Comment by scotty79

The banks will start to pull back on AI financing because their risk calculations are going up. That will make the news and people will sell their AI stocks and just put cash in a money market fund or something. Stock price decline confirms the bank’s calculations and now they def. aren’t lending to AI companies. That makes the news and now people are really selling their AI stocks which drives the price down further. The banks react again…

In 2008/9 people became paranoid there was nowhere safe to go and that really screwed things up on top of everything happening in the stock market.

https://www.investopedia.com/articles/economics/09/money-mar...

This is a great question, and one that drives right to the key issue! (oh god, that sounds like an LLM response, sorry)

Like with the implosion of the Japanese economy, people will just not invest, instead parking their money in low-yield bank accounts. It was, in some cases continues to be, an issue for that country.

They're not definitionally the same. Normally a (stock market) crash is just "everyone's assessment of expected future cash flows goes down, meaning that what everyone owns is less valuable". One thing that can cause people's assessments to drop is "everyone else is withdrawing from it, which I assume means they're assessing it as being much less valuable, so they have information I don't, so I should revise downwards", which can make a self-sustaining feedback loop, but that's certainly not the only possible cause of a crash; I wouldn't even say it was the most likely cause of an AI-bubble crash.

My guesses would be "everyone's assessments go down together because OpenAI et al's predictions of their future revenue are observed to be consistently vastly overinflated vs actual performance, but everyone was previously assuming they were roughly correct" or "some political thing happens which makes OpenAI et al's services obviously much less valuable or makes them much less able to provide services".