The Big Short 2.0

First off, an update on the AI bubble:

Since my last blog post, I noted on Twitter that the people investing in this AI bubble are eagerly handing over control of the entire economy to the Tech Oligarchs. In a world in which the majority of wealth is already concentrated in the hands of a tiny minority, this AI bubble is leading to a final concentration of wealth in the hands of the few. By the end if AI is "successful", then all jobs will be commodified and the unemployment rate will sky-rocket. Which means that those who are most paranoid about the "elites" taking control of the country are now helping them do it.

No surprise, the AI Oligarchs are doing everything possible to maximize this super asset bubble to their sole benefit. I am of course referring to Jensen Huang and Sam Altman as the primary bubble inflators. But we can add Elon Musk and the other CEOs of the Big Tech companies as well. In addition to handing over control of the entire economy to the Tech Oligarchs we are now handing over control of all aspects of society to Tech nerds who spend 16 hours a day in front of a screen, on the belief that they are experts on how to live a better life.

They don't even have a life. But these PhD dumbasses would tell you with a straight face that they are creating utopia.

Porn utopia.

In my last blog post I asserted that market breadth was imploding and many of the ancillary bubbles were already cracking. In the meantime, the inflation trade has fully cratered. Powell's hawkish FOMC meeting last week put the final nail in the coffin of this massively crowded trade:

Below we see Metals and Miners are now in a bear market.

Just today Bitcoin fell into a bear market as well:

So with these ancillary bubbles imploding, that leaves the AI bubble itself.

Today we learned that Michael Burry of Big Short fame is now actively shorting both Nvidia and Palantir using put options, hence the title of this blog post. Meanwhile, Barron's coincidentally put an article out yesterday comparing AI financing schemes to subprime circa 2007:

"One of the many great scenes in The Big Short, which fictionalizes famed investor Michael Burry’s bet against the U.S. housing market, involves a tower of wooden blocks. During a client pitch, a trader illustrating the risk of collateralized debt obligations unveils a Jenga tower that represents the mortgage bonds stuffed inside a CDO. It inevitably collapses, of course, both on screen and in real life.

A lot of skeptical investors are waiting for a similar implosion of the artificial-intelligence investment boom. The market value of the biggest tech stocks has reached eye-watering levels. The titanic levels of spending being committed to data-center projects simply aren’t generating revenue, let alone profits, in the earliest stage of the cycle."

Here I created a graphic showing the ludicrous amount of market cap that is now massively leveraged to OpenAI's miniscule $13 billion of revenue. This is a visual representation of the AI Ponzi scheme that Michael Burry is now shorting in his Big Short 2.0:

It's clear that Wall Street got what they wanted out of this bubble which was to dump another huge amount of junk stock onto the retail masses. Here we see the IPO market has now broken back below the February high:

In summary, Wall Street got what they wanted. The Tech Oligarchs got what they wanted. The Fed is making another policy error deja vu of 2008 by keeping rates too high for too long, compliments of the trade war and the government data blackout.

The guy who predicted the meltdown of subprime in 2007 is now shorting the biggest bubble in history.

So it was all just another huge scam.

But how would they know?