Comment by jillesvangurp
7 hours ago
Maybe to counter some of the apparently widely expected doom and gloom:
- bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
- large scale infrastructure spending tends to be really good for economies. These three companies are creating lots of jobs that are mostly related to construction, energy infrastructure, hardware spending, etc. That's a lot of money flowing to suppliers and regions where that spending happens.
- While overly pessimistic sentiments about AI and space companies are widespread they aren't much more rational than the overly optimistic ones. The realist scenario could actually be that, AI and especially Agentic AI is already quite useful and the total addressable market for that is obviously larger than it is today. The question is how large. Likewise, dropping the cost of launching stuff into orbit by one or two orders of magnitude, should create a much larger market for launching stuff there. Including possibly some AI relevant compute.
The valuations of these companies are probably on the high side and I'd expect post IPO share values to drop quite a bit and would not personally consider buying anything until after that happens. But that won't necessarily trigger a stock market crisis or a collapse of these well financed companies. All the spending these companies are doing is very real and the profits of their suppliers are going to be equally real. So some of those share value losses might be offset by gains for other stocks and economic growth. The stock market and economy aren't zero sum games.
However, there are worrying macroeconomic trends happening at the same time (Iran conflict, Ukraine war) that are disrupting global markets already. But you could argue that dumping tens or hundreds of billions into e.g. energy infrastructure and data centers isn't the worst way to counter those for a country like the US. The big picture might actually be pretty positive. Especially if we can dodge global economic misery via a prolonged Gulf conflict that at this point seems to serve no point whatsoever for anyone except perhaps Israel.
I have no crystal ball, but I feel uneasy when they change basic rules about indizes right before these IPOs. There are a lot of retirements on the line just by this fact. Maybe big tech gambled too close to the sun and found a way out? Whether something pops or not, it leaves a bad taste in my mouth this can be done so easily, don't you think?
This is it entirely. I don't really care if the pessimists or optimists or somewhere in between ends up being correct. What possible reason is there to change the rules around the indexes unless these companies and their backers know that time in the market is going to expose that they're overvalued and they want to force someone else to be holding the bag when that happens.
> There are a lot of retirements on the line just by this fact
1) I would expect anyone close to retirement to have a fairly balanced portfolio.
2) if they don't include SpaceX and the stock does >10x in the next year, they'll end up doing terribly on the benchmarks. SpaceX is big, but if they invest early, it won't be a ridiculous % of the portfolio. Even if one overpays by 2x, since it's under .1% of the total portfolio. If it went to zero nobody would lose their shirts, they'd lose <.1% of their portfolio.
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I think so too I’m just worried about how unequally these gains will be distributed, for myself I am quite pessimistic thinking that all these gains will not benefit my life, if at all it will move the needle more towards making my expertise and skills easily replaceable by switching human capital for agentic capital. So yeah really happy for Musk to finally make his one millionth million dollars but personally I’m middle aged and still struggling financially wondering if I can ever live comfortably or retire.
> bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
Is that true? It seemed to me that the most common opinion before the recent Chinese real estate crash was that it was a bubble; architect friends of mine who worked in China said the government had no doubt prices were unreasonably high; the thing they remained hopeful about is whether a soft landing was possible. Similarly it seems like it was by no means an uncommon opinion in the Japanese asset bubble, NFTs, beanie babies, and even the dotcom boom that this is (to use Greenspan’s phrase leading up to the dotcom bubble) “irrational exuberance”.
I also think its hard to know when it will pop. The Chinese real state bubble you are quoting is indeed a very good example. Everyone knew the prices were super high but no one really knew when it would blow. The state had a problem and they knew they had to stop it eventually. After/during the covid pandemic the state decided to start a slogan "houses are for living not for speculating" and they started to set redlines for leveraging and developing. If you know how financing works in china you know many of it flows through the state and related companies and financial structures. Then also when one of the biggest developers in the country blew up they left it to blow instead of buying it. They essentially popped it with policy.
So many would say the saw it coming but the truth is only people with inside info really knew when it would happen for sure.
Same happens today. Capital is being heavily allocated towards AI inference and infra because of the promised productivity. Nobody knows if its early or late and also nobody knows how will the state react to a possible bubble exploding. Some people would say maybe AI is too big to fall already and its better if we save it when it falls. Some people would say its better to let it blow up but again nobody knows what will truly happen until we get there.
Bubbles are extremely predictable. The problem is predicting when it will come crashing down.
> bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
Non really, there are a lot of signs. What is hard to predict is "when it will happen", not "if it will happen".
EDIT: Btw, a bubble popping is not necessarily a bad thing, they are necessary for markets, kinda natural fires in big forests.
> large scale infrastructure spending tends to be really good for economies
All infrastructure is not created equal. It requires a lot of mental gymnastics to argue that datacenters are public good with net positive externalities.
Actually, you could argue that these are anti-infrastructure since they strain the electric grid for everyone and reportedly make the surrounding area unlivable with noise pollution.
Huge data centers and energy infrastructure projects mean lots of potential for local businesses to benefit, employment opportunities, etc. These companies are raising an unprecedented amount of funding and are looking for places to spend it.
With the right policy and legislation, this level of investment should be welcomed rather than opposed in most sensibly run places.
For example California and Germany have a lot in common when it comes to the locals blocking all forms of large scale infrastructure for mostly selfish reasons. Both places have broken energy infrastructure, high energy prices, high taxes, very bad roads, etc. Both have decades of backlog in terms of outdated infrastructure in need of major upgrading/fixing. Everybody is wringing their hands about fixing these issues because there is no money and tax pressure is already too high.
And here are some of the wealthiest companies in the world looking for places to spend their many billions. Surely, that's something that could be mutually beneficial. All states need to do is set some sensible terms and conditions for this. But instead you get people campaigning against this. I really don't get that negativity.