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Posted on 08/13/2026 7:42:35 PM PDT by yesthatjallen
Unprecedented moves in the AI space this week are giving stock market experts flashbacks to one of the most famous corporate scandals in history, stoking fears that we're in line for a similarly catastrophic fallout.
The headline-worthy $500 billion that Wall Street just announced it's providing Nvidia clients to scale their AI infrastructure marks the beginning of an untested new future for financial engineering that commentators such as Ed Yardeni and Michael Burry are extremely wary of. And, based on the implications for the average portfolio and the economy at large, you may need to be wary, too.
Predicting a fall
Burry, famous for calling the subprime mortgage crisis before it happened, drew comparisons between the mind-blowing recent investment to the 2001 fall of Enron, the energy corporation that went from trading $2.5 billion in commodities a day to filing for bankruptcy (with some unsavory accounting gymnastics to obscure its failures in between).
SNIP
(Excerpt) Read more at finance.yahoo.com ...
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Is AI a bubble ready to pop?
Michael was right once. Was he ever right again?
It’ll blow up next year.
Cramer discussed this deal in his opening monologue. Whether this makes sense or not depends on how fast Nvidia chips depreciate. If they lose all their value in three years, then this deal won’t work. Cramer’s position was that since the chips from 2020 are still being used and in demand, then the depreciation period must be a lot longer.
We shall see....
“financial engineering” ❓
Burry would have been wise to throw all his wins into the indexes after his called crash, and walked away.
As much as people do NOT want to hear it, the entire economy is in a massive bubble that is going to pop. The stock markets are WAY over priced (per P/E and P/B), houses/housing costs are up in orbit (extreme amount of RV parks popping up everywhere as people can NOT buy a house), futures/derivatives investment “paper” is completely out of control. It is a massive house of cards. When it blows, the Great Depression will be nothing by comparison.
....from the article: “This week’s agreement, though it looks like a departure from this worrying funding feedback loop due to the involvement of private credit, only serves to complicate the messy subsidization of the sector,
which happens to be underpinning the stock market and economy, and is running almost entirely on debt at this point...”
Smells like insider Bailout horizon forthcoming.
This after the yen U.S. Debt. Bailout
✅
Watch out for the Exempt Ones again on this.
... The Ones that made sure that they were Exempt from O-Body Mortgage”Care”
“. The stock markets are WAY over priced (per P/E and P/B), houses/housing costs are up in orbit (extreme amount of RV parks popping up everywhere..”
Hooverville plus Demand Destruction
He’s predicted 10 of the last 2 crashes.
Thank you. It makes people angry that I know when I speak confidently about the coming economic destruction due to all of this. To me, it is OBVIOUS that we are going to have not only a U.S. meltdown, but a nearly total worldwide meltdown because of the inter-relationship of fiat currencies, for one thing.
P.S. The S&P 500 has nearly doubled since he tweeted “Sell” in early 2023.
whether/when/if an AI bubble pops, it’s ridiculous to compare bubbles like that to Enron, which was a flat out paper fraud from the get go ... with AI, a crapload of stuff of is being manufactured, built, put into service ... whether said stuff actually pays off or not does NOT make it a paper fraud like Enron ...
The guy who spotted the point of failure on sub-prime mortgage derivatives and shorted them says it’s too soon to short this new scheme, but hints he thinks the time is coming soon.
Presumably that will be accompanied by disruptions in the markets?
He said the point of failure here is that it all hinges on the success or failure of two companies, Anthropic and OpenAI. (If I heard him correctly)
Related:
“Why Jensen Huang’s $500 billion AI financing plan faces a big risk from China”
https://freerepublic.com/focus/f-chat/4391453/posts
I do not know if we are on a precipice. $40 Trillion of debt, war expenditures, and no political will to make needed cuts will make something big happen.
That said, I would NOT liken nVidia to Enron. nVidia makes powerful GPUs, and gets to charge a lot for them. They sell all they can make. Enron’s business model had to do with being an energy broker. In theory, they could have made money off of increasing the efficiency of the energy marketplace, but they didn’t make an object to sell. Worst case scenario, AI bubble pops, and nVidia goes back to making gamer cards and parts for Bitcoin miners.
I am starting a job helping build a data center, so I would like the bubble to wait a while to pop.
”AI is too big to fail.”
”AI is critical to national security.”
”AI has to be bailed out.”
“ Is AI a bubble ready to pop?”
I might have thought the same a couple of months ago, with the surge in the building of data centers. However, there has been a big pushback against the construction of new ones. This might actually be good for the industry, as it will help prevent a costly over supply of data centers.
It might not be such good thing for chip producers, such as nVidia.
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