Posted on 11/19/2025 2:05:05 PM PST by E. Pluribus Unum
It’s not just OpenAI that looks overhyped. There’s a whole mountain of sketchy financial engineering underneath.
One thing I’ve been tracking this year is the areas where Wall Street and Silicon Valley are going to war. Tech firms clearly want to become banking apps and receive special charters, private equity and crypto are jostling for position in worker 401(k) plans, and the tech right in general wants to supplant big banks as the go-to director of conservative business policy.
That’s all still going on. But in one area, Silicon Valley and Wall Street are in sync: conjuring up sketchy credit deals that are pointing us toward another financial crash.
Last month, the big focus was “round-tripping,” the way that sundry AI and tech companies were investing in their own customers—with Nvidia giving AI companies the investment necessary to buy their graphics processing units (GPUs), and so on. But there’s a lot more to this story, tangled up with yet another rebrand by the former masters of the universe, from “shadow banks” without proper regulation into something boring and neutral-sounding: private credit. Ever since the advent of financial regulation, there have been companies that have attempted to evade the rules with creative branding. Private credit companies are non-banks that are trying to rebrand into a name that doesn’t tell everyone they are unregulated lending vehicles.
The speculative financing of the artificial intelligence buildout is happening mostly in private credit, where assets under management hit $1.6 trillion in February and are likely higher today. The deals being made are perverse and irrational; there are huge mismatches between the life cycle of the assets being funded and the amount of time it will take to pay them off. Experts have been doing everything...
(Excerpt) Read more at prospect.org ...
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Phase 1: Steal underpants...
Having worked in a bank, I can assure the writer that places pretending to be banks are frowned upon upon by the regulators. Those guys have no sense of humor.
"Blue Horseshoe loves Blue Owl!"
Who will be left with the hot potato???
Oh yeah. The tax payers.
This will all be forgotten tomorrow, as NVDA just reported big earnings that have it up 6% afterhours.
“Phase 1: Steal underpants...”
Phase one is give away a highly addictive drug and then use it to steal souls and possess humanity...
THAT is the truth of this...
A very interesting piece.
Thanks for posting.
And them thar “automobiles” will never replace horses.
I have been in Tech for 40 years. It’s not a bubble. I know bubbles, i have been through them.
Proof: NVIDIA earnings today, and their current order book of 500B$.
I use AI every day. It makes me 10-20x more efficient. I even use it in my car, to drive me 45 minutes through traffic to the office (TESLA FSD). Yes, i don’t touch the wheel, it backs my car out of the garage, and gets me through stop-and-go traffic to work. At work I use AI to increase my code output to 10-20x more than i could without it.
On my drive home, i long press the right button on the Model Y wheel and have a nice technical discussion with Grok -which is friction LIGHT YEARS ahead of Siri, and years ahead of ChatGPT.
Those betting against AI and NVDIA are going to lose.
Who will be left with the hot potato???
Oh yeah. The tax payers.
********************
IMO
Only a massive sell off, combined with too much debt will threatened the great financial houses & by extention the taxpayers. Some of the biggest taxpayers are in this economic class, they provide governments with the big dollars in government receipts.
A more likely scenario is for equities with a lot of hype & noise, experiencing a sell off and lower valuations without destroying the broader market.
Then money will get redirected to undervalued securiies that are under the radar, but are basics to our current level of civilization.
“Faster, please.”
I also lived a life in tech and in my opinion we are just at the beginning of an AI revolution. Humanity has some big problems that AI will help to solve:Curing of Diseases, Energy Production, Food Production will all be improved with AI and AI still is still just a baby. That being said, AI can also be very dangerous thing and should not be let off the leash (no to anything like a skynet or weapons and systems that are totally autonomous). And with all tech I think we have to be careful on being too dependent on it.
If what you say is true, then energy stocks should be exploding as well, after all NVIDIA's chips are mighty power hungry.
And without doubling or tripling global power output, all of those pricey AI processors are just very expensive (and probably highly leveraged) paper weights ...
I have lived in tech since my first course in computer programming in 1961. I have worked for 40+ years developing expert systems to design and manufacture custom engineered machinery. I have seen it all and observed the tech bubbles first hand. My bet is very few outfits will survive the AI bubble burst in 5 years, 7 years max. Same as color TV bubble, internet stocks bubble, silver bubble, real-estate bubble, oil bubble, famous stock bubble in roaring 20’s, land bubbleand the most famous tulip bulbs bubble.
My financial advisor and I were just taking about this last week.
-SB
Bkmk
That will be the most important consequence.
AI makes highly productive employees MORE productive.
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