Is the fall of Situational Awareness the first domino?

5 points·mapping365··5 comments

I think it is, this is how it always starts (think the crypto blow up, Bear Sterns ect) but curious to hear opinions.

What is your theory of how the dominoes fall and why?

My understanding of this situation (ahem) is that SI was highly leveraged and where tech (ai and adjacent) stock prices fell, they got margin called ABs were forced to liquidate. Why would this lead to cascading events beyond SI? It appears to have been a very orderly liquidation. No counterparties are reported to have been blown up. Nothing systemic.

My theory is simple, margin debt is pushing up stock prices on the back of growth, the high stock prices allow datacenter companies to fund their debt that fuels the growth. Two types of debt are cycling and reinforcing each other. If datacenter company stock prices fall then it will be harder for them to borrow, which will slow down growth, which will cause the stock to fall more. Situational Awareness was one of the largest buyers of these stocks using margin. One leg of the cycle is demonstrably failing.

On the one hand, replacing software devs with AI is enormously profitable, on the other hand bad-actors can distill these models with industrial attacks and undercut pricing or release an open model... how does it all play out ? idk.

Stocks are back up so it looks like a fakeout.

There's always a weird quiet interlude. Bear Sterns hedge funds went under in 2007 and then things went quiet. The crypto hedge funds blew up and SBF spent the summer saying he was going to bail everyone out. The damage is happening beneath the surface of the market.

Reply on news.ycombinator.com