There's an old WSB saying: the market can remain irrational longer than you can remain solvent. The AI craze is that but on 'roids.
> These are incredibly sophisticated companies so presumably they wouldn’t let themselves get into a company ending bind.
The problem is, company C-levels don't care about the long term health of the company. They only think about next quarter (in a misguided interpretation of "shareholder duty/fiduciary duty") and their bonuses tied to their KPIs.
> But what are the chances this is actually an MBS type situation where the system is truly overloaded and a few sacrificial lambs are needed?
The system definitely is overloaded to hell and beyond after well over a decade of ZIRP. That money never got deflated out of the system in a healthy way and now everything is looking to fall apart.
Unfortunately, such events are already "priced in". VC essentially is built on 1 of 100 investments striking it big and 99 going bust. A market correction won't hurt the big guys, but it will definitely hurt all the small guys.