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Comment by HelloNurse | Hacker News Reader

If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize, bubbles aren't completely bad.

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You can't discount the impact this will have on global stock markets and what that may do to both individuals and, more importantly, pension funds, as a large swath of people are retiring

Damage is unavoidable, we can only hope that it happens to someone deserving. Innocent individuals and pension funds still have time to retreat; if they don't it will be their fault.

We are moving towards gerontocracy - if pension funds will have large losses it’s very likely that young, working age people will be taxed extra heavily to keep the QOL of pensioners.

That would likely lead to a revolution: Millennials are 30-45 and they’re not in a good place; neither is Gen Z.

We’re already seeing revolutions elsewhere — and it’s likely that trying to loot them further by generations who sold out the nation will simply lead to social collapse.

Have you ever battled an 87-year-old wearing mechanized battle armour? They're crazed, hopped on speed, eyes goggling in their sockets

A pack of 3 oldies burst through our perimeter one winter night... the screaming woke me up. Outside my tent the forest was lit up red by our laser blasts, trying desparately to take them out.

We thought that a revolution would be a good idea, but an upside-down population pyramid is a hell of a thing when you're on the bottom.

Perhaps most of the impact could be burdened on NVIDIA investors, employees, leadership, or OpenAI investors, employees, leadership, etc., etc.

Yes but this is by design. Wealthy people want bubbles, when they pop, you can gobble up all the value at all time lows. Then you hold until you don't feel like it anymore as the market goes back to growing. You see this as how private equity has bought up real estate across the USA to turn into rentals after 2008, for example.

Aren’t extremely wealthy people that wealthy due to the valuation of their stock? IIRC generally the higher the networth, the higher share is kept in stocks

Wealthy people are extremely well diversified. Their main risk exposure is to variables that effect the entire market - e.g interest rates.

And they don't spend money, they take debt against their existing assets to fund projects and investments. So long as they can service the loans across economic downturns, they don't particularly have to feel the effects of a recession, outside of the mentioned opportunities to buy the market at a discount.

I suspect $$ is just a number for them. Being able to control more resources is the ultimate game. You gotta have zillions of $$ to join the tournament, though.

Person A has a net worth of 2B Person A has a loan at 500M backed by their holdings Stocks drop 50%, Net worth is now 1B Person A buys $500m of stocks Market Recovers 100% Person A now has 2B original holdings and 1B gains, $500m owned = 2.5B

Very simple example, and not the only way to do it - but people need to remember net worth being 500B is not 500B in the bank, and at some point the number doesnt matter

They can move their wealth from stocks to gold, for example. Look at the price of gold.

More importantly you keep the portfolio semi-balanced.

Just using Google / Gold as a comparison [1].

Assume you have 100 units of each.

In late 2021, Googs gone up ~100% so you have to rebalance because you have $200 in Goog and $92 in Gold. So lets say you rebalance to 80 Goog (160$) and 144 Gold ($130).

In late 2022, Googs gone down ~40% so you have to rebalance because you have $96 in Goog and $141 in Gold. So lets say you rebalance to 100 Goog ($120) and 118 Gold ($112).

So over the course of 2 years Goog has gone up 20% and Golds gown down 5% but your investments are overall up 16%. Obviously a 100% Goog investment is higher but with more risk.

If you didn't do any rebalancing then you have a gain of 7.5% (100*1.2 + 100*0.95 = 215)

[1]: https://www.google.com/finance/beta/quote/PHYS:TSE?compariso...

There was an article here recently about alpha school that mentioned this is how of of its backers made a lot in the aftermath of the dot com bubble - picking up companies with products that happened to implode in the bust. He's not the only one and that's not the only bubble that had that happen

> If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize

Only if those are the only actual real customers. It's not. The pie is a lot bigger. And with the current hype some other AI company will just take over and the bubble will continue.

Where does that leave AMD, considering OAI are taking a 10% stake?

A shareholder going bust is a no-op. However, the loss of large customer, is concerning, but less so, relative to the market souring on AI investments as a whole, which would be not great for AMD, but disastrous for Nvidia.

They'd just pitch for using the same GPUs to run the digital dollar ledger, and begin the cycle again, maybe.

Sure who cares if we wipe out 15% of everyone’s retirement right as long as it’s got some schadenfreude involved.

I doubt, or at least hope, that no sort of managed fund for retirement (read: low risk) is going 15% on AI stuff. Regardless of what one thinks might happen, it has to be accepted at this is an obviously very high risk bet, because this all is screaming bubble even more than the era of 'zomg i flipped this house i financed on an insta-approved loan, installed granite counter tops, and walked away with $20k profit in 4 days.'

But probably they will invest in the sp500, and tech companies make a big portion of the sp 500 and these tech companies also happen to be big in AI

Failing to diversify is the fund managers' problem. Pension funds shouldn't have all their investment in a single countries' stock market (doesn't matter that most, if not all, of those companies operate worldwide, they are still from the US), not even in equity markets. A wiser investment manager (or individual investor) would put a chunk in different kind of equities, and diversify into fixed rate, precious metals, perhaps real estate... Not bet it all to the volatile S&P 500. "Past performance does not guarantee future results.".

Who's "we"? Most of us have zero say when the backroom circular deals are made.

If it’s a bubble, then the long term value people are now counting on to retire with in the future is not actually real though, right? Like a bubble popping doesn’t destroy real value that used to exist, it exposes fictional value that never really existed.

It reallocates real value to the capitalist class. Most of us don't babysit stocks 8h a day and will be holding the bag.

What’s the mechanism you have in mind for that happening via bubble? They sell early before the crash? I’m curious if that actually happens, since the mass psychological nature of market crashes seems to make them difficult to predict reliably, even for people with a lot of resources.

Inflation on the other hand definitely does reallocate real value to whoever already owns a lot of assets, and I believe inflation often goes along with bubbles, since credit expansion is what usually kicks off the bubble in the first place.

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