[HN Gopher] Wall Street races to protect itself from AI bubble
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Wall Street races to protect itself from AI bubble
Author : zerosizedweasle
Score : 49 points
Date : 2025-12-05 18:21 UTC (4 hours ago)
(HTM) web link (rollingout.com)
(TXT) w3m dump (rollingout.com)
| dentemple wrote:
| Don't worry, once the Wall Street tap runs dry, the U.S.
| government will be more than happy to step in and bail out the AI
| corps. at the taxpayer's expense.
| jgalt212 wrote:
| You're being downvoted, but a number of AI actors certainly
| taking actions to become "too big to fail".
| vondur wrote:
| I said the same thing on a different post and people downvoted
| it. The current administration believes that the US can't fall
| behind China in this AI arms race. So don't expect anything too
| drastic to happen to the large players in the game.
| zerosizedweasle wrote:
| Maybe, but a clear Republican bailout of AI might wipe them
| out for several election cycles / foreseeable future. Big
| tech isn't popular, AI isn't popular and bail outs aren't
| popular
| nebula8804 wrote:
| What evidence do you have that that's going to be the case?
| I ask because my entire life, I've seen terrible things
| done by the Republican Party. And regular people get really
| hurt. For example, the great financial crisis. Yet, a
| little bit of time passes, and that 30-some-odd percent
| goes right back to voting for them.
| malka1986 wrote:
| China made the us fall in kinda the same trap that the us
| madeade ussr fall into with the moon race.
| 1718627440 wrote:
| Does anybody know how much an ML model is actually worth to
| build a new model? Like when they start making a new model,
| do they modify the old or do they start from scratch?
|
| I'm asking to know how much owning a model is actually
| worth, not in how much it could make money by selling use,
| but in how much it deprecates and keeps value to make a new
| one. If say one side of China/US lacks out on a model
| generation, do they only need to follow progress on the
| science behind it and when they own the data, the algorithm
| and the hardware all they need is "just" time and energy or
| is it important, that they actually have their on instance
| of a large model from every generation continuously?
| daedrdev wrote:
| With what money? US debt is owned by mostly US residents. US
| defecit is already absurdly high. Not to mention the looming
| social security failure
| stvltvs wrote:
| You print more money. The only limit is the inflation you
| create.
| anonymars wrote:
| Not to disagree with the overall point, but because this
| comes up a lot I'll nitpick it: issuing debt is not the
| same as printing money
|
| With debt, along with the proverbial "cash" comes an
| opposing "IOU" -- any change* is thus only temporary, in
| the time dimension (essentially that's what's being
| exchanged: time)
|
| Printing money out of nowhere is different, because it's
| missing that other half
|
| * at the risk of stating the obvious: "change" meaning
| "difference" and not "cents"
| seanmcdirmid wrote:
| A lot of debt also arises because of savings needs. If
| everyone is saving for retirement, for example, that
| savings has to be debt marked somewhere else. Examples:
|
| * Social security used to have a huge surplus, that was
| savings that had to go somewhere (even if it was just a
| savings account in a bank, the bank would then be able to
| lend it out). They instead buy treasuries and that
| savings becomes debt to the USG.
|
| * China likewise needs to save dollars because it doesn't
| want them sloshing around in their economy leading to
| inflation, so instead of using it to buy things they buy
| treasuries, and their savings becomes debt to the USG
| (not always a great deal for China if interest rates are
| below inflation).
|
| The dollar has been so useful in the past as a currency
| of trade because you could save large amounts of it
| easily by buying US treasuries. One reason China doesn't
| want the RMB to be used so heavily for trade is that they
| don't want to do the same yet.
| sethops1 wrote:
| See: the Genesis Mission
| https://www.whitehouse.gov/presidential-actions/2025/11/laun...
|
| I complained about it already
| https://tickerfeed.net/articles/whitehouse-genesis-mission-b...
| roadside_picnic wrote:
| It's national defense! Imagine if China had more slop than us!
| seanmcdirmid wrote:
| China is focusing heavily on AI applications. They have
| basically decided already to deal with their coming
| demographic bust with robuts/AI rather than immigration. Its
| not even about military applications, the US is just afraid
| that China will shoot so far ahead of us economically that
| they won't have any leverage over it in the future at all.
| nebula8804 wrote:
| There's a lot of nonsense that comes out on both sides of
| the aisle. I wish there was a solid single source of truth
| to figure out what's really going on in China and what's
| really going on behind the scenes in the U.S.
|
| Some talk about how China has some strategic issues, such
| as do they have a reliable supply of food and energy?
| (Zeihan etc.)
|
| I guess the energy portion is being solved with renewables.
| And I guess if they solve the issue of demographic collapse
| with robots and AI, that's something.
|
| But really, if there's less people and they're getting
| older, what's the point? What are they really working
| towards?
|
| This question is also becoming a problem post-Trump
| immigration ban in the U.S.
|
| Who knows what the U.S.'s demographics are going to look
| like now?
|
| Trump inherited a U.S. with some of the best demographics
| of all nations on the planet, especially in the West. And
| he managed to throw that in the garbage.
| alexashka wrote:
| > There's a lot of nonsense that comes out on both sides
| of the aisle. I wish there was a solid single source of
| truth to figure out what's really going on in China and
| what's really going on behind the scenes in the U.S.
|
| Isn't this simply the answer?
|
| That what's going on is gaslighting of the public and
| that there _are_ people behind the scenes and they don 't
| want hoi polloi to know what they're up to?
|
| This geo-politics (or politics) talk is 'intellectual'
| men's astrology.
|
| When a woman asks me my astrological sign, I know she's a
| deeply unserious person. When a man says 'do they have a
| reliable supply of food and energy'...
| CamperBob2 wrote:
| _There 's a lot of nonsense that comes out on both sides
| of the aisle. I wish there was a solid single source of
| truth to figure out what's really going on in China and
| what's really going on behind the scenes in the U.S._
|
| I've always assumed that there is such a source of truth,
| but that I had never heard of it, wouldn't have access to
| it, and couldn't afford it if I did.
|
| Reading a few tweets from Musk was all it took to correct
| _that_ misapprehension. It 's increasingly clear that
| nobody at any level of play knows jack shit about
| anything.
| throwup238 wrote:
| _> I wish there was a solid single source of truth to
| figure out what 's really going on in China_
|
| What kind of sources are you looking for? The Five Year
| Plans are the best source of truth for what they are
| planning on doing nationwide. The annual _Statistical
| Communique on National Economic and Social Development_
| and _China Statistical Yearbook_ from the NBS contain
| statistics on how that implementation is going. Then
| every year the NDRC delivers the _Report on the
| Implementation of the Plan for National Economic and
| Social Development and on the Draft Plan_ to the National
| People's Congress which packages up the statistics on how
| the plan is progressing.
| robocat wrote:
| > contain statistics on how that implementation is going
|
| Are those statistics reliable?
|
| In the US there are often good alternative sources for
| data: the discussions about unemployment numbers have
| been interesting (e.g. after private ADP numbers
| released). https://seekingalpha.com/article/4850656-jobs-
| data-from-alte...
|
| The lies in the Soviet 5 year production stats were
| relentlessly mocked in 1984.
| throwup238 wrote:
| They're the most reliable source we're going to get
| without being party insiders. There's still Soviet-style
| inflation of figures to meet quotas but China has been
| cracking down on that for the last few decades because
| they want accurate data for the five year plans. I think
| it's more of a problem with outer provinces, less so for
| the major manufacturing hubs.
|
| Alternative sources to verify are a bit harder to find
| without knowing the languages (lots of the NRDC and NBS
| stats are available in English).
| seanmcdirmid wrote:
| You could just go over there and live for a few years,
| you can be your own source. But yes, they have energy, no
| they don't have oil, yes they have lots of agriculture
| land, no they messed up some of their environment and
| that will take time to heal, yes they are working on it.
|
| > But really, if there's less people and they're getting
| older, what's the point? What are they really working
| towards?
|
| China wants to be a rich country even if their population
| stabilizes at only 900 million people or so. Mostly they
| want to avoid the middle income trap, which would have
| been a problem regardless of their demographics falling
| off a cliff. Automation is the best way to get around it,
| and they have enough tech, production know how and
| capacity, and smart people to pull that off.
|
| China is going to continue doing what is best for it, and
| they haven't gone stupid like the USA has. Embracing AI
| for productive uses rather than just fixating on the slop
| produced is one place where they are racing past the
| west.
| HPsquared wrote:
| We cannot allow a slop gap!
| W-Stool wrote:
| Thank you General Turgidson.
| dataviz1000 wrote:
| > Don't worry, once the Wall Street tap runs dry, the U.S.
| government will be more than happy to step in and bail out the
| AI corps. at the taxpayer's expense.
|
| I have a brilliant idea. Why not start this now?
|
| The US government will give every child born $1000 in money in
| order to hand it to the small number of families who own 70% of
| equities in order to purchase equities the child can't touch
| for 18 years. That is US Government -> child -> rich person who
| currently owns the equity, although the rich person gets the
| cash in hand the child has to wait 18 years to sell the equity.
|
| Where does the US Government get this $1000 per child from?
| Borrow it, adding to the $38,000,000,000,000 in national debt.
|
| Here is the interesting part of my brilliant plan. That child
| will inherit, calculated per capita, $111,000 in debt the
| moment she is born. That child will be responsible, calculated
| per capita, for ~$3,000 a year in interest on that debt.
|
| In order to sell the idea, every time the US Government gives
| $1000 to a child to purchase stocks I own, I will give $250 to
| another child to purchase stocks I own. Let's do the math:
| $1000 profit - $250 loss + $250 profit = $1000 profit. Best
| part is the media will run this as the leading news story for 3
| days making me look like God.
|
| It is a brilliant idea.
| glitchc wrote:
| I love it, except there's no point in providing debt to a
| party with no ability to pay for ~18 years.
| bdangubic wrote:
| due to ever-increasing income inequality the legal age for
| being able to have a job will be reduced to 6 in the coming
| years :)
| dataviz1000 wrote:
| The new AI data center I build to do what ever it is that
| AI Clippy does over at Microsoft will run on coal energy
| and those dirty chimneys are not going to clean
| themselves.
| Retric wrote:
| Subtract GDP growth and it's slightly negative, meaning
| simply borrowing more money and the at current rates the debt
| to GDP ratio decreases over time. Massive spending sprees are
| why it's gotten so huge, kicking it down the road turns it
| into a smaller problem soon as politicians stop actively
| making the issue worse it goes away.
|
| We could argue about the risk if things start to fail, but in
| an emergency the US could change its constitution and abandon
| its debt.
| robocat wrote:
| Make America Bankrupt Again!?
| boh wrote:
| That's why they're hedging. US government regulation has
| liquidity requirements so it doesn't occur.
| jbverschoor wrote:
| In the meantime, people who are actually working with it only
| become more bullish, and see a world where most people are first
| willing, and later basically required to pay 20-200 per month
| thatguy0900 wrote:
| This really doesn't make sense to me. I see no world where Ai
| is so useful that the common man is willing to pay 100+ a month
| for it, but it's also a world where the common man has a job.
| There's too many people for everyone to have some niche job the
| Ai can't do.
| bojan wrote:
| And if such a job would carry a work week of, say, 5 or 10
| hours?
| MSFT_Edging wrote:
| Then they would be paid for 5-10 hours and have to ask the
| government for benefits.
|
| In what world would a corporation pay a full yearly salary
| for 1/8th to 1/4 the labor hours? The current world already
| looks to labor as the juiciest place to cut cost for the
| profit margin.
| HPsquared wrote:
| That's not enough time to maintain skill. Experience would
| build very slowly in people working so intermittently.
| thatguy0900 wrote:
| Someone is working 20 hours a month and paying for a 100$
| subscription on top of bills? And this isn't a isolated
| case, this is the expectation for the normal person? Is the
| job supposed to be real or is the government just giving
| out universal basic income while being petulant about
| people not working at all
| websiteapi wrote:
| would you bet $10,000 that the super majority (80% or greater)
| of current users of free APIs will be using a paid (20-200) one
| per month? if so let's set something up. we can set the time
| limit at January 1st, 2028.
| alpha_squared wrote:
| Someone "actually working with it" checking in, if that matters
| at all to this conversation. I'm very bearish on the industry
| even if I think the tech is going to stick around.
|
| If we separate the tech from the industry, it's clear one has
| some value (albeit very hard to say just how much) and the
| other is a lot of smoke and mirrors. This is not a healthy
| space.
| spwa4 wrote:
| One might point out that this is the story of AI since at
| least the 1930's. Impressive technology demo's ... wild
| investment, crash, bankruptcy ... but the tech remains and in
| fact has useful applications all around.
|
| AI Winters. I finished school in 2008 and have seen it happen
| twice.
|
| Convnets. LSTM (and various RNNs).
|
| Both are in wide use today.
| mhog_hn wrote:
| Imagine throwing orders of magnitude more of compute at things
| - we may have things like a monte carlo tree search for LLM
| outputs using an LLMJudge that prunes the tree.
| LaurensBER wrote:
| + we can continuously let a LLM monitor our log files and
| alert/propose/fix issues 24/7. If intelligence becomes cheap
| enough this would be an enormous market.
|
| Having a LLM run as "fact checker" /coach for everything that
| you write also would be a great addition.
| roadside_picnic wrote:
| > who are actually working with it only become more bullish
|
| I have a feeling the word "actually" is doing a lot of work
| with this. I shipped AI facing user products a few years ago,
| then worked in more research focused AI work for awhile
| (spending a lot of time working with internals of these
| models). Then seeing where this was all headed (hype was more
| important than real work) decided to go back to good ol'
| statistical modeling.
|
| Needless to say, while I think AI is absolutely useful, I'm
| bearish on the industry because current promises and
| expectations are completely out of touch with reality.
|
| But I have a feeling because I'm not currently deploying a
| fleet of what people are calling "agents" (real agents are
| still quite cool imho), you would describe me as _not_
| "actually" using AI.
| maplethorpe wrote:
| Can I ask what you do? I suspect there is a type of job that AI
| excels at, and it makes everyone in that job unreasonably
| bullish on AI.
| jtf23 wrote:
| profits have not materialized, nor can they: machines can only
| transfer value, they cannot create it
| ubercow13 wrote:
| What?
| jtf23 wrote:
| it turns out capitalists do not understand economics
| mikepurvis wrote:
| Two responses to this:
|
| - _Most_ participants in the economy are creating very little
| real value. They 're shifting things around or temporarily
| solving problems that are highly localized to the organization
| they're in.
|
| - There's a lot of _unrealized value_ stored in the corpus of
| knowledge that AI companies have ingested-- the millions of
| webpages, the scanned books, wikipedia, the blogs and Q &A
| sites. So even if AI companies are not creating new insights,
| just the act of locating, filtering, and summarizing knowledge
| that was already present somewhere in the world is valuable.
| Indeed, one could use this same argument to declare that Google
| in 1999 was creating no value, which is of course obviously
| untrue.
| zerotolerance wrote:
| Google created two kinds of value: content discovery via
| connection (value to the consumer), and market reachability
| for advertisers. Oh, and also the world's most inconvenient
| spell check.
|
| AI proposes to solve: a content supply side problem which
| does not exist, and an analysis problem which also only maybe
| exists. Really what it does in the best of cases (assuming
| everything actually works) is drive the cost to produce
| content to zero, make discovery less trustworthy, make the
| discovery problem worse, and launder IP. In the best case it
| is a net negative economic force.
|
| All that said, I believe the original comment is about the
| fact that the economy exists to serve market participants and
| AI is not a market participant. It can act as a proxy, but it
| doesn't buy or sell things in the economic sense. Through
| that lens, also in the best case the technology erodes demand
| by reducing economic power of the consumer.
|
| That said, I'm stoked to hear about the next AI web site
| generator or spam email campaign manager. Lets setup an SPV
| to get it backed off-balance sheet.
| encyclopedism wrote:
| What bubble? Where is it? I haven't seen it! Here, try my SOTA AI
| toothbrush.
| red-iron-pine wrote:
| presumably it data mines plaque locations while providing no
| actual hygiene benefit whatsoever
| lambdaone wrote:
| This makes the hair rise up on the back of my neck; it reminds me
| the sub-prime crisis - "they can't all default at once!"
| JohnMakin wrote:
| It does look and feel very similar - particularly the risk
| shedding and assumptions made there
| thewebguyd wrote:
| > "they can't all default at once!"
|
| Narrator: As it turns out, they can.
|
| The difference now is instead of banks holding the risk, they
| are now the safest portion of the loans. The risk is now moved
| to private credit, so if this bubble bursts, they will panic
| sell other assets to cover the AI losses, which will crash
| unrelated sectors as well.
|
| Since the now bad AI loans can't be sold, they need liquidity
| form elsewhere to cover. AI bursting means other S&P 500
| stocks, treasuries, gold, crypto, commercial real estate will
| all go down with it.
| Ekaros wrote:
| I wonder how much other bad private credit there is. If you
| want liquid funds, rolling it all over time and time again
| might stop working... Maybe it is really time to clean it all
| up.
| marcosdumay wrote:
| Yes. And they always start trying to diversify only after they
| work years forcing everything to be correlated to it...
|
| The .com bubble wasn't like this, but it was a minority between
| bubbles.
| vb-8448 wrote:
| One thing it's not clear to me: the amount of money is colossal,
| where the one who are supposed to refund banks will get the
| money?
| thewebguyd wrote:
| > where the one who are supposed to refund banks will get the
| money?
|
| Liquidating other assets. The point of the banks using SRTs is
| to push the default risk off of the bank and onto investors.
|
| So now, instead of banks failing, private credit gets to bear
| the risk of the bubble popping. Since they can't sell the (now
| bad) AI debt, they will need to liquidate all of their other
| assets to pay the banks.
|
| That's why a potential AI bubble burst can cause the markets to
| enter a death spiral and bring down a bunch of other, unrelated
| markets.
|
| If private credit can't cover the losses by liquidating
| everything else, well, then they fail, and we either let it all
| crumble or do bailouts again.
| spwa4 wrote:
| You forget the single greatest source of money for investors:
| loans. Sorry "margin". With the banks. And margin is
| nonnegotiable because the whole point of the stock market is
| to massively increased loaned money because that is the real
| advantage to the economy they provide.
|
| Plus the problem of 2008. You cannot offload risk if
| everything is synchronized, the math still works but doesn't
| take "either everything crashes or nothing does" into
| account.
| voxleone wrote:
| Looks like we might be witnessing a textbook cycle of self-
| fulfilling prophecy in the making. As the article suggests, once
| large investors and institutions start calling this an "AI
| bubble," the narrative alone can drive more capital, inflating
| valuations further just because everyone expects growth. When
| price - expectation - price becomes the dominant feedback loop,
| fundamentals matter less.
|
| That kind of reflexivity has powered past bubbles. George Soros'
| reflexivity thesis applies: rising prices attract more
| investment, which inflates prices further, until reality forces a
| reset. If many AI-related companies can't quickly deliver
| expected growth, the eventual correction could be sharp.
|
| In short: hype begets cash, cash begets price, price begets more
| hype, and at that point, we're no longer betting on value, we're
| betting on the belief itself.
| alecco wrote:
| https://archive.ph/kwD1t
|
| > Banks are lending unprecedented sums to technology giants
| building artificial intelligence infrastructure while quietly
| using derivatives to shield themselves from potential losses.
|
| And who is their counterparty? Aliens? What a dumb click-bait
| article.
| jesuslop wrote:
| Is there a web that calculates implicit credit ratings of the
| hyperscaler companies?
| boh wrote:
| Banks hedge investments-it's pretty standard and lowers their
| risk-weighted assets. If their investments are big, their hedges
| are big. If banks have a net negative view towards their AI
| investments, this article fails to articulate that (regardless of
| how many exciting adjectives they choose to use).
| spwa4 wrote:
| $5 trillion dollars in loans? Pretty standard?
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