Submitted 20 hours ago by Ek-Hou-Van-Braai@piefed.social to technology@lemmy.zip
https://www.lbc.co.uk/article/big-short-michael-burry-ai-bubble-5HjdGLY_2/
The investor who bet against the US housing market in the run-up to the 2007 financial crisis has now placed a significant wager on the collapse of the artificial intelligence (AI) boom.
A billion? With what money? A quick search says he’s only worth 1/3 of that. If he’s shorting it he’s gonna be toast.
Is it really a bubble?
A lot of the money is coming from the bank accounts of big tech not investors
A concerning amount of investor money in the market is riding on the wellbeing of a few big tech companies. And it got that way because the absurd valuations of those companies is built on speculation that AI will change the economy and company X will benefit from that for reason Y. When it becomes clear that either AI will not change the economy or that company X will not benefit greatly from said changes, that valuation will pop and investor assets will lose value. I’d call that a bubble
He’s highly regarded.
Expiration and strike price were not shared so unclear what his play is. For reference “the big short” was about 1.3 billion in total placed in 2005-2006 with an expiration around 5 years later around 2010-2011. It was somewhat standard for burry/scion capital and possibly still is so they could be playing this assuming the bubble will pop no later than 2030 (and paying 10s of millions a year to maintain those contracts) or they possibly have data to suggest an earlier expiration is worthwhile. They obviously won’t share this and public disclosures aren’t required
What’s an accessible way for a non-wealthy person to bet against the AI bubble?
Yes I understand that this is tantamount to gambling.
Puts on nvidia and palantir is what he bought, basically, with palantir:nvidia at 8:2 ratio so he has far more confidence palantir will blow up (in a bad way).
Note that if you don’t know what this means, or if your only knowledge of “buy puts” is buying them via an app like robinhood, keep in mind you don’t know nearly enough about the risk involved and this could blow up in your fucking face real bad.
Especially in the unlikely scenario AI crashes extremely hard (eg palantir goes to 0) and you have a naked put - using today’s closing price of $190 if you chose a strike of $180 your max profit is $285 per contract but your max theoretical loss is like 18,000 per contract if it drops to 0 (again, unlikely, but a more realistic scenario wherein it drops to say, $150 - you’re out almost $3k per contract).
Options that are safer if you don’t want to get this involved in what is ultimately literal gambling: take a degree of separation. Instead of puts directly on nvidia or palantir puts on qqq, xlk, aiq, or some other etf that is made up of AI bullshit. Spreads risk but limits payoff. Use the strategy this nerd used: long dated puts. Keep in mind this is more expensive up front and for the retail investor you’ll generally max out 6-12 months realistically. He did 4-5 years out but that came with additionally complexity (especially for the billions in contracts he held) which meant tens of millions in payments to secure the contracts each year, which made his investors furious (though they ended up eating shit because he made them 730 million and over 100 million for himself on top of that).
Just keep in mind that options trading has ruined many people who know what they’re doing and it’s ruined way way more who have no fucking clue but think they do (I’m in this category). For every dipshit that makes millions off of gamestop there’s probably a hundred people or more like the people from reddit that post shit like this Image
Don’t end up like that person. There are so many of them on reddit. They succeed with a few trades, get up 5k, 10k, 50k, then get greedy and have mad hubris and believe they’re now “elite traders” so they piss it all away, often in a handful of trades over a few days/hours because the loss causes them to panic and try to recover with foolish long shots. The sad thing is you’ll read some where it’s like “I’ve been poor my whole life and I finally got a 30k inheritance, got it to 45k” and then a screenshot like that where they pissed it all away in a day to functionally hand it to some 1%er nepo baby hedge fund manager who is worth 15 million and has never wanted for anything in their life. Then they talk about all the debt they could’ve paid off and it’s like “what the fuuuuuckkk duuuudeee”
Don’t buy naked puts and absolutely do not ever buy naked calls, which have unlimited risk, though I don’t know why you would in this scenario (or ever really). If nothing else please at least read this part.
Sell your index funds and tech stocks.
Buy Berkshire Hathaway (who’s sitting on a big pile of cash for crash buying, as they do), Walmart, and bread and butter ones, companies that make things folks would still buy in a recession (like groceries).
Don’t mess with shorts. You don’t know when the bubble will burst, and these companies will make you money even if it never does.
You can’t with any reasonability.
If you want to gamble on WHEN the AI bubble will pop, you buy large amounts of cheap puts on big-tech at a price substantially lower than where it is today.
If you have positions in companies that are overvalued due to the AI bubble, you can sell them or better yet place a stop loss. That way you can still benefit from the bubble further inflating, with less risk that you hold the bag at the end.
Other than that, invest in unrelated companies/ETFs with less weight on these companies. You’ll still crash with the rest of the market but should recover faster than those in the AI bubble.
Don’t try to do anything fancy. You’ll have to gamble to time the pop and even if you’re right, you may still get outperformed by someone with just an S&P500 ETF over that time.
If you’re in the US, that’s just part of daily life at this point. Employment? Food? Shelter? Sanity? Hope? 🤷🏼♂️ Pick three, and roll’ em!
Less risky: sell stock you hold in nvidia or other AI heavy companies. Invest in non AI.
Risk to the max: short nvidia stock. Each month they don’t crash, your wallet hurts.
Just know that Burry is more confident in Palantir crashing than Nvidia (considering how much he’s shoring each).
While I want both to be true, he’s betting against governments wanting actionable intelligence on each and every citizen (although the moat there is shallow, easy for someone else to start a race to the bottom) and massively parallel processors becoming less valuable (remember how smoothly they switched from crypto to AI?, remember when you could buy a gaming video card for less than the rest of your computer, likely another bubble in the wings) plus the whole circular investment is propping up the entire US economy situation, the epitome of too big to fail (without the whole US economy going tits up, which given the current situations is distinctly possible). Actually 8:2 sounds ballpark, but I doubts he’s not hedging his bets.
While I want both to be true, he’s betting against governments wanting actionable intelligence on each and every citizen
Not at all… governments can keep that even if ALL commercial AI disappears today. The gov wanting this would keep the tech alive but not commercially viable at all; if anything, the gov would prefer to have it all to themselves and keep whatever advantage it’s supposed to provide.
AI, in and of itself, if not more privacy intrusive than: cellphones, facebook, google suite, etc
being against governments wanting
A thing they already had
but the infra!
That burns out in like two years
but the ponzi scheme can’t collapse!
…
Governments that think AI can reliably automate this don’t understand the technology.
Nobody who thinks this has a broad use case unferstands it
They don’t care about the “reliably” part.
Well, kinda. To be more specific, he’s mostly betting that Palantir is overvalued, which it probably is. Peter Thiel is a nut case.
He’s right about that - 100% right, but there’s SOOOO many things overvalued right now and it doesn’t seem to matter. Like, whatever is good on paper doesn’t necessarily correlate with reality in this market.
This guy does nothing but bet that the market will crash. Not to say we aren’t in a bubble, but this doesn’t mean it’s about to pop
He’s predicted 12 of out the last 2 market crashes
I don’t know if this is a typo or a sick burn
I like those odds! ALL BETS ON BLACK!!!
He also lost big on Teslur
There is a big media event now to post scary news about the stock market, and push bitcoin and tech stocks down.
Happens now and then when the big investors want to get in cheaper.
What could realistically pop the bubble? Afaik, it’s a bubble because everyone is buying buying AI stocks, the goverment and every investment fund including pension funds are invested on it. How does this ever burst if theyre all in on this? Could the withdrawal of an investment fund with a large % of ownership cause a snowball and pop the bubble?
If there’s no profit being made companies won’t keep spending. A large part of this bubble are the plans tech companies have to build out more AI. If these companies blink and reduce their plans it will begin the selloff. They’re still all in on forcing AI down your throat, because they need you to be used to using it so they can start charging you a monthly subscription.
Ruh roh Raggy!
Welp, I just shorted a bit. I guess bears think alike, or something…
vane@lemmy.world 2 hours ago
Nvidia
$4752 B Market Cap
$165 B Revenue
$100 B Earnings $40 B Liabilities $140 B Assets
4752/100 = 47 years to pay up market cap
Palantir
$445 B Market Cap
$3.44 B Revenue
$0.79 B Earnings
445/0.79 = 569 years to pay up market cap
It’s pumped more than in 1998
_stranger_@lemmy.world 1 minute ago
1998 didn’t have retail investors, meme stocks or Bitcoin. The entire market turned into a carnival, I’m not sure old rules apply. For fucks sake people are trading futures on NFT’s.
It’s the same game, different rules. People nowadays don’t care about the shit that made the companies picked by Berkshire Hathaway successful, like brand recognition or quality, they are about, what, glitter and noise? It’s naked gambling on how insane it can all get, and I think there’s even odds on the bubble going nuclear and us all getting paid with NvidiaBux a year from now.
vane@lemmy.world 1 hour ago
More tech companies :
Oracle
$713.58 B Market Cap
$59.01 B Revenue
$18.07 B Earnings
$180.44 B Assets
$155.78 B Liabilities
713.58/18.07 = 39.48 years
Google
$3433 B Market Cap
$371.39 B Revenue
$140.07 B Earnings
$502.05 B Assets
$139.13 B Liabilities
3433/140.07 = 24,51 years
Apple
$3991 B Market Cap
$408.62 B Revenue
$130.21 B Earnings
$331.49 B Assets
$265.66 B Liabilities
3991/130.21 = 30,65 years
Microsoft
$3769 B Market Cap
$281.72 B Revenue
$123.62 B Earnings
$619.00 B Assets
$275.52 B Liabilities
3769/281.72 = 13,38 years
Amazon $2674 B Market Cap
$670.03 B Revenue
$85.15 B Earnings
$682.17 B Assets
$348.39 B Liabilities
2674/85.15 = 31,40 years
Meta
$1602 B Market Cap
$178.80 B Revenue
$81.23 B Earnings
$294.74 B Assets
$99.67 B Liabilities
1602/81.23 = 19,72 years
vane@lemmy.world 1 hour ago
Bank
JPMorgan
$848.45 B Market Cap
$175.65 B Revenue
$71.04 B Earnings
$4552 B Assets
$4195 B Liabilities
848.45/175.65 = 4,83 years