The stock market doesn't operate on long-term principles anymore. So, in some sense, it is immaterial that the rosy scenarios where AI is responsible for >$30 trillion in the next decade are unlikely. If you bet against the hype and it goes on for a few more months/years you lose as much or more than if you went along for the ride.
Burry is well aware of this, he has written about how passive investing is contributing to this problem.
> If you bet against the hype and it goes on for a few more months/years you lose as much or more than if you went along for the ride.
> Burry is well aware of this ...
Well, no he isn't well aware of this, apparently. He's been right in 2008 but he has been spectacularly wrong for the last 5 to 10 years, like shorting Tesla or Nvidia at the worst possible moments - and eventually closing his hedge fund...
Sure, no one can predict the future. But even then, Tesla fundamentals are shaky and it is held by Musk's ability to sell his story and brand, only some fundamentals hold- albeit the same 'fans' buying its cars might be invested in its stock. Same thing might be happening with Nvidia- hyperscalers heavily investing in infrastructure and pushing AI adoption to justify ROI.
He didn't realized that speculating stocks allowed by Fed and both parties. The vast majority money needed to prop up American economy right now (or in the last 10 years) have nothing to do with econ 101. It is purely money printing at its finest making Japanese banana money and Germans look amateurish. Fed now basically print money to bank and directed bank to buy stocks and loans as they like to certain orgs and individuals. Any short selling or whistleblowers suicided.
He was wrong about the timing of the bubble popping and might well still be too early, as passive investing might allow for the market to keep inflating for many years to come. Mike Green explaining it better, about how mathematically, there is an inflexion point where if x% of investment is passive, it could make the whole system unstable (I don't remember the specific number) and crash, but until then, it will keep rising.
> The stock market doesn't operate on long-term principles anymore.
It has been broken since ~2008 (ZIRPs, etc.) and has really gone off the rails since BTC and memestocks have taken off. Now everything's a memestock. It's all vibes-based.
I don't think there is a single thing that explain the absolute joke that is the current market. Algorithmic trading, high-frequency trading, deregulation, passive investment, “finance” influencer pump and dumping ... But in general, I do believe it has the same issues that you can say about anything these days. It's not like those things didn't exist into a form or another in the past, but it's just so, so much faster these days.
To make a parallel, it's not like disinformation didn't exist in the past, but nowadays with social media, llms and image gen tools and a few armies of bots, you can spread whatever bullshit you want at lightning speed.
It's a confluence of factors, but the really big ones are, IMO, what I mentioned:
- ZIRP and similar policies essentially forced everybody to get into the stock market if they wanted to tread water.
- Then people saw with BTC (and similar, e.g. ETH,) that these so-called "market investments" don't need to be rooted in any kind of fundamental. They can be weightless tokens. This, in short order, lead to silly things like memestocks and NFTs -- but they also twisted the hell out of the markets. The valuation of TSLA has long been an example of this.
Then there's inflation, which has inflated stock market prices as much as it has inflated anything else. And there are toothless regulators who would deserve our sympathy if they weren't so lackadaisical. There are also llms, social media, etc. -- but those feed on the above.
The US is adding so much money to the economy every year and all that money has to go somewhere. I used to think this would come crashing down but at this point no one cares about debt and by the time we do it will be too late.
>>The stock market doesn't operate on long-term principles anymore.
Nah, it might appear so, but the moment of reckoning always arrives, always. Like eventually, it arrives.
Its a different argument, that most people themselves are not long-term investors, in that case of course, such a thing doesn't even apply to you.
I think Fidelity did some research that the most profitable accounts belonged to dead people. The proven formula is to pick the best stocks out there, pyramid upwards and be patient.
Passive investing funnels money into the market without accounting for business fundamentals. It simply allocates funding by looking at sector and market cap. It's the definition of dumb money.
As long as companies can make it into the index, passive investors will funnel money into buying stock of these companies, no matter how badly these companies are run.
Doesn't that passive process reverse at some point?
The trillions that mechanically and automatically flowed into index funds in pensions and 401k accounts must mechanically and automatically flow right back out after retirement, right?
Especially when younger generations are too poor to save for retirement and most companies don't offer pensions to younger workers any more, where will the inflows come from to offset the outflows?
Simple. Most "passive investors" are ETFs and pension funds that sometimes by law, sometimes by statute/sales prospect are limited to being low-risk, i.e. the monthly contributions go towards "safe" asset classes, and in addition retail customers prefer low-fee (and thus low-management) funds.
That in turn means that a lot of the invested money goes towards ultra-safe stuff like government bonds, which is about the only thing keeping the US government afloat (if there is always a healthy amount of buyers, you can go into debt no matter if it is sustainable), and what remains of the hundreds of billions of dollars that flow into these funds each month (and [1] is just pension funds, not 401k and other forms of privately-held retirement assets) and is not earmarked for such safe asset classes spills onto the ordinary stock market, i.e. S&P 500, NASDAQ et al.
And here comes the trap with low-fee investment funds... when the ETF or pension fund's policy is "we'll track NASDAQ 100" and SpaceX enters NASDAQ 100, they have no choice than to shift billions of dollars worth of assets into SpaceX at whatever is the market price at that point. No matter if the fund managers think that the valuation is excessive, if SpaceX has a long term viable business strategy, nothing can prevent this.
To make it worse: once in NASDAQ 100, you as a company have no incentive to behave. You cannot be punished by free-market means (aka going under), simply because your inclusion in the NASDAQ 100 means that any significant loss in value would wipe out way too much value in pension funds.
The US' idea to completely tie pensions to the stock market will fry the US economy alive. We've already seen this during and past Covid... first, lockdowns got relaxed because it fried the stock markets too heavily, thus giving us four massive waves until vaccine distribution caught up, and then remote work that was allowed in many countries by law got slowly axed because REITs (real estate investment trusts) got screwed by companies quitting expensive rental contracts for office space. But that pales in comparison to what we'll see when the AI bubble pops.
This is a very interesting comment. Companies like OpenAI or ChatGPT sell hardware hidden in tokens, and the token is different for each company depending on the tokenizer. The concern is this: when you have an Opus 4.7, Sonnet, or GPT 5X with an Nvidia H100 or H200 GPU, what will happen to this cost when, if not Nvidia, another Chinese company enters the market and starts running these models? The point here is that as long as Nvidia is the provider, and limits access to the machines and the number of data centers is also limited, these companies can be worth whatever they want. But the moment this starts to expand, the value will surely decline, because what you're selling isn't the model itself, which is ultimately just a 1 TB file that you have replicated across machines. What you're selling is access to a software program on a specialized machine. As long as you control the resource, which in this case is that machine, you'll have value. The moment other machine manufacturers enter the market, your value will decrease.
If you check openrouter there are a tons of providers selling API access to open source LLMs at a fraction of the cost compared to SOTA models (codex/claude). What model you're serving and what kind of platform you serve is a big factor.
I'm no expert but I think eventually we'll have even more specialized ASIC like machines with models burned into them and a that will absorb a chunk of the market, similar to what happened to crypto mining but to a lesser degree since the work isn't as static.
They want the index to be representative of the top stocks listed on the Nasdaq, even if they are brand new. The Nasdaq 100 in particular is a marketing tool for the stock exchange, it's not a particularly principled index.
Quote from Cameron Lilja, Nasdaq's global head of index solutions:
"It is not necessarily representative to have a company that's big and could have a sizable representation in the index to keep them out for that long," Lilja said in an interview. "We're seeing share and corporate structures change - and companies that are staying private considerably longer are thus growing to be truly mega-cap companies before they even come to the public markets."
There's been fewer IPOs recently so Nasdaq and competitors are all racing to woo the few big ones to list with them.
Tens and hundreds of thousands of dollars for listing. But they make money from the trading and associated services they facilitate, hence the desire to have the largest most liquid stocks.
The largest so far. We have always been in a boom/ bust cycle. The difference is that they are coming faster and faster.
I need to figure out the next one.
The famous quote, "Markets can remain irrational longer than you can remain solvent," is widely attributed to the renowned British economist John Maynard Keynes 1883-1946
The internet absolutely went bust. That’s what the dotcom crash was.
Same with a lot of physical infrastructure. The UK has a robust railroad network today, but it was built during a bubble that was so insane people would take loans from banks to invest in railroad stocks.
How does it matter to you? If you had invested in Internet broadly, you would have been WAY better off in the long term. Meaning: your strategy had been to keep investments tied to Internet first companies, you would have done better than pretty much any other person.
Things go up and down but broadly internet went up.
The new thing lately is ETFs that are "Whole-Market minus Microsoft" or "Whole-Market Minus Magnificent Seven". You can achieve similar ends by combining a whole market fund with direct short positions if you're an institutional investor, but it gets a little needy of your attention and your calculator and your fees to maintain those positions as a low-cap retail investor (just buy a put a day or something?).
I am explicitly avoiding these indices until this exploit is fixed. The lack of diversity in SPY and the like is already bad enough without these pump and dump schemes being added to the mix.
Buy alternative ETFs with similar performance and low fees. VIG is one example.
But he then writes: "I want to be really clear that this is the schematic maximally cynical approach, is not what SpaceX is doing, and is not actually possible."
It’s very risky to make these kind of claims. If the denominator (USD) gets obliterated they might very well be worth $1T. It’s all about liquidity and central banks have a whole bag of tricks at their disposal. They never want to see deflation shocks again and they prefer asset inflation.
I think you could argue Anthropic could be worth $1T. With AI becoming an essential work utility, every global knowledge worker would want a claude subscription. There are 650M to 1B of such office workers. 300M workers × $50/month × 12 = $180B/year. The genie is not going back into the bottle, I have seen what claude code can do when properly connected to tools.
But Micheals arguments are valid. There could be competition, or even local models, thus indeed becoming 'commoditized'.
What probability do you assign to that, especially since CC harness code leaked?
Because I used frontier models this weekend (I had 78% of my assigned tokens for this month left, I wanted to burn them before June 1st, ended up with 24% left), and tbh, I don't see much of the improvement compared to the models I use day-to-day. I'd rather pay less for a slightly worse model. Stacktrace analysis (or any bug analysis really) is where LLMs have the most success rate imho, and free models are good enough since last year. As for coding/architecture tasks, frontier models seems to hallucinate less, but I wonder if it's the guardrails or the he model themselves.
Well... $1 a day is not that far from that hypothetical $50 a month though.
Especially if it gives you access to significantly more powerful models (which it does).
EDIT: i still find absurd thinking that all those subscription would go to a single company, let me be clear. But that $50 price doesn't sound unreasonable at all.
> Especially if it gives you access to significantly more powerful models (which it does).
Anthropic and OpenAI are losing lots of money with their subscriptions. They are giving away access to those powerful models for cheap. The Deepseek price is the API price, which is the only sustainable approach here
AI is far from becoming an essential work utility, Anthropic will not be used by approximately 100% of the office workers in the developed world, and a price to sales ratio of over 5 for a company that is struggling to become profitable due to high operating expenses seems exceptionally high.
The problem with all these companies is that they are priced as if their training and inference costs are going to come way down, but somehow only for them specifically.
thing is, we have both local models and local hardware and a true evaluation would do a calculation before openai inflated thw market, before nvidia made circular deals and the other distortions.
i think youd find the ROI is nowhere near the API rates are the "price support" is entirely a figment of billionaires and their parasites trying to corner the market by horde logistics
The real question is how we are defining "worth." Much of the market has decoupled from traditional fundamental data, with Tesla's P/E of 380 illustrating this perfectly, but the Tesla stock price refuses to collapse.
We all know the market can stay irrational much longer than you can stay solvent if you bet against it. If you watched "The Long Short" (excellent movie btw.) you know how close Michael Burry came to capitulation before his subprime bet paid off. He seems to have a tendency to be too early with his predictions, even with his genius GameStop investment. So while he may be right again fundamentally, his timing may be completely off and those companies could be "worth" significantly more than a trillion dollars, at least temporarily, in stock valuations.
My personal prediction is this: The hype will go on longer than people think, just like with the New Economy. There is this quote from market analyst Larry Wachtel in 1999 who said: "Everybody's happy, everybody's making money - something's wrong here"[1]. Ironically, even Wachtel eventually succumbed to FOMO, capitulated, went in late, and lost a lot of money[2]. I am trying to not make his mistake, but it will be tempting to do so, I am sure about that.
Exactly. Anthropic has been losing three-comma money until recently. In Q2 2026 it earned a profit for the first time, about $500 million. If we imagine they will earn $2 billion in 2026, that’s a 0.2% return on the $1 trillion investment.
To believe the valuation, Anthropic earnings need to grow 100x. For a more likely outcome, I can recommend a bridge in Brooklyn.
Doesn't matter, it will go into the nasdaq/s&p at $1t, passive funds will have to buy it at that price, meaning a wealth transfer from 401ks to people with pre-ipo stock
The only reason AI is worth $1T is if you believe it will continue to get better and displace all those jobs, not just in claude replacing knowlege workers, but in the outcome of that work being so transformational that physical work is also replaced.
If it does, then the entire economy is completely turned over and it doesn't really matter as nobody will have a job, and thus the entire concept of the S&P and the western economy as a whole falls to bits.
And the counterpoint is that META, GOOG, AMZN, MSFT are all betting their companies that AI is the next move. Just yesterday, GOOG lent another $80 billion to be invested in their AI hardware, and they're also investing their own stock in AI hardware, for a cumulative investment of already over $1 trillion. Clearly the tech sector thinks this is worth it.
And of course the people deciding in FANG companies actually have numbers, Michael Burry has the same numbers you have. So these investments are "worth it" according to people with inside information. What Burry is doing, in one perspective, is calling out the leadership of FANG companies. Now that's the job of a short-seller of course. But that's the bet being made.
Literally adjusting my pension funds and ETA's away from this ... I don't even care if I lose out. I want stable growth. Not a nation obsessed with memestocks.
He's been wrong a few times, but has been right far more than ONCE and appears to be profitably making decisions. For example:
Short dot.com stocks (55% return), short subprime mortgages (Massive return), long Gamestop 2019, short ARKK 2021, The shorts on Palantir and NVDA are probably still running (PLTR 25% in profit, NVDA 20% loss).
The Gamestop 2019 play was a fundamental analysis on supply and demand of the shares of the stock vs financial performance. TSLA seems to be similar. There is just a lot of demand for the the stock.
Its frustrating; you grind out a living making consistent solid double digit returns for investors and all anyone talks about is a guy who made 5bn for their investors 20 years ago and has lost 25bn for them since.
Neither Anthropic, Open AI nor SpaceX in its current form is a good candidate for an IPO at valuations that all but guarantee hundreds of billions of dollars in "passive capital" aka pension funds and ETFs will have to buy in.
SpaceX might have been a candidate on its own core business (aka: launching spacecraft and Starlink), but ever since the weird side deals with all of the other companies in the Muskverse (Twitter, xAI, Tesla) it is far too contaminated.
Sooner or later the AI bubble will burst - and assuming that the pension funds and ETFs buy in as projected, they stand to lose a lot of money that will make Covid's first lockdown + dotcom + 2007 Lehman combined look pale.
Elon must be looking to merge the new amalgamation of SPCX into TSLA and join all his sinking ships in one. Starlink itself won't be able to save that, but make it too big and the government might. That is the way to get to the ridiculous valuations needed for Elon's pay package.
AI doomers really are punching the air these days.
They will be right eventually and inevitably. Until then, it's funny watching them build a personal "brand" just to say "I told you so" when the market drops in X years.
Being an AI enthusiast doesn't mean you have to say "yes my lord" to every coked-up delusions dario, musk and altman decide to regurgitate today. This feels more and more like football team shenanigans, or even a cult.
He didn't say AI is doomed or a fluke, he said that these two AI companies aren't worth 1T in capitalization.
The same way semiconductor, internet or railroad companies were not great investments regardless of how important the technology was going to be. It's still a financial investment and it's only going to pay off if bought at the right price, not at crazy multiples.
I will also add: if all your moat is your latest model, you're as good as your latest model and can be easily dethroned.
Strong moats are monopoly-like concessions (Verisign), exclusive technological edge (ASML), brands (Coca Cola), etc.
Anthropic is the one company where that makes no sense. If revenue really is about 50 billion annually and growing than that means that a 20x 1 year of revenue valuation is modest compared to the shenanigans that have been going in the market. It's almost classically textbook conservative in comparison. The moat with these corporate enterprise contracts is literally your conversation history and companies aren't likely to jump ship when everyone likes the tools so long as costs stay nominal. AI at most orgs isn't even the biggest line item.
We know nothing about Anthropic, they make a few money go round deals, announce a bit of revenue, extrapolate it into the whole year and people parrot that they may be making $50bn. Most likely the cost to remain competitive eats at whatever revenue they could hope to make. I expect them to fudge the numbers the last quarter before their IPO, dump on passive investors, and then go back to being officially unprofitable.
What does revenue have to do with it? Mercedes has a revenue of $130 billion, profit of $5 billion and a market cap of $56 billion.
According to your logic, it should have a market cap of $2.6 trillion.
Conservative is to look at P/E, which is 10 for Mercedes.
Anthropic isn't even a growth stock, since it has already been force fed to everyone with one of the largest marketing and coercion campaigns in history.
I've had economics professors tell me that a "normal" business valuation is 10 years of profit so your example is in line with my thinking there. I'm just as curious to see the final numbers as you but if they are even approaching them it's not very out there to consider a high valuation. I don't wish to speculate on what the numbers actually are. I want to see them too.
All competitors need are their latest model to be either better or similar but much cheaper. And Anthropic has no less than 2 big competitors in the space in US alone providing similar quality models.
There's no moat in LLMs when you're as good as your latest model.
Companies out there aren't in the business of throwing money down the drain.
Take DS4, you can use Deepseek APIs directly with Claude Code, and you're unlikely to notice a difference for the overwhelming majority of your use cases. But your bills run in few $ per day. I'm talking 2 magnitudes less.
You forget the institutional inertia of how these things get negotiated from year to year. If something is working for people they tend to wanna keep it. The existing curation of how everything works is cheaper than rolling your own. Sure you can get something running yourself but integrations for a lot of people are worth some of this cost. Also for AI heavy customers (multimedia, video, etc) the sky is the limit and there's not enough processing for it right now.
> Strong moats are monopoly-like concessions (Verisign), exclusive technological edge (ASML), brands (Coca Cola), etc.
Agreed with the exception of Verisign. Many a "security" company went bust like DigiNotar after mishaps or hacks. Being a globally trusted root CA or DNS operator is a strong moat - but also an incredibly brittle one.
And brands... brands aren't as safe as we thought either, as "store brands"/"private labels" are taking up more and more market share [1].
The stock market doesn't operate on long-term principles anymore. So, in some sense, it is immaterial that the rosy scenarios where AI is responsible for >$30 trillion in the next decade are unlikely. If you bet against the hype and it goes on for a few more months/years you lose as much or more than if you went along for the ride.
Burry is well aware of this, he has written about how passive investing is contributing to this problem.
> If you bet against the hype and it goes on for a few more months/years you lose as much or more than if you went along for the ride.
> Burry is well aware of this ...
Well, no he isn't well aware of this, apparently. He's been right in 2008 but he has been spectacularly wrong for the last 5 to 10 years, like shorting Tesla or Nvidia at the worst possible moments - and eventually closing his hedge fund...
Sure, no one can predict the future. But even then, Tesla fundamentals are shaky and it is held by Musk's ability to sell his story and brand, only some fundamentals hold- albeit the same 'fans' buying its cars might be invested in its stock. Same thing might be happening with Nvidia- hyperscalers heavily investing in infrastructure and pushing AI adoption to justify ROI.
He didn't realized that speculating stocks allowed by Fed and both parties. The vast majority money needed to prop up American economy right now (or in the last 10 years) have nothing to do with econ 101. It is purely money printing at its finest making Japanese banana money and Germans look amateurish. Fed now basically print money to bank and directed bank to buy stocks and loans as they like to certain orgs and individuals. Any short selling or whistleblowers suicided.
Outlandish claims require substantial citations.
He was wrong about the timing of the bubble popping and might well still be too early, as passive investing might allow for the market to keep inflating for many years to come. Mike Green explaining it better, about how mathematically, there is an inflexion point where if x% of investment is passive, it could make the whole system unstable (I don't remember the specific number) and crash, but until then, it will keep rising.
"As long as the music is playing, you've got to get up and dance."
> The stock market doesn't operate on long-term principles anymore.
It has been broken since ~2008 (ZIRPs, etc.) and has really gone off the rails since BTC and memestocks have taken off. Now everything's a memestock. It's all vibes-based.
People have seen others make insane, life changing money at this slot machine and are wanting to take their chances.
There are no fundamentals.
There is very low signal to the noise.
>People have seen others make insane, life changing money at this slot machine and are wanting to take their chances.
Isn’t this the exact same sentiment from the late 1920s when people were making “insane, life changing” money by buying equities on margin?
This time is different.
It may well though, because now we have an automatic buy from the government to 'fix' the market if it 'breaks'. The line goes up.
That just means it's like the 1920s even harder, just on a time delay fuse
The question is how long until things break.
I wouldn't advocate for betting against any of this. But I took my money out of the stock market a few months ago.
Shorting is too risky and depends a lot on timing. Staying clear of this mess is a safer bet.
The Stock Market of the Spectacle
Honestly you can go back much further than that. Every few years it's broken for different reasons, but the exuberance is irrational all the same.
I don't think there is a single thing that explain the absolute joke that is the current market. Algorithmic trading, high-frequency trading, deregulation, passive investment, “finance” influencer pump and dumping ... But in general, I do believe it has the same issues that you can say about anything these days. It's not like those things didn't exist into a form or another in the past, but it's just so, so much faster these days.
To make a parallel, it's not like disinformation didn't exist in the past, but nowadays with social media, llms and image gen tools and a few armies of bots, you can spread whatever bullshit you want at lightning speed.
It's a confluence of factors, but the really big ones are, IMO, what I mentioned:
- ZIRP and similar policies essentially forced everybody to get into the stock market if they wanted to tread water.
- Then people saw with BTC (and similar, e.g. ETH,) that these so-called "market investments" don't need to be rooted in any kind of fundamental. They can be weightless tokens. This, in short order, lead to silly things like memestocks and NFTs -- but they also twisted the hell out of the markets. The valuation of TSLA has long been an example of this.
Then there's inflation, which has inflated stock market prices as much as it has inflated anything else. And there are toothless regulators who would deserve our sympathy if they weren't so lackadaisical. There are also llms, social media, etc. -- but those feed on the above.
(Agreeing with you) In the 1980s Gary Shilling said:
The market can remain irrational longer than you can remain solvent.
A long-term principle that I think does still apply.
The extent to which you’re exposed to long term principles is directly related to the time you’re in the market. Ie trader vs investor
“In the short run, the market is a voting machine, but in the long run, it is a weighing machine”
- benjamin graham
> The stock market doesn't operate on long-term principles anymore
by "anymore" I assume you mean for a few decades now
The US is adding so much money to the economy every year and all that money has to go somewhere. I used to think this would come crashing down but at this point no one cares about debt and by the time we do it will be too late.
>>The stock market doesn't operate on long-term principles anymore.
Nah, it might appear so, but the moment of reckoning always arrives, always. Like eventually, it arrives.
Its a different argument, that most people themselves are not long-term investors, in that case of course, such a thing doesn't even apply to you.
I think Fidelity did some research that the most profitable accounts belonged to dead people. The proven formula is to pick the best stocks out there, pyramid upwards and be patient.
Can you elaborate on how passive investing contributes to this?
Passive investing funnels money into the market without accounting for business fundamentals. It simply allocates funding by looking at sector and market cap. It's the definition of dumb money.
As long as companies can make it into the index, passive investors will funnel money into buying stock of these companies, no matter how badly these companies are run.
Doesn't that passive process reverse at some point?
The trillions that mechanically and automatically flowed into index funds in pensions and 401k accounts must mechanically and automatically flow right back out after retirement, right?
Especially when younger generations are too poor to save for retirement and most companies don't offer pensions to younger workers any more, where will the inflows come from to offset the outflows?
https://news.ycombinator.com/item?id=33493662
note that the comments on that post were written in the middle of the 2022 bear market, that's why the tone is more depressed than average.
Simple. Most "passive investors" are ETFs and pension funds that sometimes by law, sometimes by statute/sales prospect are limited to being low-risk, i.e. the monthly contributions go towards "safe" asset classes, and in addition retail customers prefer low-fee (and thus low-management) funds.
That in turn means that a lot of the invested money goes towards ultra-safe stuff like government bonds, which is about the only thing keeping the US government afloat (if there is always a healthy amount of buyers, you can go into debt no matter if it is sustainable), and what remains of the hundreds of billions of dollars that flow into these funds each month (and [1] is just pension funds, not 401k and other forms of privately-held retirement assets) and is not earmarked for such safe asset classes spills onto the ordinary stock market, i.e. S&P 500, NASDAQ et al.
And here comes the trap with low-fee investment funds... when the ETF or pension fund's policy is "we'll track NASDAQ 100" and SpaceX enters NASDAQ 100, they have no choice than to shift billions of dollars worth of assets into SpaceX at whatever is the market price at that point. No matter if the fund managers think that the valuation is excessive, if SpaceX has a long term viable business strategy, nothing can prevent this.
To make it worse: once in NASDAQ 100, you as a company have no incentive to behave. You cannot be punished by free-market means (aka going under), simply because your inclusion in the NASDAQ 100 means that any significant loss in value would wipe out way too much value in pension funds.
The US' idea to completely tie pensions to the stock market will fry the US economy alive. We've already seen this during and past Covid... first, lockdowns got relaxed because it fried the stock markets too heavily, thus giving us four massive waves until vaccine distribution caught up, and then remote work that was allowed in many countries by law got slowly axed because REITs (real estate investment trusts) got screwed by companies quitting expensive rental contracts for office space. But that pales in comparison to what we'll see when the AI bubble pops.
[1] Q1 20: 23T, Q1 21: 26T => about 3T/y, 250B/mo, per https://fred.stlouisfed.org/series/BOGZ1FL594090005Q
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This is a very interesting comment. Companies like OpenAI or ChatGPT sell hardware hidden in tokens, and the token is different for each company depending on the tokenizer. The concern is this: when you have an Opus 4.7, Sonnet, or GPT 5X with an Nvidia H100 or H200 GPU, what will happen to this cost when, if not Nvidia, another Chinese company enters the market and starts running these models? The point here is that as long as Nvidia is the provider, and limits access to the machines and the number of data centers is also limited, these companies can be worth whatever they want. But the moment this starts to expand, the value will surely decline, because what you're selling isn't the model itself, which is ultimately just a 1 TB file that you have replicated across machines. What you're selling is access to a software program on a specialized machine. As long as you control the resource, which in this case is that machine, you'll have value. The moment other machine manufacturers enter the market, your value will decrease.
If you check openrouter there are a tons of providers selling API access to open source LLMs at a fraction of the cost compared to SOTA models (codex/claude). What model you're serving and what kind of platform you serve is a big factor.
I'm no expert but I think eventually we'll have even more specialized ASIC like machines with models burned into them and a that will absorb a chunk of the market, similar to what happened to crypto mining but to a lesser degree since the work isn't as static.
Or the AI labs just take an increased margin? The model is ultimately what people want access to and are paying for
What's the rationale offered by NASDAQ for their new "15-days and you're in the index" rule for these massive IPOs?
Seems equivalent to removing road safety rules for the least-tested, most-powerful new vehicles only.
They want the index to be representative of the top stocks listed on the Nasdaq, even if they are brand new. The Nasdaq 100 in particular is a marketing tool for the stock exchange, it's not a particularly principled index.
Yeah, indeed. See (march) https://www.reuters.com/business/new-nasdaq-rules-include-fa...
Quote from Cameron Lilja, Nasdaq's global head of index solutions:
"It is not necessarily representative to have a company that's big and could have a sizable representation in the index to keep them out for that long," Lilja said in an interview. "We're seeing share and corporate structures change - and companies that are staying private considerably longer are thus growing to be truly mega-cap companies before they even come to the public markets."
There's been fewer IPOs recently so Nasdaq and competitors are all racing to woo the few big ones to list with them.
How much will NASDAQ make for getting SpaceX on them? Surely it is not small sum?
Tens and hundreds of thousands of dollars for listing. But they make money from the trading and associated services they facilitate, hence the desire to have the largest most liquid stocks.
https://resourcehub.bakermckenzie.com/en/resources/cross-bor...
https://www.investopedia.com/articles/investing/050515/how-n...
I suppose you could make an argument that these enormously large IPOs are themselves a new phenomenon and need to be accounted for.
Of course not, this is pure speculation just like in past cycles, until it goes bum.
And this time the boooom has a larger blast radius than all the previous booooms combined.
The largest so far. We have always been in a boom/ bust cycle. The difference is that they are coming faster and faster.
I need to figure out the next one.
The famous quote, "Markets can remain irrational longer than you can remain solvent," is widely attributed to the renowned British economist John Maynard Keynes 1883-1946
Keynes died 50 years before this started being a saying. It was made by Gary Shilling.
Minus, of course, all the times where it did not go bum, right?
Such as?
Do you live in a cave? I guess not.
Do you have access to the internet? Seemingly yes.
The booms just tend to be much bigger than the busts.
The internet absolutely went bust. That’s what the dotcom crash was.
Same with a lot of physical infrastructure. The UK has a robust railroad network today, but it was built during a bubble that was so insane people would take loans from banks to invest in railroad stocks.
Now we just take loans to purchase the train tickets.
> The internet absolutely went bust
How does it matter to you? If you had invested in Internet broadly, you would have been WAY better off in the long term. Meaning: your strategy had been to keep investments tied to Internet first companies, you would have done better than pretty much any other person.
Things go up and down but broadly internet went up.
Unless the investment was into worthless paper from those companies, tied to pension funds and similar.
The strategy should be to put money into AI broadly and not necessarily tie to a certain company -- something pension companies already know.
So evidence that internet was a bubble is wrong, it in fact shows that pensions did the right thing by putting money in the internet.
Do I need to dig out newspaper articles from around 2003 - 2008?
Great examples.
Yes, and I lost my job during the dotcom crash, so nope.
Most people can't get past the kind of logic that declares Facebook doomed for 20 years because Myspace.
Beyond GenX and Boomers who is still using Facebook? We don't live forever.
The last time Facebook reported its monthly active user base they were at 3 billion. [1] So I guess the answer to your question is… everyone?
[1] https://www.sec.gov/Archives/edgar/data/1326801/000132680124...
How many of those are real people?
Every bot
A lot of people use it for Facebook marketplace
But what's being discussed isn't usership: it's stock prices.
This is a description of the life itself.
And TSLA isn't worth it's current market cap of 1.47 trillion dollars either. Hasn't been of any consequence for years.
Matt Levine made an interesting point that the SpaceX IPO looks like a short squeeze/pump and dump [1]:
1. Do an IPO.
2. Sell a small amount (5%) to price insensitive Elon Musk-fans at a $2 trillion valuation
3. Get in all the indexes, because you are huge.
4. Unlock more stock, which the index funds have to purchase
[1] https://www.bloomberg.com/opinion/newsletters/2026-06-01/the...
Please, don’t buy the stock. It’s a classic retail investor trap
The issue is that once it's in the S&P500, Russel, Nasdaq100 etc indices - everyone with a pension or tracker fund will be buying it without thinking
Yes. I am severely reducing my exposure to these indices finding alternatives.
My impressions is that US investors also have a special love for the S&P500 and could likely benefit from a non-US bias.
The new thing lately is ETFs that are "Whole-Market minus Microsoft" or "Whole-Market Minus Magnificent Seven". You can achieve similar ends by combining a whole market fund with direct short positions if you're an institutional investor, but it gets a little needy of your attention and your calculator and your fees to maintain those positions as a low-cap retail investor (just buy a put a day or something?).
This is why direct indexing is important. I can simply exclude these tickers. Will it skew it slightly from the index? Sure but I’m ok with that
I am explicitly avoiding these indices until this exploit is fixed. The lack of diversity in SPY and the like is already bad enough without these pump and dump schemes being added to the mix.
Buy alternative ETFs with similar performance and low fees. VIG is one example.
Not great when every other share price collapses as they get sold as funds are rebalanced.
Almost every stock in VIG is in the S&P.
The "almost" portion of your statement is the entire point, and re-balancing isn't going to cause "every other share price to collapse".
But he then writes: "I want to be really clear that this is the schematic maximally cynical approach, is not what SpaceX is doing, and is not actually possible."
Coinbase IPOed 5 years ago and is (and has mostly been) trading below its IPO price.
Perhaps private equity has become so skilled that when they finally sell to the public they leave nothing on table.
It’s very risky to make these kind of claims. If the denominator (USD) gets obliterated they might very well be worth $1T. It’s all about liquidity and central banks have a whole bag of tricks at their disposal. They never want to see deflation shocks again and they prefer asset inflation.
That seems like a hollow win.
I think you could argue Anthropic could be worth $1T. With AI becoming an essential work utility, every global knowledge worker would want a claude subscription. There are 650M to 1B of such office workers. 300M workers × $50/month × 12 = $180B/year. The genie is not going back into the bottle, I have seen what claude code can do when properly connected to tools.
But Micheals arguments are valid. There could be competition, or even local models, thus indeed becoming 'commoditized'.
What probability do you assign to that, especially since CC harness code leaked?
Because I used frontier models this weekend (I had 78% of my assigned tokens for this month left, I wanted to burn them before June 1st, ended up with 24% left), and tbh, I don't see much of the improvement compared to the models I use day-to-day. I'd rather pay less for a slightly worse model. Stacktrace analysis (or any bug analysis really) is where LLMs have the most success rate imho, and free models are good enough since last year. As for coding/architecture tasks, frontier models seems to hallucinate less, but I wonder if it's the guardrails or the he model themselves.
Why would we need 1B office workers when Claude is supposed to fire everyone anyways?
I code 8+ hours days with Deepseek V4 flash and it costs me under $1 per day... I dont know how they will charge so much for a sub.
Well... $1 a day is not that far from that hypothetical $50 a month though. Especially if it gives you access to significantly more powerful models (which it does).
EDIT: i still find absurd thinking that all those subscription would go to a single company, let me be clear. But that $50 price doesn't sound unreasonable at all.
> Especially if it gives you access to significantly more powerful models (which it does).
Anthropic and OpenAI are losing lots of money with their subscriptions. They are giving away access to those powerful models for cheap. The Deepseek price is the API price, which is the only sustainable approach here
AI is far from becoming an essential work utility, Anthropic will not be used by approximately 100% of the office workers in the developed world, and a price to sales ratio of over 5 for a company that is struggling to become profitable due to high operating expenses seems exceptionally high.
The problem with all these companies is that they are priced as if their training and inference costs are going to come way down, but somehow only for them specifically.
thing is, we have both local models and local hardware and a true evaluation would do a calculation before openai inflated thw market, before nvidia made circular deals and the other distortions. i think youd find the ROI is nowhere near the API rates are the "price support" is entirely a figment of billionaires and their parasites trying to corner the market by horde logistics
What's going on with SpaceX and the S&P seems pretty crimey.
The real question is how we are defining "worth." Much of the market has decoupled from traditional fundamental data, with Tesla's P/E of 380 illustrating this perfectly, but the Tesla stock price refuses to collapse.
We all know the market can stay irrational much longer than you can stay solvent if you bet against it. If you watched "The Long Short" (excellent movie btw.) you know how close Michael Burry came to capitulation before his subprime bet paid off. He seems to have a tendency to be too early with his predictions, even with his genius GameStop investment. So while he may be right again fundamentally, his timing may be completely off and those companies could be "worth" significantly more than a trillion dollars, at least temporarily, in stock valuations.
My personal prediction is this: The hype will go on longer than people think, just like with the New Economy. There is this quote from market analyst Larry Wachtel in 1999 who said: "Everybody's happy, everybody's making money - something's wrong here"[1]. Ironically, even Wachtel eventually succumbed to FOMO, capitulated, went in late, and lost a lot of money[2]. I am trying to not make his mistake, but it will be tempting to do so, I am sure about that.
[1] https://youtu.be/uaK5tsH59UM?t=1188
[2] https://youtu.be/DSVPsP0Bfx0?t=456
Exactly. Anthropic has been losing three-comma money until recently. In Q2 2026 it earned a profit for the first time, about $500 million. If we imagine they will earn $2 billion in 2026, that’s a 0.2% return on the $1 trillion investment.
To believe the valuation, Anthropic earnings need to grow 100x. For a more likely outcome, I can recommend a bridge in Brooklyn.
Doesn't matter, it will go into the nasdaq/s&p at $1t, passive funds will have to buy it at that price, meaning a wealth transfer from 401ks to people with pre-ipo stock
The only reason AI is worth $1T is if you believe it will continue to get better and displace all those jobs, not just in claude replacing knowlege workers, but in the outcome of that work being so transformational that physical work is also replaced.
If it does, then the entire economy is completely turned over and it doesn't really matter as nobody will have a job, and thus the entire concept of the S&P and the western economy as a whole falls to bits.
The belief (for some) is that it will create new jobs like previous revolutions. No one has said what those will look like yet though.
This is what they're actually talking about:
https://michaeljburry.substack.com/
And the counterpoint is that META, GOOG, AMZN, MSFT are all betting their companies that AI is the next move. Just yesterday, GOOG lent another $80 billion to be invested in their AI hardware, and they're also investing their own stock in AI hardware, for a cumulative investment of already over $1 trillion. Clearly the tech sector thinks this is worth it.
And of course the people deciding in FANG companies actually have numbers, Michael Burry has the same numbers you have. So these investments are "worth it" according to people with inside information. What Burry is doing, in one perspective, is calling out the leadership of FANG companies. Now that's the job of a short-seller of course. But that's the bet being made.
Literally adjusting my pension funds and ETA's away from this ... I don't even care if I lose out. I want stable growth. Not a nation obsessed with memestocks.
Are you trying to be sane and rational in a market that has turned into a casino? U crazy or something?
It'll be a wonderful crow feast to anyone who agrees with Michael Burry on this.
I'm noticing a sort of mass hysteria and performative concern over AI's fundamental economics coming from grief/cope.
I believe that Anthropic is worth $1T. I believe it won't go below it (inflation adjusted) for the next 2+ years. How do I make money with this?
[dead]
bro was right ONCE and now every tweet is a headline
He's been wrong a few times, but has been right far more than ONCE and appears to be profitably making decisions. For example:
Short dot.com stocks (55% return), short subprime mortgages (Massive return), long Gamestop 2019, short ARKK 2021, The shorts on Palantir and NVDA are probably still running (PLTR 25% in profit, NVDA 20% loss).
> long Gamestop 2019
So he really relies on zero fundamental analysis these days
He was early and had a clear thesis based on fundamentals, he had nothing to do with the short squeeze
https://en.wikipedia.org/wiki/GameStop_short_squeeze#:~:text...
The Gamestop 2019 play was a fundamental analysis on supply and demand of the shares of the stock vs financial performance. TSLA seems to be similar. There is just a lot of demand for the the stock.
Its frustrating; you grind out a living making consistent solid double digit returns for investors and all anyone talks about is a guy who made 5bn for their investors 20 years ago and has lost 25bn for them since.
It was a hell of a once tho
He's still right this time.
Neither Anthropic, Open AI nor SpaceX in its current form is a good candidate for an IPO at valuations that all but guarantee hundreds of billions of dollars in "passive capital" aka pension funds and ETFs will have to buy in.
SpaceX might have been a candidate on its own core business (aka: launching spacecraft and Starlink), but ever since the weird side deals with all of the other companies in the Muskverse (Twitter, xAI, Tesla) it is far too contaminated.
Sooner or later the AI bubble will burst - and assuming that the pension funds and ETFs buy in as projected, they stand to lose a lot of money that will make Covid's first lockdown + dotcom + 2007 Lehman combined look pale.
Elon must be looking to merge the new amalgamation of SPCX into TSLA and join all his sinking ships in one. Starlink itself won't be able to save that, but make it too big and the government might. That is the way to get to the ridiculous valuations needed for Elon's pay package.
True, but the VC money will have been paid back, and what are we if not meat for the soulless machine of capitalism?
AI doomers really are punching the air these days.
They will be right eventually and inevitably. Until then, it's funny watching them build a personal "brand" just to say "I told you so" when the market drops in X years.
Your comment suggests that you (1) didn't read the article, and (2) have no idea who Michael Burry is.
Being an AI enthusiast doesn't mean you have to say "yes my lord" to every coked-up delusions dario, musk and altman decide to regurgitate today. This feels more and more like football team shenanigans, or even a cult.
He didn't say AI is doomed or a fluke, he said that these two AI companies aren't worth 1T in capitalization.
The same way semiconductor, internet or railroad companies were not great investments regardless of how important the technology was going to be. It's still a financial investment and it's only going to pay off if bought at the right price, not at crazy multiples.
I will also add: if all your moat is your latest model, you're as good as your latest model and can be easily dethroned.
Strong moats are monopoly-like concessions (Verisign), exclusive technological edge (ASML), brands (Coca Cola), etc.
Anthropic is the one company where that makes no sense. If revenue really is about 50 billion annually and growing than that means that a 20x 1 year of revenue valuation is modest compared to the shenanigans that have been going in the market. It's almost classically textbook conservative in comparison. The moat with these corporate enterprise contracts is literally your conversation history and companies aren't likely to jump ship when everyone likes the tools so long as costs stay nominal. AI at most orgs isn't even the biggest line item.
We know nothing about Anthropic, they make a few money go round deals, announce a bit of revenue, extrapolate it into the whole year and people parrot that they may be making $50bn. Most likely the cost to remain competitive eats at whatever revenue they could hope to make. I expect them to fudge the numbers the last quarter before their IPO, dump on passive investors, and then go back to being officially unprofitable.
As of March 2026 lifetime revenue was >=~ $5 billion, and total 2025 revenue was supposedly around $4.5 billion.
https://www.wheresyoured.at/anthropics-profitability-swindle...
> If revenue really is about 50 billion annually
Might I interest you in some bridges sir?
What does revenue have to do with it? Mercedes has a revenue of $130 billion, profit of $5 billion and a market cap of $56 billion.
According to your logic, it should have a market cap of $2.6 trillion.
Conservative is to look at P/E, which is 10 for Mercedes.
Anthropic isn't even a growth stock, since it has already been force fed to everyone with one of the largest marketing and coercion campaigns in history.
I've had economics professors tell me that a "normal" business valuation is 10 years of profit so your example is in line with my thinking there. I'm just as curious to see the final numbers as you but if they are even approaching them it's not very out there to consider a high valuation. I don't wish to speculate on what the numbers actually are. I want to see them too.
Anthropic has negative profit. There are rumors they had one quarter of profit with some accounting shenanigans.
It also has no path to become profitable.
All competitors need are their latest model to be either better or similar but much cheaper. And Anthropic has no less than 2 big competitors in the space in US alone providing similar quality models.
There's no moat in LLMs when you're as good as your latest model.
Companies out there aren't in the business of throwing money down the drain.
Take DS4, you can use Deepseek APIs directly with Claude Code, and you're unlikely to notice a difference for the overwhelming majority of your use cases. But your bills run in few $ per day. I'm talking 2 magnitudes less.
You forget the institutional inertia of how these things get negotiated from year to year. If something is working for people they tend to wanna keep it. The existing curation of how everything works is cheaper than rolling your own. Sure you can get something running yourself but integrations for a lot of people are worth some of this cost. Also for AI heavy customers (multimedia, video, etc) the sky is the limit and there's not enough processing for it right now.
That logic works for 20 vs 40$ SaaS subscriptions, not for burning triple/four digits per day in APIs.
> brands (Coca Cola), etc.
Paul Graham doesn't think so
https://paulgraham.com/brandage.html
> Strong moats are monopoly-like concessions (Verisign), exclusive technological edge (ASML), brands (Coca Cola), etc.
Agreed with the exception of Verisign. Many a "security" company went bust like DigiNotar after mishaps or hacks. Being a globally trusted root CA or DNS operator is a strong moat - but also an incredibly brittle one.
And brands... brands aren't as safe as we thought either, as "store brands"/"private labels" are taking up more and more market share [1].
[1] https://www.nbcnews.com/business/consumer/shoppers-are-tradi...
So the company that actually makes computers programming computers work, ain't worth $1T.
Whoever you are Michael Burry, you don't know shit about the implications, and where this is headed, and that the party only just got started.
I sure do wish I had a big chunk of that overpriced Google IPO stock, and Amazon, and MS, and Apple, etc etc etc
> So the company that actually makes computers programming computers work
Translation (took me while to understand this sentence):
So the company that actually solved the problem of making a computer program write other computer programs
makes computers work. makes computer programming work.
please go back to school
> the company that actually makes computers programming computers work
LOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOL
Do you feel good about being a mouth breathing retard?