More precisely the mismatch in investment and debt and timelines. The people laid the fiber (if that is even an apt description) were not the ones who made money from that investment. If there is even some sort of mismatch in the investment timeline then that could mean all the current investors are wiped out and someone else will eventually profit from their work.
Executives and investors tied to the AI supply chain were among the biggest insider sellers in the second quarter, taking advantage of a sharp — and volatile — rally in technology stocks.
Eight of the top 10 sellers had ties to companies benefitting from artificial intelligence as chip stocks posted their best quarter ever, driven by insatiable demand for AI equipment. The Philadelphia Stock Exchange Semiconductor Index jumped 88% during the three months through June 30, reflecting big gains by such companies as Broadcom Inc., Astera Labs Inc. and Nvidia Corp.
I use to pay for Anthropic top tier plan but I cancelled it in May. Until there is some reckoning with what this bubble is doing and how these companies are behaving, I'm staying out personally. My job provides AI subscription but I use it as little as possible because I don't want to contribute to usage charges.
This is on top of the $3 trillion in AI debt already accrued. And the number keep multiplying every month it seems. US GDP is 34 trillion, so their debt and spending obligations amount to 15% of gdp. That's a mindbogglingly large amount taken from the rest of the economy.
I'm not going to make a prediction of what will happen with AI whether it will autocomplete / productivity or AGI. I will say it seems to be trending towards former than the latter just by how scaled down the promises have become over the last year (we went from curing all disease and cancer / post-scarcity to productivity and code.) The amounts being spent on this can only really justified by some paradigm shifting returns and within the timeframe investors expect. This isn't something like Apollo / Manhattan project - those were taken on by the government with public money. This is explicitly a profit making enterprise funded by markets.
That could all be true, but the problem is however powerful it is, it still needs to make money for the people who invested in it who are expecting a return. The stock valuations, the bonds yields - they don't care about the power of a nuclear bomb. They want to get paid. They expect to get paid. And if they don't get what they are expecting, there will be hell to pay in the economy. There's a probably a good reason the power of nuclear weapons isn't an ETF I could buy into.
So the disclosed balance sheet debt is 1.35 trillion and then the off-balance sheet debt is 1.65 trillion for a total of 3 trillion in AI debt for the 5 tech giants so far. It's multiplying every quarter and they've set investors expectations to be that this is never ending basically. But the tech giants aren't the only people spending themselves into massive debt, think of the CoreWeaves and the Nebius and the hundreds of other smaller companies. And the expectation is that there will be a near term return on all this with a healthy profit. Those five tech giants are just the tip of the iceberg in terms of the amount of debt.
I mean that's so far, it continues to grow exponentially larger with each quarter. The debt issuance for the first half looks to be crowding out US treasuries in the bond market - https://www.bloomberg.com/news/newsletters/2026-07-23/ai-deb... - that's an extremely large amount of debt. And it's still getting larger and larger each quarter.
I think these large numbers are casually thrown about, but the real meaning is mind boggling. 1 trillion dollars is the entire US defense budget - aircraft carriers, nuclear submarines, health care, salaries, stealth fighters ect. The hidden AI debt alone is more than that https://asia.nikkei.com/business/technology/five-us-tech-gia... just for five tech giants (not to mention all the other smaller players like neoclouds)
That's the financial stakes here. That's why it's all or nothing. You're spending on a level that is only justified by the bonafide machine god being ushered into existence, not productivity or coding tools (and on relatively short time horizon). So if this doesn't change the near term trajectory of humanity to a parabolic move upward there is going to be a lot of economic pain. It's not just the spending, it's that the expectations for the returns to justify them are in a relatively short period of time.
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.
I mean of course, this isn't for the steady investor, but also active WallStreetBets style retail gambling / investing is just now a way bigger piece of culture now. This is meant for that context. There are a lot of them who could be potentially fooled if the rally peters out.
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.
This bubble has both, the margin in stocks is keeping share prices of datacenter companies afloat as they try to borrow more. The growth from the borrowing keeps the share price afloat. Now a massive buyer of datacenter company equities is out. There is circularity to how the debt is reinforcing each other. When one part of the cycle stops spinning it could reinforce a drop in the other.
Yeah, but that was a classic stock bubble. There's a lot of debt in this one. Think of all the debt for the data centers and margin for stocks is at record high. You just lost one the of the biggest buyers of data center stocks at a time they desperately need to keep their stock prices up in order to borrow more.
No, less than a year, much less. There needs to be a certain level maintained in order to keep pressure and lot of the bottom stuff is unusable because of contaminants - it's like sludge.
'Bond investors are looking for significantly higher yields on the latest $12bn Meta-backed data centre deal compared with the terms secured just nine months ago, as markets price in higher risks around AI financing.'