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Comment by mindwok | Hacker News Reader

One possible explanation for this is that it’s basically a systemic failure of the market. Shareholders are pricing companies as if being a winner in the AI boom is the most important thing. Company leadership then must position themselves as a winner, or the market responds by devaluing their share price and they lose their jobs and probably their incentives. The most legible way for leaders to show they’re in the AI race is to spend money on AI infra, even if it means taking on debt to do so.

So if this is in fact a bubble, nobody can really act differently until the market stops treating AI spending as a winning strategy.

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It’s the same in every bubble, there is a term for it that I can’t remember.

If you’re a Japanese company making spanners in 1988 and you’re not speculating in land while all your competitors are, your profits are going to look terrible in comparison and the board will probably try and fire the leadership and replace them with people who’ll speculate in land.

This is part of the reason bubbles can go on for so long - there’s often a point where a lot of people sort of know it’s a bubble and it will end in tears, but they’re still incentivised to participate

As much as I dislike it, is there really any alternative?

It’s not like we have any other industry doing well (or could be made to do very well with such an investment that would also pay off).

Maybe a few trillion could allow us to overtake China as the world’s leader in battery technology and manufacturing…

But it would take more time, effort, and a lot of logistics. The payoff from AI is much sooner…

> Shareholders are pricing companies as if being a winner in the AI boom is the most important thing

Well yeah, that's the most obvious way this plays out

I don't think the root is shareholders. These numbers are getting absurdly high, and so it's predictably being driven by commercial banks and debt. And lo and behold, the US monetary supply is skyrocketing out of control - up ~6% in a year, more than a trillion dollars, driven primarily by commercial lending. [1] As the bubble starts to shake all we need is for them to start packing the debt in asset backed packages and we're good to go, or at least as good to go as 2008 was.

[1] - https://fred.stlouisfed.org/series/M2SL

This graph looks pretty normal if you enable log scale.

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