Comment on The air begins to leak out of the overinflated AI bubble

helenslunch@feddit.nl ⁨2⁩ ⁨months⁩ ago

• SturgiesYrFase@lemmy.ml ⁨2⁩ ⁨months⁩ ago

  Also bubbles don’t “leak”.

  I mean, sometimes they kinda do? They either pop or slowly deflate, I’d say slow deflation could be argued to be caused by a leak.

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  • stephen01king@lemmy.zip ⁨2⁩ ⁨months⁩ ago

    We taking about bubbles or are we talking about balloons? Maybe we should change to using the word balloon instead, since these economic ‘bubbles’ can also deflate slowly.

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    • SturgiesYrFase@lemmy.ml ⁨2⁩ ⁨months⁩ ago

      Good point, not sure that economists are human enough to take sense into account, but I think we should try and make it a thing.

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  • helenslunch@feddit.nl ⁨2⁩ ⁨months⁩ ago

    I’ve never seen a bubble deflate, but I digress.

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    • sugar_in_your_tea@sh.itjust.works ⁨2⁩ ⁨months⁩ ago

      You can do it easily with a balloon (add some tape then poke a hole). An economic bubble can work that way as well, basically demand slowly evaporates and the relevant companies steadily drop in value as they pivot to something else. I expect the housing bubble to work this way because new construction will eventually catch up, but building new buildings takes time.

      The question is, how much money (tape) are the big tech companies willing to throw at it? There’s a lot of ways AI could be modified into niche markets even if mass adoption doesn’t materialize.

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      • helenslunch@feddit.nl ⁨2⁩ ⁨months⁩ ago

        A bubble, not a balloon…

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• iopq@lemmy.world ⁨2⁩ ⁨months⁩ ago

  The broader market did the same thing

  finance.yahoo.com/quote/SPY/

  $560 to $510 to $560 to $540

  So why did $NVDA have larger swings? It has to do with the concept called beta. High beta stocks go up faster when the market is up and go down lower when the market is done. Basically high variance risky investments.

  Why did the market have these swings? Because of uncertainty about future interest rates. Interest rates not only matter vis-a-vis business loans but affect the interest-free rate for investors.

  When investors invest into the stock market, they want to get back the risk free rate (how much they get from treasuries) + the risk premium (how much stocks outperform bonds long term)

  If the risks of the stock market are the same, but the payoff of the treasuries changes, then you need a high return from stocks. To get a higher return you can only accept a lower price,

  This is why stocks are down, NVDA is still making plenty of money in AI

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  • sugar_in_your_tea@sh.itjust.works ⁨2⁩ ⁨months⁩ ago

    There’s more to it as well, such as:

    • investors coming back from vacation and selling off losses and whatnot
    • investors expecting reduced spending between summer and holidays; we’re past the “back to school” retail bump and into a slower retail economy

    September is pretty consistently more volatile than other months, and has net negative returns long-term. So it’s not just the Fed discussing rate cuts (that news was reported over the last couple months, so it should be factored in), but just normal sideways trading in September.

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    • iopq@lemmy.world ⁨2⁩ ⁨months⁩ ago

      We already knew about back to school sales, they happen every year and they are priced in. If there was a real stock market dump every year in September, everyone would short September, making a drop in August and covering in September, making September a positive month again

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      • sugar_in_your_tea@sh.itjust.works ⁨2⁩ ⁨months⁩ ago

        It’s not every year, but it is more than half the time. Source:

        History suggests September is the worst month of the year in terms of stock-market performance. The S&P 500 SPX has generated an average monthly decline of 1.2% and finished higher only 44.3% of the time dating back to 1928, according to Dow Jones Market Data.

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• SapphironZA@sh.itjust.works ⁨2⁩ ⁨months⁩ ago

  Its all vibes and manipulation

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