the guys who sat up there on the dais during his inauguration. Zuck, Musk, Pichar... He's hosted Altman and Amodei recently, too, right?
Why do you think all of them want to be in the S&P 500?
You can make billions overnight if you think it is inevitable.
As many have commented, not really. Shorting is about exact timing as much as knowing the inevitable outcome. Get the timing just a bit wrong and you can be right and broke. The Big Short portrays that quite well.
How? I would like to! And don't say shorting because, well inevitable doesn't mean imminent.
Credit default swaps. Basically an insurance that pays if a stock/asset value plummets. The problem is that you have to pay for this insurance coverage, and currently the prices are really really high [1], meaning that the market is expecting a failure soon, especially with interest rates/bonds yields going up.
[1] https://www.tradingview.com/news/seekingalpha:bce1fc46a094b:...
“Markets can remain irrational longer than you can remain solvent."
> Some VCs are in for a world of hurt and private credit markets will lose their shirts,
They will walk out only rich rather then super rich. They will talk about it as if they were poor, but nope, they will still have toms of power and money.
Some yes. But it’s no secret that there are a lot of folks way in over their head at the moment with no clear way out.
https://archive.ph/dAI6p
aaaaahhahahahahahaha!!!
nice place you got here, be a shame if something happened to it....
If AI share crashes, that’s actually good for the public because all the value is now captured by them instead of companies. This is because a crash can only happen if prices go down (which is good) or Chinese models become as good as frontier (which is also good).
The question is, if this happens then how do you incentivise more R and D? Which investor would invest without the returns?
Edit: not surprisingly people don’t understand the point.
Would you rather NVIDIA and OpenAI get rich and capture the value or the public? Such a strange thing to see people rooting for the big companies.
Would a correction unlock funds for other interesting and important ideas, even in AI space (not just LLM). I guess only time will tell.
In the short term things tend to freeze up as those with funds to invest lock down the hatches and weather the storm. But fairly quickly after yes funds start flowing elsewhere as money chases the next big thing.
AI is here to stay, but the market needs a big forest fire to wipe most things out. A few strong plants survive to build a better future.
It’s a cycle that keeps repeating, and we’re overdue for a big forest fire in tech.
The real question is if the money leaves AI stocks where does it go.
Well, a lot of that money is leveraged, so it will just disappear.
Cash because no AI bubble means the market is cooked for a decade or so
> This is because a crash can only happen if prices go down (which is good) or Chinese models become as good as frontier (which is also good).
No... This is not accurate at all. AI valuations are based on high future growth. Prices could stay the same but growth slows and that could cause a crash by itself.
Right. AI companies have P/E ratios rarely seen for very large companies. Except for TSLA, which has a P/E ratio of 383, unheard of at that scale. No other large-cap company is much over 40.
TSLA should have crashed by now, but the hype just keeps on coming. Eventually reality will set in, but the market can remain irrational for longer than you can remain solvent. Big AI may be like that.
Investors like a story that lets their imagination run wild. TSLA offers that. AI / NVIDIA has that 10-fold. It’s “man’s last invention” - you couldn’t come up with a better hook to raise capital.
Short of an emergency rate hike to 10%, nothing stops this bubble.
False. They are based on future revenues that companies can capture. If the companies can’t capture the value and there’s no moat, then the public stands to gain from it.
Why is this controversial?
In what world is a global financial crash good for the public? At least short-term this will be painful for everyone.
It's already painful now.
At some point out becomes a case of least worst I think.
If a crash unlocks capital and eases the compute price squeeze, it might be worth the pain.
Every crisis is an opportunity. Maybe we could build something where we don't have ridiculous power and wealth concentration at the expense of the public - to the point where the world's richest man literally took over the US government to cut aid to the world's poorest.
Weird that you're downvoted. It would suck very hard indeed if your pension portfolio matured the day after a crash.
Why do you discount the immense gains due to AI that the public can use cheaply?
There has to be a name for this fallacy.
Because if you can no longer pay your rent from your pension portfolio, AI capabilities matter much less to you.
Most people who are currently enjoying the benefits generative AI don't even have pensions, let alone ones that are heavy into AI stocks. Wtf are you even talking about?
What does the public get from it, materially? More expensive energy and hardware.
This comment shows the exact problem with the incoherent ideology prevalent in some bubbles.
You fundamentally believe that AI is useless and that it wastes energy and hardware. Shouldn't you then want the bubble to burst even faster? If not, you are just delaying the bubble.. but to what end? So that you personally won't be affected? This is a morally bankrupt stance to take.
My ideology is at least more coherent in this context. I think AI is useful, and AI being cheaper for the masses is good for them rather than the value being captured by a few companies.
Wouldn't be so bad if shitty companies were allowed to fail.
They can't properly meet the current demand. A crash will primarily hit NVIDIA, AMD and other AI chip makers as they have oversold already and the cards are sitting in storage waiting for the needed data centers and the power needed to run them.
Its like a gold rush where half of the picks are sitting in storage because there are not enough miners to wield them.
AI build out goes on until the universe is filled with AI robots reporting back to us