I've been told the following (obviously negative) narrative. Can someone verify/refute some of these? I've put (?) next to questionable claims.
1. Twitter is purchased with debt
2. Debt is transferred to xAI via acquisition of X/Twitter
3. Debt is further transferred to SpaceX via acquisition of xAI
4. SpaceX IPO offered at extreme valuation
5. Index fund inclusion rules waived for SpaceX IPO: profitability requirement, inclusion period cut from 90 to 5 days
6. Index funds are largely held by passive investors such as pension funds.
7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?)
8. Holders of original X/Twitter debt (banks) incentivized to support the rule waiver since post IPO, SpaceX will have liquidity to service/pay the debt.
9. Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?)
10. SpaceX is in Texas jurisdiction, where shareholder lawsuits are not possible and must instead go for arbitration. (?)
> 7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?)
Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.
side effect: they'll have to sell other stocks, pushing their prices and weighting in market cap weighted indexes down.
> Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?)
For some active investors, yes. For passive investors (say you through your employer's pension fund), the tax isn't the problem. It's that the market has such a short time to adjust the price of these companies before indexes are forced to include them--and so might buy them at wildly inflated prices. Then, not too long after, the early investors can sell at still-high prices as soon as their lockup periods end. It's a massive transfer of wealth from pension funds and index investors to the early investors in those companies.
> Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.
Maybe, most indexes do not have to follow the index. they just need to match the returns. An index fund manager has choice of what stocks to buy. However an index fund doesn't have enough managers to make many choices and so they normally buy just what is in the index. However all index fund managers know they are large enough that if they change their holdings "instantly" when the index it self changes the market will collapse and so the fund will under perform. Thus index fund managers are always trying to figure out what the index will do so they can start buying/selling stocks in smaller amounts before the change happens.
How each fund handles this is up to the managers. (and "total market" funds have less ability and need to do this)
The whole point of index funds is that you don't have to pay management fees to managers. It's very expensive to hire a team of people to analyze the entire stock market in detail and chose the best 500 companies, and historically people who did that on average didn't beat the S&P500.
Just look up the performance of Mutual Funds vs S&P500.
That is the point, and index funds pay many less managers. However they all have a few managers to handle the various paperwork needed and those managers do make some decisions. They have much less influence vs a traditional funds, but it is slightly above zero.
I think the point is that they don't have the influence to intentionally deviate from the index because they think they know better. If your mandate is to be passive, then you need an index to follow. If you are that sure the S&P 500 index is wrong for some reason, or whatever other index you follow, then you need to invent a new index. Then, you can follow the new index.
At least my index funds do that. They don't get to constantly trade like non-index funds do, and they typically stick with the index, but every index fund I own has a line about "we select stocks that we think will match the index", which is different from buying the stocks from the index.
Again, the vast majority of the time they are matching the index stocks. However they have the right.
but any upside to second guessing the index gets allocated to the management, right? just like any downside, so its kind of immaterial for the end users, they're effectively bought into to SpaceX anyways
They are judged by how close to the index their returns are. If there a significant deviation either way they are judged harshly. Each fund is different, but they typical thing they will do is buy a competitor of some company in the index once in a while.
Typically managers pay is such that they don't get awards for guessing correctly, so they won't get any upside from a correct second guess, and they will see downsides from incorrect guesses.
Also unlike traditional funds, there are not enough managers to follow every company, so they can't pick stocks that will win just because they don't have enough to time research the stock. When they pick a stock they are just looking at the high level will this company perform like the other peers in the industry long term.
But surely the managers of those pension funds can see this happening, and will not likely take on the risk of shares that are that young, no? The index funds hands are tied, i agree, but passive retirement funds are largely managed by people who are motivated for them to succeed. If this were not the case, then pension funds could have been looted long ago...
Pension funds that are actively tweaking the mix of stocks they hold likely might decide to play it safe.
On the other hand, do you want to be the one who says, "As a rule we follow the index, but this time we decided to break our own rule, and as a result we lost X% of returns"?
Better wrong with everybody else than wrong on my own.
The reason pension funds include index funds in their mix of investments is because those funds have two features that are exactly what pension funds are aiming for: (1) broad diversification, and (2) conservative inclusion rules that avoid undue exposure to highly volatile firms.
Changing one of those features undermines the reasons for including the index. Doing it specifically for the purpose of including a firm where large pension funds have also been extraordinarily critical of the governance structure as a particular source of risk [0] even moreso.
>Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.
Right, if they've advertised as an S&P 500 index fund, they have to robotically follow the S&P 500, stupid inclusions and all. Changing that strategy would require ... a lengthy process involving input from shareholders.
However, someone can still start e.g. a "classic S&P 500" fund that follows the old rules for inclusion, and I suspect we'll see that in response to these recent decision.
The twitter debt is a negligible portion of the money at stake here. It’s a footnote compared to the trillions of dollars in wealth that are moving around. We are only talking about it because the internet commentariat has special interest in twitter. Not worth wasting time thinking about it if you are deciding how to allocate your portfolio.
Nevertheless it is part of a pattern of weird deals in Elon’s companies. He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross.
Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.
These are indices created by private entities. They are free to change their rules are they not? Maybe this is the wake up call to the risks of concentrated passive investment vehicles the public needed.
If you think it's a wakeup call about passive investment I think you're asking the wrong question. The vast majority of people do not want to become experts in the financials of 800 different companies in order to maximize their account return on investment over the next 20 years. It's a part time job to do that. Some people do that successfully but most people recognize that they won't. Passive investment was supposed to be a tool for those people. If you ignore all of that, then sure they can just change the rules whenever they like. But that totally ignores the reason a lot of these rules exist in the first place. In my book we're about to get a taste of why we don't want private enterprise responsible for this stuff in the first place.
Exactly all this. The whole idea of passing investing is "hardly any of us know better than the market as a whole." If you don't agree with that, then you don't agree with passive investing. Which, whatever. Live your life.
But the story is not about all indices being wrong, the story is about index management being corrupted. Like bond ratings on mortgages in the run-up to 2008.
If you dont like it, you need to choose something else. I dont know how people can keep throwing money at the thing they dont like and then complain it isnt doing what they want.
"Im too busy to spend 30 minutes to move my retirement somewhere I trust" just doesnt cut it.
A "401(k)" is not a monolithic entity. In practice, most employers offer a choice of funds, with the most popular being a year-targeted fund that rebalances between equities and bonds as you get closer to retirement. Having said that, you can probably dump your entire portfolio into government bonds, small cap stocks, or euro futures.
If I could pick from any possible retirement plan, I'd want in on the UK pension system that's guaranteed to beat inflation and earnings growth. Until the money runs out, at least!
Doesn’t it say that it’s a retirement fund, intended to be saved until retirement age? The 10% penalty is little more than a wrist slap level deterrent, too. It’s usually like ~1 year of returns. Not a huge deal if you need to dip into it.
(There’s plenty to criticize about the whole 401k system of retirement accounts. But these criticisms seem misguided)
People putting retirement funds in a pile of companies that often have little impact on local communities they live in.
They’re changing laws to fast-track sketchy IPOs, putting hard earned money at risk why? So we can send people on a death-mission to Mars?
Point being, they are doing what they will with other people’s money and won’t suffer the consequences. Removing the checks and balances is exactly how financial disasters happen.
Exactly right, there's even ones so conservative they market themselves as cash equivalent. Basically zero gain/loss in those funds. If you're so worried then go login to your 401k and change it.
This was always the endgame of moving away from managed pensions to 401k's. First you get everyone's retirement income into the stock market, and then you use the stock market to take it all away from them.
No, they absolutely don't fear prison (but they should).
It's just the aggregate behaviour of a group of people optimizing for short term profit and self-enrichment over everything and without any need for long-term careful planning because for various reasons they are pursuing the short term at all costs.
Space is raising $75B at an expected valuation of $750B so the Twitter value is just 5% of SpaceX’s IPO valuation and if it goes up then the fraction gets smaller.
It’s a footnote because SpaceX is going to be worth trillions. If Twitter were fully written down right after IPO SpaceX’s shares might not even have a bad day.
It may or may not be worth trillions. But the valuation right now based on the IPO sale price is .75 trillion. Which makes it vastly bigger than Twitter regardless.
It could nonetheless be worth trillions by the end of the day.
Space is the next great frontier and right now every single other company, and even country, remain orders of magnitude behind SpaceX. This could change in the future and viable competitors could emerge, public ownership could ruin SpaceX, or humanity's further entry into the cosmos could be delayed (Americans circa 1969 certainly probably also felt they were on the cusp of something great). But at current trajectories you're looking at something akin to there being one company that made ships better way better than everybody else, right before the Age of Sail kicked off.
A similar path to Microsoft. Being the primary gate holder to a developing market segment aka space. In our modern overvalued stock indexes they are worth 750 billion before considering future growth.
UFO soft-disclosure is already underway (the Pentagon releases more and more evidence). The USA will go full disclosure before the end of Trump's second term. SpaceX will be granted monopoly on the reverse-engineered alien spacetime propulsion tech, becoming the most valuable company ever. The SpaceX IPO is the final act of the plan that was set in motion when president Eisenhower signed the pact with the Zeta Reticulans (aka "the greys") at Holloman Air Force Base in 1954.
To explore this (hopefully parody) alt history, I don't know why the us gov wouldn't waited 70 some years for spacex to reach this point to grant that monopoly versus handing it off to the usual collection of defense contractors, eg raytheon (or whatever they're called now), Rand, etc.
The Holloman Pact made the alien technology transfer contingent on launching an alien-human hybrid program. You see, the Zeta Reticulans mandate their technology to be stewarded by hybrids (similar to how China requires a 50% Chinese joint venture to gain access to their markets). The two species' geneticists started working together, and in 1971 the first viable hybrid was born: Elon Musk. Then we had to wait for the hybrid to mature, before it could be given stewardship of this sensitive technology. Meanwhile a generations-long cultural manipulation program was also underway, to prepare humanity for disclosure.
Of course it's sarcasm, but if it WAS true, it would be because the government was working in cahoots with all those defense contractors all along, until the Trump administration came along and decided to privatize it, at which point SpaceX seized its opportunity.
"He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross."
Unfortunately, if you really start digging in to what is going on in the financial world, you will find he has violated no norms here. This is not a defense of Elon; this is a condemnation of the entire financial industry.
The whole thing scares me, honestly. It has never been a clean happy market where lots of honest people get together and are just honestly trying to make a better world for each other, there is no golden past where people were just nice or anything, but damn if computers don't let people build some structures that the robber barons of old could only have dreamt of. I'm really concerned that "index and chill" doesn't just have a "best by" date but that the best-by date could be in the past; I've heard of an awful lot of ways of exploiting it and other retirements schemes we have, this is just one. I find it implausible that these ideas exist but nobody is doing them.
> Index funds are largely held by passive investors such as pension funds.
Pension operators are not typically passive. It's a different story to say that maybe they should be given that their returns don't always match up with index funds.
But the SPCX float is a small fraction of its overall shares. So it will end up being around 0.08% to 0.12% of the weight of the SP500 [1]. Nothing to write home about.
Personally, I do think SpaceX is overvalued at these proposed IPO numbers and I will trade accordingly. So should anyone else who is confident and competent at taking appropriate market positions.
There are many valid complaints about public markets undervaluing businesses in comparison to private markets, now that everyone is putting their money on the line we start to see a different view being taken
which is exactly why public markets have always been a superior price discovery mechanism in comparison to private markets
As of January, TSLA was somewhere around 2.3% of the S&P [1]. Because SpaceX will have so little float available, it would be somewhere around 0.7% if included.
> The fact that the indexes don't have our back is a huge problem
how could an index fund possibly have anyone's back? It's in index of the top 500 publicly traded companies. that's all. If SpaceX or Tesla or Anthropic or anyone else fall out of the top 500 then they fall off the index by definition.
I think a lot of these comments are coming from extreme emotions associated with AI and Elon Musk and not so much the way things work and will play out.
It's only a problem for the ones left holding the bag. I'm at an all-time low allocation percentage in the US stock market and considering pulling more out still. Full on casino vibes at this point.
What Spacex/Elon are doing is sketchy as hell. But the numbers involved here are not terribly meaningful for your portfolio.
At IPO, $75B of Spacex shares will be bought/sold. The S&P 500 uses float-adjusted weightings, and the current float-adjusted total is $54T. If you are 100% invested in SPY, then about 0.14% of your holdings will be spacex on IPO day (75B/54T~=0.14%).
Obviously Musk and friends will start dumping some of the locked up float (~1.65T) when they can. But they definitely will not be doing so in a way that crashes the price or the market. That's in nobody's interest.
If you assume that half of the shares end up as float eventually (post-lockup), you'd end up owning around 1.6% of spacex in your S&P 500 etf (875B/~55T~=1.6%). That's not nothing but it's not significant enough that you should consider liquidating your 401k.
I'm picking on Spacex specifically because they are the biggest and imo, have the sketchiest/worst finances of the 3.
I think the idea here isn't the absolute numbers, but that if Elon manages to successfully fleece everyone's retirement, it will collapse confidence in the market, which could wipe out far more value than SpaceX alone.
IF SpaceX is actually worth 400-500bn and it's a few hundred billion dollars of fleece, sure, that's a "small" amount (still.. lord almighty it is never enough for these people). But the hazard is that it is a fleece. That would shake confidence in the system, the bear case is basically unlimited at that point.
I dunno won't index funds be forced to sell other stocks to buy these IPOs? Won't that possibly trigger a market crash if the IPO stocks loses a lot of value very fast after the IPO on top of investors predicting this fact and selling shares of other companies?
I dunno, the logical explanation makes sense, but markets don't work on logic especially on the short term. People fearing what other people will do and act in anticipation is known to happen.
Read the find print, but probably not. Index funds are aware of the issue you raise and they all have plans to handle it. Plans range from "not a problem, ignore", to "we don't even try to have the same stocks as the index, just similar stocks that we think will match the index performance". Most are someplace in between those extremes.
Yes selling will happen, and in the case of the S&P 500, it will be weighted selling across the whole index.
Spacex/Anthropic/OpenAI almost certainly won't crash the market. The most probable thing to happen is that all 3 of these rally a surprising amount on their opening day, because there will be so much forced buying of the shares.
In my opinion, the most likely bagholders will be any retail traders that buy these stocks before the lockups expire.
I think it's very likely that we see the following:
IPO day -> all 3 close higher than opening price.
1 month -> price settles into a range 20-30% higher than IPO price.
6-12 months -> price is back near IPO price +-5%. Anyone who bought and held in the first 3 months has unrealized losses.
Not completely sure what you mean by "short term compared to the IPO time"
IPO's fairly reliably pop on day one. The performance in the first 6 months is mixed but skews slightly negative.
But the size of these 3, combined with the rule changes that are allowing them to be included in the indices much quicker than normal, means this time is very different than what we've seen before.
In general you should never "sell your 401k." Period. (Short of using it for income during retirement.)
What you should do is have an Investor Policy Statement[0].
This should contain at least two things:
- your desired Asset Allocation (e.g. 30% U.S. stocks, 30% International stocks, 20% U.S. bonds, 20% International bonds) which should be decided upon based on specific, personal goals and risk tolerance
- your strict policy rules for if and when to do anything, if ever, e.g. (don't sell anything ever, or... rebalance your portfolio if one of your allocations is more than 2% from the desired goal)
Now... if say U.S. stocks took a big dump in the next 6 months (while other asset classes either grew, held steady, or simply didn't drop as much), when it would drop below 28% of your allocation, and you'd open a spreadsheet and figure out which other asset classes to sell a few percentage of, to buy the reduced price U.S. stock funds. (This is a policy-driven buy low, sell high strategy.)
Thanks for being the voice of reason here. So many people make their investment/allocation decisions on the fly... it's only going to get magnified by these 3 big IPOs. (and their unexpected consequences)
Firms will look at your $600k 401k AUM, Investor Policy Statements, and laugh you out the door. They won't care, you have no say. Your 401k plan is between them and your employer.
Not sure if OP meant literally sell, or just rebalance out of stocks. TBH I've been considering sliding over to all bonds for a time, since there is no tax event if funds stay in the account. But the numbers don't seem that high at the end of the day.
If you try to time the market and you sell at the exact peak you still have to time the market again and buy back at the correct bottom. If you miss either of these you're likely leaving long term performance on the table.
"Be fearful when others are greedy". Greed is at an all-time high, so be careful. Whether that means buying or selling or staying put is for you to decide.
Any advice that confidently ends with "but whether you do A, B, or C, is for you to decide" can generally be safely avoided. This is providing 0 bits of guidance.
401ks probably have limited control, but in proportion to their share of your index funds, you could short these stocks or use options or buy an inverse ETF (if one will exist).
Hopefully you didn't accidentally waive your right to class action by signing something at some point in the last 15 years that survived multiple buy-outs to land in the hands of some company tertiary to the lawsuit.
i read it as most likely people will lose their retirements if the companies goes bust. is that correct? in my country now they move to new pension model which will allow more aggressive investments with them. i am worried it will just get sent to these bros and i'll work until i die.
I don't know about your country, but in Sweden you can choose where part of your investment money (I think 40%) gets allocated.
On top of that you can choose where 100% of your private pensions are allocated.
Also some EU pension funds are already in the process of divesting from US markets...
I mean, the US public markets is about 49% of the worlds market so it is not like there aren't other options. Divesting doesn't mean moving everything out and pension funds also invest in non-public markets.
Amazon is worth $2.81T right now and only represents 4.03% of the S&P500.
So a $1T share would represent less than 2% of the S&P500. This is significant for a single company, and 6% for 3 shit-tier companies (SpaceX, OpenAI and Anthropic) is even more significant, but we're far from "losing retirement if they go bust"-levels.
I wish we would start paying proportional attention to business news, instead of treating AI (or any other "cutting edge") companies as economy-defining and giving these 50+% of the attention.
It is especially telling if we try to list out all the psychological biases at play:
- Availability & salience bias - vivid, memorable things feel more important than they are
- Narrative bias - humans tend to think in stories, and AI tells plenty
- Recency and novelty bias — new things feel more consequential than established ones (this one already drives like 80% of all HN content btw)
- Proportionality neglect - people are bad at intuitively grasping what percentages mean, even if they see the stats
- Social proof and reflexivity - coverage signals importance, and drives more coverage
- Status quo invisibility - things that work reliably become invisible (surprisingly, HN is really good in terms of working against this bias, I feel like at least 5% of all posts are some niche "inner daily workings" topics)
- Speculation premium in attention - uncertainty generates more discussion than certainty
- In-group signaling - cutting-edge things are status markers among influencers
One of the places you could have learned this would be the article itself:
> most share indices weight firms in proportion to the value only of shares they have released for public trading (the “free float”). For SpaceX, this means just the $75bn or so of stock it intends to issue in June—so its initial weight in the S&P 500 will be around 0.1%. The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk. Even so, SpaceX’s probable initial weight in this $40trn index will still only be around 0.5%.
You're not modelling the contagion here. The problem is that while any single one isn't that big a share of the S&P 500, similar companies do make up a lot collectively. Excl some non-tech/AI firms:
NVIDIA Corp NVDA 8.02%
Apple Inc AAPL 6.53%
Microsoft Corp MSFT 4.84%
Amazon.com Inc AMZN 4.01%
Broadcom Inc AVGO 3.36%
Alphabet Inc GOOGL 3.32%
Alphabet Inc GOOG 3.09%
Meta Platforms Inc META 2.23%
Micron Technology Inc MU 1.71%
Advanced Micro Devices Inc AMD 1.19%
Oracle Corp ORCL 0.99%
That's 40% of the S&P 500.
And if anything happens to the AI bubble all of these go down together. While they won't all go to zero and cause a "-40%" overnight, Nvidia's rise is so meteoric that they will trigger a -8% and the rest's valuation has more than doubled since 2023. Even Apple, which isn't much of an "AI company", is still following the AI-tech hype.
If Nvidia eats shit, and the others go -50%, that translates to an overall ~-24% on the stock market.
Before any contagion outside the tech industry is considered. Look at the Dotcom Bubble and a -40% to -50% crash is quite plausible.
Unlike OpenAI or SpaceX, a lot of those tech companies are raking in the money. meta, google, amazon, apple all have huge cash flows. They will be buffered by this money - in dot com time, the money wasn’t already there, just the eyeballs. And while Cisco, which like Nvidia sold actual things, took a long time to regain their stock price, they made money selling actual things all along. On the other hand, there is more debt now than in dot com. I wouldn’t be surprised by a fifty percent decline, but it will be different than dot com for sure.
> And while Cisco, which like Nvidia sold actual things, took a long time to regain their stock price, they made money selling actual things all along.
This is the key comparison. It's not the "Pets dot com" side of the DotCom bubble, but the Telecom Bubble that followed. (All the AI startups that just repackage someone else's inference will go the way of Pets dot com, but their economic impact is minimal)
Certainly, Big Tech has massive cashflows. But those cashflows were priced into the 2023 valuations.
That is what makes the current valuations so ominous. Just a correction back to 2023 would be enormous. And as you note, a lot of these companies are taking on debt, dumping huge investments into AI. They're worse off than they were in 2023. Oracle may straight up go bankrupt.
The issue with nvidia is that they're "selling" most of their product to companies taking out debt to fund the purchases. The company explodes, nvidia's booked but not-yet-existing profits go poof. They're also giving most of these companies the money to buy their own products. Looks sweet on a balance sheet, doesn't represent reality in any sense.
I wish I could upvote this more. This is the point. Everything is so incestuous now that the problem isn't 2% here or 3% there, it'll be a catastrophe of epic proportions.
I do not want things to go kaboom, the CAPE index seems to indicate that what I want isn't relevant.
That's if everyone were acting perfectly rationally, but a world in which those three companies go bankrupt would have everyone panic selling every equity possible like it's the endtimes.
If they go bust won't it likely trigger a massive market crash? Afterall index funds will be forced to sell other US stocks to buy them, bringing their values down. Non-passive investors will predict that and divest even more and so on...
And that is on top of the IPO companies losing value themselves, this seems likely to trigger a doom-loop until the market reaches a low enough value. This will likely trigger layoffs and companies reducing spending and investments further depressing the economy. Added inflation from oil prices and war.
This doesn't seem like one big balloon ready to burst, but more like a house suspended by hundreds of balloons and they are about to be ran over by an airplane.
Yeah, think dot-com crash all over again, but probably worse IMO. Problem is, there really isn't a safe place to hide when this all happens. Some are less unsafe, like funds which track dividend-yielding stocks, or gold I guess (but that's just a speculative value store like bitcoin).
The reason they're doing that is because traditional European ponzi scheme pension systems don't work with shrinking populations, so actually we're working till we die in either case unless automation taxes pay for it.
You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits. If we had a reasonable tax system that captured more of that surplus value (which mostly goes offshore and does not in fact "generate more jobs"), then we'd have no problem at all funding the pension systems, and much more.
> You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits.
Surplus value is a propaganda myth from Marx along with other trivially disproven delusions like LVT. Tell me what work is being done by whom in a wine cellar as the vintage matures after harvest?
"Reasonable" is doing herculean amounts of work as usual, as it is implicitly operating under a thief's logic that the target didn't really deserve it anyway therefore if I steal all of it I will be justified.
We see the same shit when regiemes 'nationalize' segments of the economy and then wonder why instead of miraculously getting better without the 'exploiters' things turn to shit and absolutely nobody wants to trade with them. Empathy such a foreign concept to them that they don’t understand why merchants refuse to trade with those who steal businesses wholesale. Whose only response when confronted about their crimes is lame whataboutisms and victim blaming.
Yep, I'm sure in 25 years time, when I "should" retire, the retirement age will be 75, meaning another 10 years of work, so I have 35 left :) At least!
Which is why I have several different sets of savings for retirement. I have no choice about working now, but I hope to retire early in a few years, and my other savings just need to get me through until the official retirement income starts.
But this doesn't solve the problem in any way; it simply leads to production drop.
I mean, this is literally the logic of every communist government in the 20th century. They had the same logic that "given the mechanization of agriculture, food practically produces itself; you just need to throw a seed in the ground and give it a couple of tractor rides, and the earth will do the rest. Therefore, we need a tax on such activity, because we have enough resources to feed everyone".
In other words, it's literally a pure tax on automation. The results were mass deaths from starvation every single time.
There were so many contributing factors to those famines but my understanding is that it was far and away the broken incentives for reporting failures as successes to avoid immediate head chopping.
There has yet to be an attempt at a centrally planned economy that actually had accurate data to plan with.
Not advocating for central planning but the important point is that these failure modes are possible under any tyrannical regime. For an example of where capitalist competition fell down in a similar way, look no further than the Irish potato famines.
> it was far and away the broken incentives for reporting failures as successes to avoid immediate head chopping
Actually, no. What you're describing is more of a part of the next stage, designed to solve the already existing problem of famine, rather than its cause.
When communists come to power, they don't try in the first place to reorganize food production under strict centralization; this directly contradicts Marxism, according to which the state gradually withers away as a communist society is built. They simply try to redistribute what is already being produced in a more fair manner, to force peasants to contribute their "fair share" to society.
This causes production to plummet, people are dying of hunger, and only then the government takes control of organization of food production, and only after that do the factors you mentioned become relevant.
But the famine itself under communism, at least in its initial, most massive iteration, is not a consequence of a tyrannical regime, but is a consequence of the "taxation policy" being pursued.
Surely redistributing food (still effectively central planning) produced by a large number of peasant farmers is exactly equivalent to redistributive taxes on a very small number of very wealthy people who have captured the productivity gains of automation. Let's just dispense with the entire field of economics, all that fussy declining marginal utility and indifference curves, and just make a real zinger of an analogy.
Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?
It's absolutely correct that we can easily feed, clothe, house everyone. We can even give everyone comforts. It's mostly greed that prevents it. Greed that capitalism spends $trillions cultivating by brain-washing us all to want more and never be satisfied.
Greed is a human axiom. Anything that depends on humans not being greedy isn't worth the paper it's printed on. That's why capitalism won, despite its many faults: it requires human greed to function.
Because its the only way the people who would like to be in power and can't manage to produce anything anyone else wants can see to get themselves put in charge: convince enough other people that despite their freedom, high standard of living, etc. they are somehow oppressed.
Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?
No, I don't think so. From a historical point of view, everything is quite clear: after communists came to power, the most severe famines occurred even before this totalitarian dictatorship is build, as a consequence of these very tax policies, the purpose of which is "easily feed, clothe, house everyone".
Totalitarian dictatorship comes later, as the problem transform to "we can easily feed, clothe, house everyone, but they don't want to, so we should force them"
Could you expand on your second paragraph - I'm not sure I understand your position. Are you saying you think we're not able to provide for basic necessities with our current level of technical ability and available workforce?
Originally pensions were created so people who could not work would not be destitute.
The fact it became an all-inclusive all-year-round vacation reward is an anomaly which is getting corrected. Too bad for us we're the generations holding the bag.
There was a response about starting businesses. I consider those in their 60s to be capable of contributing to financial systems (eg businesses), I was just focusing on social aspects that have seemingly been lost with societal/political changes. So it was contribution in the non-financial sense I was particularly thinking of.
I suppose when we look at things like the 4-day week, we imagine more time and energy available for social cohesion. Or I do at least.
Why? An index fund represents the market (usually top 100 or 500 companies), and SpaceX will certainly be in the top few companies. I would argue it's a lot riskier to buy it after the IPO price (if you're buying it secondary it would be easier to spike prices by accident), plus then it's not representative of the actual market until you've purchased the stock.
Unless I'm misunderstanding this, buying at the sale price is the least risky way of purchasing the stock, which is what index funds should do. They should pursue the least risky way of indexing the market
Because nothing about the IPO price has any resemblance to a fair market valuation, and if it's being propped up by this forced inclusion, even less so? The rules existed to fundamentally protect against a Potemkin village situation where an underwriter and some early round investors whip the valuation into a froth and raise against a rabid corps of retail investors who don't necessarily care about a PE ratio of 1,000+ because they're buying the hype.
More importantly, it allowed organic price discovery to occur. This eschews that process because the indexes are _forced_ to participate essentially at _any_ price, so rather than the market writ large having the opportunity to reward or punish the underwriter pricing of the IPO and determine any true idea of price, they're forced to buy the banker's narrative, which will intrinsically prop up the stock to some degree, but at what cost, and based on what underlying?
You know that short selling is possible? And index funds are traditionally some of the keenest participants to lend their shares out to short sellers in return for a bit of extra return (over the raw index).
Index funds are largely synonymous with passive, long term, buy-and-hold investors. That kind of investors are best served by slower changes to the index, especially since index funds are intended to piggy back on the price discovery that happens in public trading. An IPO price, which is the result of a private negotiation, is exactly what you don't want to buy stocks at if you're a passive, long term investor.
How is that the smart move? It's exactly what OP stated as undesirable for index fund investors. The price discovery of the public markets hasn't taken place yet.
And when it happens, I suspect we'll end up having to eat austerity to avoid inflation again. Under new leadership from the Responsible Party, whoever that is where we live.
>Why does SpaceX warrant a change of existing trading rules?
They don't, while timing certainly benefits, and potentially was triggered by them and OpenAI and Anthropic IPOs, these rules are not specific to only apply to SpaceX.
FTSE Russell (Russell 1000/2000 etc.) Adopted "fast entry" for large IPOs. Eligible companies (investable market cap above Russell Top 500 cutoff) can join after 5 trading days (previously quarterly rebalances). Also eased float rules with carve-outs.
Nasdaq (Nasdaq-100): Effective May 1, 2026, top ~40 market-cap companies can enter after 15 trading days (previously 3+ months). Adjusted low-float handling.
S&P Dow Jones (S&P 500): Reducing seasoning from 12 months to 6 months for megacaps and waiving the 4-quarter GAAP profitability requirement for large issuers.
The answer remains, these rules do not specifically apply to only SpaceX, they apply to a range of companies that fit specific profiles. Timing happens to favor SpaceX, but will equally favor OpenAI, Anthropic and others within the same qualifiers.
The links above provide specifics as to the what's and the why.
And prior to that Elon did float the idea of IPOing on a non-NYC exchange, some Texas exchange. So a bit of a stick and some honey in the IPO fees and early access.
We all know they get paid by musk to load up on overvalued stocks so musk can get some cash from pension funds, the pay off a bit Russell’s for bending the rules. No one in their right mind would change rules to buy space x. What profit must have to compensate the valuation?
Because 5 days is not enough for the market to discover the price of SpaceX.
And the rules were changed so the float is weighted as if it was much much larger than it is.
Are you sure? It discovers it within seconds following a bad earnings report. It seems hard to know right now whether five days might actually be sufficient or not, seeing as the cat is out of the bag about how unprofitable and debt laden this trillion dollar enterprise is.
If price is fully discovered right after ER then you will see price stabilized right after ER. But in fact post ER prices can wildly differ from the next minute, next day and next week price. It’s speculation and anticipation.
SpaceX financials are a mess outside of the actual SpaceX part. xAI is losing money hand over fist, other random bits in there are doing the same. The valuation makes no sense.
It's basically a money transfer from the average person to the poor richest person on the planet.
The true Great Filter is mental illness, apparently.
I don't find this reassuring, because Elon's playbook is to force the public to purchase anything of his which doesn't do well on its own. Maybe a nice $1.776 trillion dollar tax funded investment into "unwoke" AI. :D
Well, apparently Anthropic became "profitable" last month, because of some 1-time deal with xAI.
I wouldn't bet on either Anthropic or OpenAI being profitable, we'll find out soon enough what this house of cards has inside, as they both want to IPO.
Though with the current US administration, as proven by the SpaceX IPO, laws are mere recommendations.
> That’s $15 billion a year in compute costs, but reduced to an indeterminately-discounted level for the precise months that Anthropic is using to tell investors and the media that it has an operating profit. That operating profit is a result of accountancy rather than any improvements to its business model.
> While I wouldn’t say this is cooking the books, it’s definitely a shiatsu-grade massaging of the numbers. Anthropic has deliberately leaked a quarterly “profit” where it knows it can suppress its costs
Moreover their filings on the matter basically correctly weight their space launch business and then go "and xAI will obviously be worth a bajilion dollars more".
Ask yourself this question: Why were the rules there in the first place? SpaceX being big doesn't make this okay, it actually makes it more dangerous since more and significant money could be funneled.
You shouldn't be downvoted because your point is completely valid. Matt Levine made the same point in the last Money Stuff podcast. These indexes are supposed to contain the largest, most significant, and in some cases all companies so people shouldn't be mad at the indexes for pulling in a company that's going to have a 1.5T market cap at IPO. Given the market cap, it would actually be weird to not have it in an index like the S&P500 or QQQ.
Instead blame the bankers and market who are putting buying in at 1.5T valuation.
If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.
>>If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.
"People" don't know much about finance to put it mildly.
ETFs are created by market demand. Even "factors" ETFs are often based on completely irrational things like dividends, P/E ratios and other meaningless metrics. This happens because people are easily seduced by narratives ("solid dividend paying stocks", "low P/E ratio - good returns") which are plainly wrong but tempting to an average person.
Most people realized they don't know anything about finance and would like to pay someone (their fund manager) to make responsible decisions and expose them to wide market while avoiding blatant manipulations. Unfortunately the incentives are misaligned here. The managers' incentives are somewhere else. They are not paid by long term performance of their fund and they are disproportionally penalized for taking contrarian decisions.
People being force feed those mega IPOs losing money on them is bad for others as well - there will be less wealth for productive investments and more in hands of "players" (or scammers if you want to call it out). There might be a crash. Trust in financial market will plummet and hostile regulation might arise which other market participants will pay for even though they are not to blame.
I will not have exposure to those mega IPOs but I am in privileged position because:
-My understanding of financial markets is much better than that of an average person.
-I have quite a bit of time to follow all of it and react in time
-I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)
-I know where and how to move my money so I don't lose advantages of wide market exposure
It took me a lot of effort to set it all up like that. An average person falls short on all of the above and is not in position to avoid donating part of their pension fund to Musk and Altman though. It is still bad for me for reasons mentioned above.
What's really clever is that Musk could pull his Nazi salute at the inauguration of the president he bought, and the ensuing 'voting with your dollars' against him doesn't matter because he was able to orchestrate forcing people to pay him by cutting them out of the loop. I mean it's absolutely evil, but it's pretty clever - his team proved they can't run a country (they probably could, but don't want to), but they're incredibly adept at stealing.
I wonder if Musk chose rocketry solely because of the ability to use it to drain money from government?
Initial public offerings whose market capitalizations rank within the Nasdaq 100’s top members will normally be eligible to be included after 15 days of trading, Nasdaq said in a statement. The timeline is shortened from at least three months currently.
“Industry professionals, including asset managers and institutional passive portfolio managers, were mostly supportive of the Fast Entry proposal and proposed timing,” Nasdaq said in the statement.[0]
15 days vs 90 days isn't some huge shift nor is it inherently some "flaw." These changes have been asked for long before Elon entered the White House.
The question is whether or not those industry professionals are speaking in their own interest, in the interest of all stockholders, in the interest of the economy as a whole, or any mix of the above.
This is why non partisan financial institutes like the FED and consumer protection groups like the CPB are important and we should have them as non corrupt and robust as possible.
Because it just doesn’t seem wise to trust asset managers with these kinds of things without a lot of evidence and transparency. The 2008 crisis should have taught all of us that much.
The money still comes from somewhere. In this case, those index funds will be forced to trim holdings of other companies. So it's cannibalizing other parts of the stock market.
which, if true, would make an arbitrage opportunity for a fund that explicitly excludes these high valuation targets but buys those trimmed companies (because for trimming to have happened, they must've been sold unwillingly and thus must be under-priced).
Which, again, benefits the wealthy and well-informed and well-connected.
The suckers who have their retirement savings in some kind of index fund because all the experts have been saying, "Buy index ETFs and forget about it" for decades are gonna get fleeced, and the wealthiest get wealthier.
I suppose everyone reading this thread counts as "well-informed" then, right? All I have to do is move my 401k into the bond-heavy fund right now and then back into the stock-heavy one when everything craters is what I'm hearing. It's what you're doing, right?
I'm informed enough to see what they're doing and why, but I'm not informed enough to know how to prevent them from wrecking the economy for normal folks while enriching themselves. I don't think information alone can solve the problem for the majority of people. Retirement accounts aren't often easy to change, non-retirement accounts have tax consequences, timing the market as a normal retail investor is risky.
I don't really have advice. If I were directly holding an index that tracks the Nasdaq 100, I would get out of it, and take the tax hit. But, I suspect the impact and risk will cascade outward. Nvidia has exploded in price based on actual revenue (though I suspect it will be temporary, and have to come back to earth in time). SpaceX is entirely fantasy land. It doesn't have revenue to justify anything like the price they're launching the IPO, and when indexes are forced to buy it, everyone holding those indexes provides exit liquidity for the same scammers who've been hyping it.
You are giving up equity premium for the time till everything settles. You will also not know when that is. It's going to be more like a long term ticking bomb that may take years to detonate.
Yeah it's years because they will slowly unload it to entities that are forced to buy (and as they do those entities will be forced to buy more).
If you have money invested in those ETFs I think you may want to pay a bit more attention rather than making sarcastic comments unless you want to end up with 5%+ of your portfolio being invested in hopium by the end of 2028.
The threat is to end up with the bag, not that the bag explodes this month or the next.
> Yeah it's years because they will slowly unload it to entities that are forced to buy
I get your logic, but why all the handwringing over the short time frame for inclusion in these funds (days instead of a year)? None of that should be relevant if it's going to take so long to play out.
> unless you want to end up with 5%+ of your portfolio being invested in hopium by the end of 2028.
OK so, going back to the original question: the play is what? Move into bonds around IPO time and move back in when everything craters?
>>I get your logic, but why all the handwringing over the short time frame for inclusion in these funds (days instead of a year)? None of that should be relevant if it's going to take so long to play out.
It matters at what price the forced buying starts.
>>OK so, going back to the original question: the play is what? Move into bonds around IPO time and move back in when everything craters?
It's hard to say what's the play is because:
1)For many people making any kind of "play" triggers a tax event
2)It's not clear what ETFs to choose as currently there aren't many good options.
Imo one decent choice out of available ones are ETFs based on MSCI World Quality Factor index. It's not ideal because it still excludes companies like Berkshire Hathaway (because of accounting rules) but it avoids many suspicious companies (like MSTR) as well as mega IPOs. Unfortunately those are more costly (0.3% instead of like 0.05%). If you are in EU you and want world wide exposure you still need something for emerging markets (EU based ETFs based on that methodology exclude emerging markets).
You can also become an active investor but that's a job and I don't think many people want to take on it.
The main problem with going with bonds is that you are giving up equity premium and you still need to time the market for a comeback and that's very difficult.
I don't understand what you wrote. It sounds like you are saying this is a zero-sum game of winners and losers -- SpaceX "wins" and the tracking funds "lose". The ETFs and mutual funds that track these indices don't care what stocks are added or removed. They have one job: To track the index as closely as possible with the lowest cost.
Not true, they collectively lose investors if they become less attractive. Probably not an overnight thing, but if people are told that index funds are not attractive anymore then increasingly fewer people will put their money in them vs a hand-picked portfolio.
Dimensional funds have a type of index factor funds that roughly track these indices without strict adherence to S&Ps inclusion rules. That's the only one I'm aware of.
> they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?
Yes. And I see the argument for it. It’s hard to claim you represent the market if trillions of dollars are outside it for no reason other than newness or capital-structure weirdness. (I agree with excluding unprofitable companies.)
Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear.
> Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear
These indices have lots of competition. NASDAQ 100 lost basically zero money when they made these changes. If S&P makes them, I'm doubtful anyone will react either.
When S&P was still taking public comment, I put the link on HN. It got like two upvotes. This isn't something materially care about as much as like to get angry about on the internet.
Why do you consider HN upvotes to be more indicative of "materially caring" than HN comments?
Perhaps you got unlucky with the timing of your post, or title didn't grab attention in the /new feed compared to this post's. For all we know, whether or not they saw your HN submission, every critical commenter here may have also submitted a public comment to S&P.
Not particularly. When I posted the request for comment to HN it got crickets [1].
Not enough people care about this. And the "safe" option has kind of shifted with the other index providers having moved first. That said, there were a lot of proposals and I'm not expecting all of them to be adopted.
> This forces over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.
And more importantly forces them to sell the rest of the market.
Who will be on the other side of these trades? I suspect the stock market is not sufficiently liquid for all of that to happen in a single day without the rest of the market seeing a significantly depressed price, and index holders effectively gifting value to everyone else by effectively pre-announcing their large trades.
90 days or 5 days, it doesn't really matter because the float will be tiny due to the 6 month lockup. What kind of price discovery are we expecting that would happen in the other 85 days?
Well, they changed that rule as well. If the float is less than a set percentage, then it is weighted as a much higher percentage. Something like the minimum for weighting is 12% where SpaceX's float will be below 5% (those are the numbers I recall, but I don't have a lot of confidence in them.) That means they will be weighted as if the float was 12%.
No, the parent was saying the other rule change is arbitrary.
The tiny float and just a few days before the index funds buy means they have to buy without any more revenue / earnings info than was already published pre-IPO. 90 days is a quarter, so there WILL be more price discovery before a 0 day index fund seasoning period.
SpaceX is slowly and steadily increasing the float over the first 6 months by having a rolling end to the lockup. The only major cliff will be Elons shares
Off-load some of them when the valuation is _to the moon_ from AI and then later he'll force shareholders and the board to gift him even more shares then he sold.
There is a world of difference between 5 and 90 days, even if you aggressively stick to the “time in the market over timing the market” strategy. If it wasn’t of consequence, then they wouldn’t be attempting to change the rules. And if SpaceX is such a great long-term investment, then they shouldn’t need the advantages this provide. Join the index funds like any other company. Let the market sort itself out.
You're misrepresenting things a bit. S&P 500 has not approved those changes yet and they have some other protections as well. Nasdaq and FTSE Russell definitely sold out and should not be trusted as good indexes going forward.
Most popular passive indexes are S&P 500 and some total markets. Total index, like the one used by VTI, is likely the best spot in this case. They have not changed any rules, as far as I know.
You protect yourself by understanding that this is one infinitesimally small cost (expressed as a fraction of your portfolio returns) that doesn't overcome the benefits of maximum diversification and the ultra-low fees of broad-based ETFs.
Buy MSCI World, enjoy the 0.04% p.a. fees and minimal idiosyncratic risk, and relax.
Index rebalance traders will reduce your annual returns by less (probably much less) than 0.1%, but there is no better alternative for you at this moment in time.
I broadly agree. Though I'm less pessimistic: lots of people will pay lots of attention to SpaceX and friends, and with short selling in public markets being possible, an accurate price will be established very quickly.
Remember also: index funds are some of the participants most keen to lend out their shares to short sellers. It's one of the rare ways they can boost returns above the raw index they follow.
> and with short selling in public markets being possible, an accurate price will be established very quickly.
I know very little about markets, but: aren't the short-sellers just going to provide liquidity for the big index funds? Like, if the funds HAVE to buy SpaceX, and the funds are enormous, wont every single stock sold short be immediately gobbled up, as well as pretty much anyone else wanting to sell? Even if everyone else is selling like mad, it wont affect price much at all?
Maybe this is naive, but if these enormous funds are more or less forced to buy SpaceX, it seems impossible that "actual price discovery" is going to happen in any reasonable amount of time, and the short-sellers will be screwed.
Here are some options for pre-tax retirement funds (ex. 401k):
1. Exchange your market-cap funds for S&P 500. Afaict, even with their own rules changing, they will wait up to 6 months (as opposed to 12) to let SpaceX in. This is the simplest solution that buys you time without losing other gains in the market, assuming your existing funds were broad market-cap funds. The idea here is to wait for ~5 months and see if you still want/need to exit S&P before they let SpaceX in, or pick another option.
2. Exchange your market-cap funds for RSP, an equal-weight fund. This is also simple and reduces your risk, as SpaceX's allocation of the fund would only be 0.2%.
3. Exchange your market-cap funds for a selection of different funds in order to replicate the previous allocation. Buy small-cap and mid-cap funds, and buy ETFs that cover the market without including tech. This is more complicated, but not really that complicated once you learn how to exchange funds. Still mostly passive, you're just actively managing your allocation into different indexes. Downside is you lose the gains from tech.
4. Exchange all your index funds - temporarily - for a money market fund or other low-risk, low-return investment vehicle, until SpaceX price settles down. This is the absolute simplest option, least risk, least reward. You lose all the gains from the market during this time, but a percentage of your fund doesn't disappear overnight. If you're nervous, it's safe to do this by June 11th and sit on it until July 5th and see what you'd like to do then.
You probably DO NOT want to do this for non-retirement funds, as you will get hit with capital gains taxes. You would have to estimate how much you think your portfolio would drop due to SpaceX's overinflated price falling, and compare that to your potential tax bill from rebalancing. It's almost certain that your tax hit would be higher.
Not buy these index funds. If you don’t want to own the entire market, don’t buy funds that seek to own the entire market. Funds like ESGV which exclude companies with poor governance have existed for a very long time - I can’t find a clear answer as to whether or not it will buy SpaceX, but I’m sure you can find funds that cater to your desires.
That ignores the actual issue here, which is the change in rules. Index funds already seek to own the entire market, and when most people chose these index funds there were rules about when newly listed stocks get purchased by the funds. And now those rules are being changed.
Index funds generally try to match the performance of the index, but most are not required to hold the same companies as the index itself does. They typically do, but managers often have choices.
Yes, most index funds don't literally intend to own the entire market for any sufficiently broad interpretation of the word "entire."
But the point is that we have notable index funds which are marketed to customers as having the intention to own segments of the market according to certain rules, and they are changing those rules with relatively short notice and for reasons that seem suspicious to many customers.
The problem is I'm already in a S&P500-tracking ETF, for a decently large amount of money. Selling it off would be a big taxable event for me, something I don't want to do.
Could you use a prediction market (or Spread Betting in the UK) to hedge against your ETF loosing money during the period? If the ETF lost value, the hedge would gain it back and vice versa. You wouldn't need to sell the ETF and you'd only be liable for tax on gains from the prediction.
Yes, because when you sell it, you get cash and profit. Profit is taxable, in Germany they tax it with 25% + Solidarity Tax + Church Tax (if you are a member of a church).
After, you can go ahead and buy another fund, but in between you "shed" a significant amount of money.
However they are literally changing the rules of what "the entire market" means to include those companies sooner that they would have been when people bought those indices.
You could move your passive investment to an index that includes a great proportion of bonds or move to an entirely bond based index. You reduce the upside potential and downside potential.
I personally have moved my retirement accounts to bonds while being more aggressive with my personal investments.
If you intend to remain a passive investor, keep doing what you’re doing. If you have conviction that AI boom will bust and you want to become an active investor, follow the advice from other comments on how to prevent these companies from being part of your portfolio. If you're going to become an active trader, I suggest thinking about both upside and downside risks and look beyond the local echo chamber.
Here are some factors I would expect to rule out the frothiest stocks:
"Quality Factor ETFs are made up of securities deemed to exhibit strong fundamental characteristics. These ETFs screen for stocks that have healthy balance sheets, encouraging growth prospects, and consistent improvements in their earnings."
"Value-centric ETFs invest in securities deemed to possess value characteristics, including those operating in stable industries with relatively low price-to-earnings ratios."
"Low Volatility ETFs invest in securities with low volatility characteristics. These funds tend to have relatively stable share prices, and higher than average yields."
Be sure to check the expense ratios on smart beta ETFs. Generally, the more sophisticated the stock screening, the more they will charge you in management fees.
Personally, I keep my portfolio extremely conservative. My bet is that if the singularity arrives, we will all either die, or get UBI. I don't particularly care about having more moons than the other guy: https://www.astralcodexten.com/p/you-have-only-x-years-to-es...
That’ll do precisely zero to protect against the effect described. In fact the opposite - the dividend paying stocks will by mathematically necessity be among those ETFs sell down to buy these IPOs
I believe you may have gotten discussion threads mixed up, but in any case: I expect that as SpaceX investors sell their SpaceX stock, they will buy ordinary equities to diversify.
It is not just the passive money. Many active managers are benchmarked against those indices, and you do not want to try to explain to your clients that you lagged in performance because you did not buy these stocks when your benchmark did. Sitting out would be taking a huge risk (of losing your job, which is important to you, as opposed to losing your clients' money, which is less important if your benchmark also lost money).
> Although Nasdaq has already shortened the “seasoning” period before index inclusion to 15 trading days and FTSE Russell has slashed its waiting time to five days (and S&P Dow Jones is reportedly considering something similar), most share indices weight firms in proportion to the value only of shares they have released for public trading (the “free float”). For SpaceX, this means just the $75bn or so of stock it intends to issue in June—so its initial weight in the S&P 500 will be around 0.1%. The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk. Even so, SpaceX’s probable initial weight in this $40trn index will still only be around 0.5%.
So people who hold ETFs that track the S&P 500 probably don't have too much to worry about. People invested in the NASDAQ 100 probably have more to be outraged about - but then again I suppose if you're invested in the NASDAQ 100, you may be consider more exposure to SpaceX to be a good thing.
This needs to be higher for more visibility, because the weighting and the float's proportions are an important aspect that most news sources or comments fail to mention.
>The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk.
im not a finance guy, can someone explain to me why the nasdaq would want to "woo" someone specifically? what benefit would nasdaq get? or, alternatively, what harm would befall nasdaq for not woo-ing musk?
It's still extremely corrupt, and done to benefit a very small group of people. Dismissing the criticism like this is directly against the rules and spirit of hackernews to assume good faith
This fundamentally misunderstand the point of an index. The fundamental reason S&P 500 exists is to let people buy the entire market ( the top 500 companies make up most of the entire market ). That is it. Period.
They are not saying these 500 companies are going to be the most successful in 6 months or 10 years. At one point Enron was 0.6% of S&P500 because it was a large company, not because the directors at S&P500 thought the management were honest people.
If you don't like that, fine, don't buy S&P500 and buy stocks or other funds that do have companies you like.
This disregards the fundamental reason why people buy index funds in the first place. Rules for consistent GAAP profitability and cooldown periods specifically prevent retail investors from being exposed to particular malicious stock market tactics and overall risks that otherwise could significantly hurt them in the short term. So it's more like saying "you don't like extra risk? too bad."
This is simply not true and a misrepresentation of the issue. There is no issue with SP500 buying into all these companies. The issue is that “valuation” should be determined by the market before the index funds buy into it hence the original rules and policy in place. Else wise we run into the issue now where our 401K is pumping the IPO, regardless of fundamentals.
> The fundamental reason S&P 500 exists is to let people buy the entire market
And why do people want to buy the entire market in the first place? They want to diversify and insulate themselves from a single company crashing their portfolio value.
What are people afraid of right now? They're afraid of a single company crashing their portfolio value.
Why are people afraid of their portfolio value crashing? Because these 3 companies will fundamentally increase the overall risk and volatility of the index.
The problem is people equating S&P 500 with "set and forget" investment when that's never what it was. It's an index. You're not paying anyone to balance it with a particular risk profile.
There are indexes that invest equal amounts of money into all companies, so Nvidia doesn't dominate. Or you can pick low growth high dividend indexes to insulate against AI. Or just grab Vanguard LifeStrategy if you don't want to think.
The current situation is unusual. No index can handle all situations. Either adapt or use a fund that does the thinking for you, right?
People use the dollar in business becaUse its a stable currency.
If the US does something to destabilize the dollar, will economists be running around saying “the dollar was never intended to be used for that purpose!”? No.
It doesn’t really matter if the index “wasn’t supposed” to be something it became. The problem is the same. The only difference is who you blame.
The current situation is unusual and the standard rules handled it fine. For some reason they're changing the rules. That's not "no index can handle all situations." It's a deliberate, harmful change.
Why the special rules for SpaceX though? I still do not understand why the world’s richest man and one of the most valuable companies needs an exemption? Genuinely confused.
You forgot the part where NASDAQ already enacted a rule change that normally prohibits small floats from index inclusion (and thus forced purchase by index funds), which was normally 10% [1]. SpaceX is only floating ~4.3% of their stock and they're triple-weighting it.
Also worth asking what SpaceXLAI's plan is to make money. $22.7T of their $28.5T Total Addressable Market is... Drumroll... Enterprise AI! That's the plan, that's what we are investing in: spacex and Tesla and Twitter are all side shows, to sell AI. That's what everyone's absurdly overpriced forced passive investment is going to.
https://bsky.app/profile/segyges.bsky.social/post/3mnan7hr2j...
There is nowhere near enough burning rage for this absurd fleecing of the public.
I used it. It doesn’t work as FSD. A driver has to pay attention and intervene. Can’t sleep. Can’t read a book. Can’t look at the scenery going by. It’s still super neat and I like it. But it’s not FSD, and I suspect why fewer than 10% of tesla owners pay $100/month or bought it.
The problem is the stock market is more divorced from reality than we have ever seen. For instance, why does Tesla stock still sit where it is? How could it possibly not be going down at this point? So many undelivered promises, major setbacks in sales, massive decreases to their sales forecasts… literally nothing has gone well for them in years and yet the price is still outrageous. It really feels like I’m just out of the loop on something.
Jack Barker’s rather blunt monologue in SV about how the stock is the product is more true than ever. It felt very heavy handed at the time but it’s only proven to be more the case than I thought.
This probably illustrates my disconnect from reality, but I’ve never understood why a company would care about share price once they’ve left the door. I get that the co still owns its own shares and can conjure new ones for sale, but why would those very infrequent events interfere with the day-to-day operations. In my (wrong) eyes, it’s like pro-baseball players trying to increase the value of their trading cards via their participation in the game. The team doesn’t matter any more, it’s al about what the card owner wants.
Selling more stock is usually a lever a company can pull when they want. So even if a normal company in normal times doesn't have a reason to do so often, they can if circumstances change. Tesla and some other meme stocks have been extremely aggressive about selling more shares into crazy valuations, and have raised immense amounts of money doing so.
Plus as others have said, usually all of the decision makers have a bunch of stock exposure and will prioritize their own financial gains over pretty much anything else.
Company itself really shouldn't. Everyone involved in management from board to executives do. Board operates behest of stock owners, executives operate behest of board. Such to keep their job they have to do what stock owners want. And stock owners either want dividends or growth in some term.
> Board operates behest of stock owners, executives operate behest of board
These are often both weak signals, though. They'll govern very high level decisions, but all the day to day is inside the company. Just as I want a return on the money in my bank account (as I was promised) investors want a return on their money too, and as you say, the executives and board should care about making sure the people who put money into the company are getting a decent deal out of the arrangement.
People have always way overstated the power and scope of “fiduciary duty.” It doesn’t mean you have to redline your company at all times to maximize every single penny in the short term at the expense of all other considerations. That’s just a cultural thing we do in the US by choice
It is not easy to radiate heat in space. You need a significant extra mass budget to radiate heat from hardware that is easily cooled in less volume on the surface. These will also be too large of a capital investment to operate as disposable satellites at the bottom of LEO. They will necessarily be higher up.
Well, unfortunately, it's not such common knowledge that it would be considered sarcastic by default. I have learned to be explicit by appending "/s" or "/j" so it's clearer.
To quote a message I wrote on a finance channel on telegram:
The TAM for "enterprise applications" at 28 T sounds both too much and too little: by the time the tech (and/or overall economy) allows it to reach that number, that number itself will look unimpressive, and this kind of scale seems to be reachable with ground-based more easily than with space based (at current energy prices, even that TAM is only about 2% of being Kardeshev 1).
Feels like Musk did vibe-economics for "how big is the global digital economy?", much like the claims about factories on the moon making data center satellites looks like he prompted grok with "if I tile the moon with solar powered factories and mass drivers to launch them, how many TW can it launch per year?"
The world's GDP is about 100T. That would mean more than 1/4 of every expenditure in the entire world would go into buying AI or by AI providers into their consumables.
While I essentially agree Musk is BSing, TAM doesn't imply "we can actually get this entire market". The TAM for the food sector is *all food*, not what one particular alcopop manufacturer can sell: https://en.wikipedia.org/wiki/Total_addressable_market
AI today can't do all desk jobs, I don't know how far we even are from that given the spiky nature of ML, but it smells like this IPO is using that as the justification for the claim.
Do we know what the situation looks like with other popular indices such as MSCI World, MSCI ACWI, MSCI ACWI IMI, FTSE All-World, …? Do they have any requirement of 12 months of trading or of profitability or similar?
Very silly question but cant someone just spin up an index cutting out spacex? Like even an etf that is nothing more than an sp500 sans non profitable companies?
Yes that's definitely possible and will probably happen. The big hurdle is traction though. How many people will know about it and be willing/able to shift into it? A lot of passive investments are effectively locked in by unrealized gains or limited 401k provider options.
This kind of doesn't make sense. You don't park "money" "in" crypto. Crypto sits there, with its value set at the last sale price. There's nothing to stop the next sale price taking its value to zero without anything happening to real money other than some of it changing hands. It's not like crypto holders can sell $2.5T of crypto and plough it into equities, for a start some other investor will have to buy it from them for $2.5T and then we're in the same position we started in.
So the obvious thing to do, for someone that's got ~$3mm to play with, is to setup an ETF that is SP500 but with the old rules. If you can convince $40mm of other people's money to go into your not-specifically-Musk-less-but-just-happens-to-be ETF, they'd come out ahead.
One presumes it's because a huge amount of its revenue comes from defense contracts, which are haram. Here is n excerpt from the fund's exclusion criteria:
> S&P 500 Shariah Industry Exclusions. The index universe consists of all the constituents in the S&P
500 Shariah, excluding companies classified as part of GICS sub-industries 20101010 (Aerospace &
Defense), 40203040 (Financial Exchanges & Data), 40201060 (Transaction & Payment Processing
Services).
That is wild. Saudi Arabia which is governed by sharia law spends about 7% of its GDP per year on its military. I had no idea that ownership of defense contractors is considered haraam.
You raise an excellent point. I did a little bit of Googling and discovered:
> S&P Shariah indices ... are overseen by an independent Shariah Supervisory Board consisting of a panel of internationally renowned Islamic scholars. This board is facilitated by Ratings Intelligence Partners, a London and Kuwait-based Islamic finance advisory firm.
The only good news here is that the SP500 and wide market index funds like VTI are "float weighted", meaning they will only buy based on the dollar value of SpaceX stock sold to the public. The latest numbers are something like $75B for SpaceX, which is only something like 3% of the $2T valuation, so they will only buy a small amount of this (0.1% of the SP500 fund) because the total float for the SP500 is $45-50 trillion.
Still criminal, and also, anyone buying this individually is a fool.
This is going to be very... "interesting". SpaceX will IPO with minimal float, while at the same time forcing every index fund to buy a fixed percentage. A long squeeze, so to speak.
I can't picture any scenario where this ends well.
It's honestly blown out of proportion. S&P 500 allocation is float adjusted, i.e. the allocation is based on the market cap of the floated shares, not the total market cap. SpaceX float is ~4% at IPO, and at a $1.75T valuation that's $70B in floated shares.
SpaceX will be ~0.125% of the index. The actual amount of buying is in the low tens of billions, and given these are $30 trillion+ markets, this is hardly anything to fret about.
Cutting SNP500 from you etf portfolio seems the sensible choice now. On the other hand, things haven't been sensible for over a decade, and there's still no sign the insanity will stop. The market can stay irrational longer than you can stay solvent...
Oh, SpaceX already has that covered: thanks to the TX legislature, SpaceX shareholders cannot file shareholder lawsuits, you can only complain to the "Texas Business Court" or get binding arbitration [0].
Indeed. Everyone should be moving their funds out of target date funds right now and into medium and small cap stock funds.
It's quite sad that the pillar of American life that is the 401k is given to shady fund managers. The law should be that if you manage a 401k you must be a fiduciary. If that were the case then no one would be bag holding these fake valuations because they'd be liable for negligence. Right now they're just in on the scam.
If it's actually your 401k, sure you can. Just today I rebalanced my retirement funds away from large cap stocks to avoid this steaming turd that Elon is dumping on the public.
For what it's worth, I think anything selling energy or fertilizer which is not sourced from the Middle East is a pretty good bet right now. Depends on how the US/Iran conflict plays out, of course, but I'm not optimistic.
If you're truly convinced there's nefarious reasons for including megacap IPOs in passive index, you can always short the stock (or use derivatives) by the same amount.
I'm not sure you'll come out ahead. (Personally I don't get the outcry, except for nasdaq which has fairly stupid rules, delaying the inclusion of megacaps won't make the problem go away, but probably increase since the float will be massively larger). It's inherent to being a passive index.
Regular people want to invest so they can make money and companies want people to invest so that they can raise money. So pretty much everybody wants the 401k money to be invested in the stock market.
But the issue is that investing in the stock market is very technical, so some smart asses invented the index funds to make it easy for daddy and mummy to put their retirement accounts to work.
The index has safeguards in place to try and reduce its volatilty. So people are happy, cause they are investing in stock without having to look closely at what it is they bought.
But if suddenly some people change the safeguard rule, so that their buddy can dump their overvalued stock over people who think they are investing relatively safely, then it can be argued that there is foul play.
People are not finance specialists and they are heavily incentivized to buy index funds, so they need to trust that the people who are telling them to invest are not hiding things from them. If that trust is broken, lawsuits will follow.
It’s like: imagine you own a Toyota and have a maintenance contract with Toyota, and one day you have your car serviced and they tell you they changed the brakes. They tell you the brand of the new brakes and they tell you it’s fine while in fact, they put some cheap garbage that fail after 100 km of driving.
When the brakes fail and your car falls off a cliff, you go and see them and they tell you: “yeah those brakes were bad, but we told you we put them in, you could have looked up that these were bad, it’s all over the internet, so that’s on you”.
> People are not finance specialists and they are heavily incentivized to buy index funds, so they need to trust that the people who are telling them to invest are not hiding things from them. If that trust is broken, lawsuits will follow.
A "lawsuit" isn't a concern for the likes of Musk.
He's got the money to pay lawyers, politicians, and influencers. He's spread this risk around to the right people; if he goes down, they're going down with him, too.
At a certain point you have to start jailing people for long periods of time. I don't mean the Milken, Belfort, or Skilling treatment. I mean being placed away for 30+ years in medium-security facilities at the least.
> At a certain point you have to start jailing people for long periods of time. I don't mean the Milken, Belfort, or Skilling treatment. I mean being placed away for 30+ years in medium-security facilities at the least.
Bernie Madoff was sentenced to 150 years in prison, if that counts. But then he had committed a crime, which is the usual "certain point" we wait for.
> * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings
That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there.
> * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize
> * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble
OK? It could also mean there is.
> I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.
I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public.
Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox.
The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.
> Hyperscalers are in big trouble if the build out suddenly stalls.
How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).
You mean "Listen to [someone who started on Wall Street at Lehman Brothers, joined PayPal in its earliest days and worked alongside Peter Thiel and Elon Musk, and eventually became a venture capitalist in Silicon Valley] argue why AI probably isn't a bubble".
Funny how this different framing of the exact same person provides a completely opposite expectation of their incentives behind commenting on whether AI valuations are a bubble.
We don't let bubbles pop anymore. We print money and borrow from the future so that no one loses money on their homes and retirement accounts. The GFC changed the rules.
It looks less like capitalism and more like socialism for the rich, marketed as free markets.
Print money. Push most of it into cheap credit for giant corporations and asset owners. Let a little trickle into the real economy so ordinary people feel temporary relief. Then let inflation quietly do the dirty work.
The public pays through higher prices, weaker savings, and future debt.
The powerful collect the upside.
That is the game: privatize the profits, socialize the losses, and call it capitalism.
And all of this is legal under the disguise of "protecting the economy for regular folks", and they can keep doing it repeatedly.
It worked. The only people upset about it are young people who don't vote. If young people don't want a continual wealth transfer from them to the old, they need to start voting. That's been the case since 2008, and here we are a generation later.
People under 40 have much lower voter turnout than people over 40. 75% of 65+ year olds vote. Less than 50% of 18-25 year olds vote. I wasn't referring to children.
Old people will be the majority for the foreseeable future, though. To be honest, the only strategy that I currently see for young people is waiting and growing old, unfortunately..
Logically, it seems insane that people who live on other people's taxes have the right to vote. Officials, public sector employees, and anyone else who receives money from the government rather than contributes to it shouldn't vote.
Irrational exuberance rarely transitions to a rational drawn down. The minute the first selfish-actor flood-liquidates, everyone else will too. That's now runs work.
In my opinion the amount of money poured into these companies is the definition of irrational exuberance. And even if you want to call it dread, once they start to deflate people will panic and flee.
That's not the problem, the problem is when they take it out of these companies, where it goes after that is irrelevant. Once the exodus starts prices will plummet and lots of people will lose a lot of value.
> "Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
While this is factual, the world (and humans) haven't functioned this way since ... ever? It doesn't matter what you think logic is, if the people who are providing the services (teacher, worker, doctor, etc..) are illogical and you need these services from these people.
Because traditionally the pop is delayed while those who realized most of the gains attempt to offload the risk to other parties. Whether this works or not at some point it becomes an inevitable and self reenforcing feedback loop.
Just investing less in risky things on the run up means you personally perform worse so even in known bubbles you don't see reasonable slow downs instead of disastrous pops.
> traditionally the pop is delayed while those who realized most of the gains attempt to offload the risk to other parties
What? Source? Plenty of investment bubbles pop before the bag is passed.
This thread involves a lot of people looking at something they don't like and presuming karmic forces will give them what they deserve. There is no reason these companies, even if massively overvalued, have to "pop."
That's fundamentally different from e.g. the financial crisis, or the 2023 bank collapses, or even the dot-com bubble. Those did not have the ability to self correct. There was no slow deflation other than through a bailout.
> This is a wild thing say without any qualification
It’s really not. Bubbles are notable because most elevated asset prices slowly go down. And they have common characteristics that force the reckoning. Usually debt. Sometimes operational leverage.
I'm genuinely curious why you say this is different from the dot-com bubble?
As I see it, this is the exact same situation - wildly overvalued companies based on investor exuberance, the underlying business is not capable of supporting this kind of valuation. IPO tends to be the crunch point at which this overvaluation is exposed. Once exposed, the valuation correction spreads to other similar businesses quickly and the bubble pops.
What's the self-correction ability that AI companies have?
> genuinely curious why you say this is different from the dot-com bubble?
A lot more revenue. Dot coms were going public pre revenue. And Anthropic is profitable. Both it and SpaceX wouldn’t be dependent on further stock sales to stay alive—that lets them weather a downturn.
As I understand the situation, Anthropic is revenue-positive but not profitable. As usual, Ed Zitron covers this well [0].
As with the dot-com bubble, there is a lot of voodoo accountancy (and flat-out lies) about the actual situation here.
As I understand it, the basic problem is that the big three can't charge enough per token to cover costs because they're in competition with each other (and one of those is Google that can afford to buy market share using its other operating revenues), and the OSS/cheap Chinese models.
And this situation is unlikely to get better in the short term because building cheaper per-token capacity is very expensive and time-consuming.
> this situation is unlikely to get better in the short term because building cheaper per-token capacity is very expensive and time-consuming
They don’t need to fix it in the short term.
Look, this could be total nonsense. But what won’t happen is Anthropic or SpaceX disappearing inside a year. That was true in the 90s because the only cash flow going into those companies came from investors.
Agree, some of these are valid businesses. But they are also massively overvalued on that underlying valid business, because of investor enthusiasm. When the bubble pops they are going to have real problems because of that overvaluation. Hopefully they survive, as a lot of the dotcom businesses did.
I think the real bloodbath will be the second-tier businesses that are mostly reselling cheap tokens to a market niche with custom prompts, and also massively overvalued as "AI businesses". And that kinda mirrors what happened in the dotcom bust - all the overvalued "webscale" businesses that hadn't really worked out a solid model yet went to the wall immediately
OpenAI seems to have made debt-like commitments to spending on infrastructure. If those are indeed binding, they may have less flexibility than the others. (If Anthropic’s revenue growth stalls and its valuation halves, it should still be a going concern.)
If what you say is true and it predicts the future, then everyone would be selling right now. The fact is, no one knows when or if the bubble will pop, and we will only be able to say in hindsight whether your comparison is correct.
I said attempt to offload see mortgage backed securities for one such attempt.
The point is that nobody wants to be the first out of a hot market nor the last so that bubbles everyone knows are bubbles first hang on despite it being broadly believed to be so and then crash as people head for the exits.
Broadly people are taking on debt to realize profits that may not exist. Retrospectively widely acknowledged bubbles like every crash in the last century all popped im not aware of any big enough to cause a recession that petered out slowly. Since we don't need to look up 100 years of crashes together can you name some similarly large issues that were resolved slowly over time?
Once the liquidity is transferred, that's it? There is nothing there (datacenter in space, that dude is really smoking some serious stuff), so the money will be spent/transferred and then there is no revenue/new sources of money.
It's the same scenario of a ponzi scheme. Everything looks fresh and fine until everyone realizes there is nothing in there.
Not related - many robber barons went bankrupt in the severe economic crashes of the time, such as the Panics of 1873 and 1893. The Gilded Age continued despite bubbles popping.
Is there any definition of bubble that doesn't involve popping? That's literally the metaphor.
> We have no fundamental reason current valuations have to collapse suddenly.
I would agree, but i think that is just saying that the current situation is potentially not a bubble. Which may be true. We will only find out after the fact.
One thing I have come to realize, is that worrying about bubbles will keep you poor.
If everyone is in the bubble and it pops, everyone is in the same boat, so you’re not really going to be poorer than your peers by comparison.
If it’s not a bubble and you are wrong, you will fall way behind everyone else and just watch people get richer and richer doing the exact same thing you should have done.
Also, just because something is a bubble doesn’t mean it has to end in a devastating pop. Sometimes bubbles expand and then just get diffused. The exponential rise stops and prices plateau, but it just becomes a new normal and things stagnate for a while before resuming normal upward growth.
Ask Warren Buffet how concerned he was of "missing" on bubbles... He got richer than pretty much everybody else by just avoiding bubbles and then buying assets at fire sale prices when they inevitably popped.
Chamath says Warren Buffett outperformed the $SPX by 2 times pre-2000’s because he used "insider info".
Berkshire Hathaway completely exited its investment in Paytm (One97 Communications) in November 2023. This divestment occurred just two months prior to the Reserve Bank of India (RBI) initiating its strict regulatory and KYC-related crackdowns on Paytm Payments Bank in early 2024.
No, Warren Buffet became so rich because he was making deals to pick up stock at favorable prices the public didn’t have access to. You will not be Warren Buffet just by buying after stocks crash.
> If everyone is in the bubble and it pops, everyone is in the same boat, so you’re not really going to be poorer than your peers by comparison.
> If it’s not a bubble and you are wrong, you will fall way behind everyone else and just watch people get richer and richer doing the exact same thing you should have done.
I don't get? First scenario, you get richer vs. the average and in the second you gt poorer. So in total you average out? I don't see how not participating makes you poorer in average.
> Sometimes bubbles expand and then just get diffused.
That's not what a bubble is. A financial bubble is defined by the "burst" at the end.
Normal people generally won't be able to beat professionals in the "market timing game". So when Joe Sixpack decides to sell off his index funds with intent to buy back in at a lower price, he's usually making a mistake. Staying invested in the market is a better choice for most investors because being in cash is about -2%/year EV whereas being in stocks is about +6%/year EV.
The opposition you're talking of will hold no significant power in 2029. They currently hold a minuscule amount of power and this isn't going to skyrocket within 4 years. A meteor causing an extinction event is more likely and I don't think you're expecting that.
And significant part of those in opposition will jump the ship if they gain power. I think there is little hope for system to change unless there is total collapse and replacement.
Think about it: you have hundreds of thousands of pages of evidence that the hyper-wealthy may have trafficked minors across state and international borders. Only one person is in prison over it, and her cell gets upgrades.
35 years ago this would have been a slam dunk for the opposition party of any republic. Instead of standing ten toes down on it, opposition leaders are doing... what exactly? Going on with business-as-usual, for the most part. They should be attempting to add language to every single bill that comes across the floor to see more done. They aren't.
I think stock trading shenanigans are far lower on the list of moral outrages, particularly given Congress' predilection for insider trading.
Nowhere in history we had products as addictive as those. There are people making a career studying how to exploit people's weaknesses, to induce them to buy products.
Not really. Social security is a defined benefit plan that requires new payors to fund todays expenses. 401ks are a defined contribution plan. Very different.
SpaceX used its massive IPO and listing fees (and the prestige of being the largest IPO ever) as leverage. Index providers and exchanges saw financial incentives: listing fees, trading volume, data sales, and long-term revenue from asset managers. Reuters reported that SpaceX advisers contacted major index providers (including Nasdaq) to discuss early index entry, and that SpaceX was leaning toward listing on Nasdaq only if it got early inclusion in the Nasdaq 100.
The rules built to protect passive investors were waived:
> the illusion S&P is second guessing or reconsidering its plans?
There is no second guessing because no decision has been made. A consultation was put out. I’m expecting it will be adopted in parts. Like, the market hasn’t priced in a full rebalancing.
>Yes it can, since they changed the rules to force over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.
Why not just say SpaceX is being added to the SP500?
You can complain about the discretion to add it to the SP500. But that's irrelevant in terms of whether or not its "forcing" people to invest in it. Arent you upset people are forced to invest in Apple, Bank of America, etc.?
They should have to float on the market for a certain amount of time before being added to any index. This would reveal what the market value of the stocks actually is.
"Why don't you just say that this store is selling pants that smell of poop, it's irrelevant that someone pooped in them because they also sell other pants that no one pooped in. Aren't you upset that they also sell you pants without poop in them?"
All these things are apparently valued at trillions of dollars these days. Where's the trillions, or hundreds of billions worth in improved quality of life? What has gotten better other than the ability to produce more crap?
In terms of SpaceX (the space portion of it) they've produced the cheapest way to get any payload into space. If you pay anybody else, you will overpay drastically depending on who you want to take your payload into space.
In terms of AI, we've seen even here on HN everything from mathematical problems that remaind unsolved, being solved, mathematical proofs being used to disprove theories, heck we even learned more about alzheimers, new antibiotics, precision targeting in oncology, using AI to flag healthcare anomalies in imaging. The benefits are easy to miss, but they're snowballing into place, there's definitely an explosion of useless crap, but you have to look for the real things and you will come to find, that AI is giving us things we otherwise either might not have discovered or wouldn't have within our lifetimes.
I have yet to see an application outside of harnesses and LLMs itself where adaptation has happened on a larger scale. Devs are fine with babysitting their LLMs. People like to use LLMs to improve their mails and so on. But outside of that, the adaptation is not there yet.
Don't get me wrong. I love LLMs and use them myself. But the biggest gain for me is easier context switch and text manipulation. It's not the: replace X with a bunch of LLMs every CEO is dreaming of. So yes, you have higher productivity, but is the eval of those companies legit? x doubt.
One third of all software code is written by AI. At the frontier AI labs it's 80%+. It has completely upended the software industry. How is that not a massive adaption?
You couldn’t have picked a better argument to show how this bias is exactly what’s making tech people think this shift is ubiquitous.
“It works extremely well for coding, in which I am a domain expert, so why wouldn’t it work for all the other domains I absolutely know nothing about?”
ChatGPT has 700 million users. What do you think they are using it for? It's upended entire industries.
How many millions of emails do you think are composed using ChatGPT? How many legal briefs were reviewed by AI? How many businesses use AI generated art? How many kids do their homework using ChatGPT?
The GP is arguing that AI has struggled to replace humans, but in so many roles AI is doing the heavy lifting and humans are copying its output.
The entire education industry, so many students ask ChatGPT to help with their homework, and lots pass it off as their own work. Many students have quit going to office hours & tutoring, and ask AI for personalized answers instead. The education industry has no answer, and is struggling to deal with this.
The homework "help" industry (i.e. paying for answers) is dead. Chegg stock fell 99% because of ChatGPT.
Stock photography is rapidly dying, nobody will pay for shutterstock when ChatGPT can generate a passable image for free.
ChatGPT is killing studio photography, it can generate great looking studio photos for free.
Same with basic graphic design / custom art commissions.
SEO / copywriting has been almost fully replaced by AI. Companies no longer pay writers to churn out SEO slop, and now the web is full of AI generated SEO spam.
Customer service as a job is dying and is rapidly being replaced by AI chatbots.
You have no data to support what you're saying, you sound anecdotical, and on top of these flaws in your argument, you proceed to make a point mentioning "industries" that are neither formally upended, nor at all significant in the great scheme of things in terms of value produced or perceived.
I believe the education industry is fundamental and one of the most important industries in the world, but it hardly moves markets, nor is filled with high-paying customers.
On top of that, you are showing another stark bias in considering the US experience as the global experience. It is not, and education in particular works way differently, aka, it's not a business wild west.
Cognitive surrender in writing emails is another shaky ground: do you honestly think that AI's worth the tens of trillion the tech bros are claiming it'll be worth as a glorified email-maker?
I will add that my point still stands.
If you say this:
>>ChatGPT is killing studio photography, it can generate great looking studio photos for free.
Same with basic graphic design / custom art commissions.
the only point you're proving is that you don't understand shit about photography as a business, nor about design as a business.
AI is being rapidly integrated, for sure, but it has not upended those industries, and the average mediocrity it produces (because of its very nature) is not even close to replacing what you claim it is.
What is a larger scaler for you? What is "outside harness an LLM"?
What is _the proof_ if all the proofs are not _proofs_?
I don't babysit my LLM based services which are used by coaches and clients around the world. One of my LLM based solution get 30-4k daily hits and I have users coming back on the regular to use it. without babysitting, doing things that would take them hours of manual work and research.
I don't babysit the developers I work with and our clients, which both use LLM's themselves and at scale with their clients, serving all kinds of LLM powered services to millions of users worldwide.
You are not "seeing" the large adoption because:
- The technology is "a few years old" in its usable state
- The corporate adoption cycle is slow
- You have to understand the technology to use it in a good way, which most corporate devs and PM's do not
So it will take a bit for the "obvious" adaptation on large scale.
But you won't "know" when the large adoption happens.
Silent inference is growing every day, and that is what real adoption looks like - not an LLM being in your face chatbox, but running in the background, sorting, finding, fixing things, aligning data, figuring out analytics, tuning the ads, cleaning the datasets.
My understanding is that it’s better than doctors themselves. But it’s probably the same as with autonomous driving: the bar isn’t just “be as good as humans”, it’s “be flawless”.
It’s actually quite a lot worse than even doctors in training except for highly constrained experimental settings and a few very nice applications that are mostly too tedious/impractical for a human to do or are very basic detection tasks.
I am a radiologist and researcher predominately focused on AI.
I work with pathologists and radiology is way ahead of us with AI use in clinical setting (but still not very far). Only things that get serious use are lab-developed (ie not commercial) image analysis algorithms for very limited (tedious, error-prone and ultimately not that often used) biomarkers. Don't believe the hype.
You could also look at the market, one of the biggest players, Paige, was acquired for about 30% of the money they raised.
I don’t think so, not beyond the current trend in medicine which is going up anyway.
For some things, like 3D volume segmentation of structure or disease (e.g. CVA/stroke volume, cardiac muscle mass, iron quantification) the bottleneck is the time it takes so we currently use approximations like single longest dimension, circular regions of interest, etc. AI will dramatically increase accuracy allowing for more accurate treatment and easier large scale research with quantitative endpoints.
Other things people think of like detection of aneurysms, fracture, lung nodules are not “hard” but AI has already added and will continue to add the second-reader benefit which will reduce detection errors. For this category the clinical benefit is as of yet unclear and we know that increased detection does not necessarily translate into improved patient outcomes and can in fact make them worse from over-diagnosis which means investigation related harms and over-treatment.
We were already in a phase of “over detection” in much of radiology with advances in imaging technology so the incremental benefit of current AI remains to be seen and I personally think is going to be much more limited. I had a case recently where a 2 mm brain aneurysm was missed on 3 CT scans over 10 years but was picked up by AI so now is being followed annually. This is too small to treat considering the risks and a serious argument could be made that 10 years of stability is proof enough that this is almost certainly clinically irrelevant for this patient.
Far more interesting areas of AI in imaging are in acquisition of acceleration (i.e. the medical equivalent of upscaling) which can dramatically decrease costs and increase accessibility as well as analyzing imperceptible features.
It may not be a popular take here but in my opinion the future of radiology is like what we see in software engineering today - a skilled human equipped with AI will outperform humans without AI and AI without humans, the latter of which we are still several years away from prototyping due to various technical hurdles.
> in my opinion the future of radiology is like what we see in software engineering today - a skilled human equipped with AI will outperform humans without AI and AI without humans
I suspect this will be the case across the board. It's a useful tool, but it's just a tool. It's not a replacement.
A friend of mine, a dermatologist, told me that LLMs are quite performant for melanoma analysis. Based on their own statistics, LLMs are able to beat humans with ~10 years of experience in the field.
They will never beat the human instinct tho, but they can be great tools sometimes. Unfortunately, LLMs mostly produce garbage.
Whenever it comes to medical diagnosis I would caution anyone to be careful with what “beat humans” really means.
In real life pathology is a spectrum not a binary and physicians are not trained to be 100% accurate instead optimizing sensitivity and specificity considering pretest probability as well as the harms of overdiagnosis and under diagnosis for a given scenario.
For something like melanoma which is relatively easy to diagnose with a superficial, extremely low risk skin biopsy and where early staging dramatically improves outcomes you would want to design around overcalling (high sensitivity) rather than maximize accuracy given the significant harms with false negatives and minimal harms with false positives.
An AI may be more accurate at classifying melanoma/not melanoma but if it does not meaningfully improve on the clinical threshold of biopsy/no biopsy or result in less biopsies that accuracy is wasted and may even be detrimental.
Note: I am just using this as an example to illustrate the considerations.
Last time I checked thoroughly (roughly two years ago), AI (in the form of small ML models) mostly outperformed radiologists in areas where the gold standard is "one level" above imagining wise. By that I mean that you train a model to detect on an X-ray what would normally need a CT. Or train it to see on a non-contrast CT what would normally need contrast or an MRI, or biopsy, and so on.
Essentially the cutting edge reaches up to 99% of human performance on the task it is trained, which is good enough for triage but not for a final diagnosis. However, magic sometimes happens when you train a model to detect something, which you already know is there, on an examination that is cheaper, faster or less invasive than the human"gold standard". Conveniently, this dataset exists since it's common to first do a cheap examination like an X-ray, and then escalate if nothing is found (or if something is found that you want to see better, or a number of other possibilities).
Examples of AI outperforming humans like this includes AI detecting sacral fractures on x-rays better than radiologists (who normally take a CT to conclusively exclude it), detecting potential precursors to pancreatic cancer on non-contrast CTs (where contrast or an MRI is usually required) and detecting an occluded coronary artery on an ECG without the archetypical "ST-elevation changes".
So AI, as a general rule, doesn't usually match or exceed the upper bound of the "gold standard" medical performance. But it tends to carry the quality of the upper bound downwards towards the faster, less expensive and invasive methods. In some cases, like in the case of EKGs, that's huge. In some cases it saves time, in some cases it decreases miss rates from tired radiologists or triages their review feed. And in some cases it's not very useful.
LLMs doesn't come close to specialized radiology models at the moment, because LLMs are more about applying knowledge than creating new correlations. Of course that's also hugely useful, but that's a bit of a different topic to unpack.
With these kinds of things, I want to see comparisons to trained, alert humans. Cut out all the distracted, stressed, tired, incompetent, intoxicated cases from the baseline. That includes rushed doctors at the end of a long shift.
A self driving car doing better than a drunk on the freeway doesn't reassure me that it'll do better than sober me in a snowstorm.
Non sequitur.
The core idea is that if you have just self-driving cars you won't be trained enough to drive properly next time you're caught in a blizzard, because you never drove for the last 5 years.
I also question if the kind of person who actually drives while drunk - knowing perfectly by thousand of society inputs and peer pressure that it is wrong - will care enough to buy a self-driving car.
It doesn't, but I'm not going to trust my own safety to a self driving car that can only be said to be better than the worst drivers. It's a bad baseline.
> In terms of AI, we've seen even here on HN everything from mathematical problems that remaind unsolved, being solved, mathematical proofs being used to disprove theories, heck we even learned more about alzheimers
Sure but SpaceX can get you into orbit for $1400 per kilogram, and future projection and goal is $100 per kilogram. The competition is at $15,000 per kilogram. I think it's a no-brainer for anybody trying to get anything into orbit. Unless someone figures out superior tech that surpasses SpaceX, I'm just not seeing why anyone would spend more for less capable and costly rockets.
Doesn't SpaceX charge 2 to 3 times their internal cost to external customers? ISRO is still more expensive, IIRC they charged ~US$60 million (roughly $6000/kg) for the OneWeb launches whereas after the recent price hikes SpaceX is supposedly charging ~US$74 million on a larger rocket (~$4200/kg), but that's far from an order of magnitude difference like your comment suggests, which I assume would be using the $25 million they charge Starlink internally (IIRC ISRO's internal cost is much higher, around $40 to 50 million, but that's still not anywhere near an order of magnitude). Using internal cost from one provider and external price for another is somewhat misleading.
how many packages have you shipped so far to space? SpaceX could disappear tomorrow and most people wouldn't notice. Your satellite TV might get slightly more expensive. Those rare people that don't have LTE internet access and need starlink are exception.
At the rates you quote, $1 T (the size of the market) is 714,285 tons of stuff in the space each year. I don’t think there is enough space in space for that much cargo.
Although realistically this will be built from lunar materials, you still need to lift a lot of mass to build the necessary industrial processing and mass drivers to launch it from the Moon to some Lagrange point.
And there are many other useful space megastructures that can be built in space from common materials, like giant solar arrays beaming power down via microwaves: https://en.wikipedia.org/wiki/Space-based_solar_power
I guess for a trillion dollars vine can built Elysium. Generating solar power in space (vs. on the ground) makes as much sense as running AI inference in data centers in space.
On one order, correct, but it's still on the order of hundreds of millions to billions.
Also, keep in mind that a stock price discounts expected future cash flows. Is it likely that SpaceX will have a near-peer competitor within a few years? No, it's not, and that market share is being priced-in.
Is it likely that SpaceX will have actual reasonable demand? Their major customer is Starlink. How legitimately confident are we in the numbers with regard to price reduction vs creative accounting to offload costs to Starlink and subsidize the launches to appear to offer huge cost reductions?
If there exists sufficient demand for the product of space launches then it's probably reasonable to expect their to be a near-peer competitor soon, but that's only if SpaceX were to be profitable, which it isn't, even with the subsidization by Starlink on the order of many billions.
> If there exists sufficient demand for the product of space launches then it's probably reasonable to expect their to be a near-peer competitor soon
Space is not that easy. Even with unlimited money, it'll probably take 10 years to build a rocket like starship. Going from nothing to orbit needs a lot of money but more money doesn't make that faster.
There is about 3 chinese orbitallaunchers with some reusability support flying & about as much scheduled to debut this year.
But other than that, yeah - outside of China, progress has been horrendously slow & Blue Origin, the only other US company that demonstrated a partially reusable rocket just had a devastating pad explosion, destroying one of their 2 rockets and their only launchpad.
Were we struggling to do this before? Was the overall percentage reduction in costs? Was some other achievement held back because we couldn't accomplish this? What is now enabled?
> to get any payload into space.
A limited set of payloads into space. No vehicle can get "any payload" to space at a fixed price.
> The benefits are easy to miss,
You've listed a bunch of reasons to publish papers. What is the actual ground level change that's occurred? Are those antibiotics produced? Do they actually work just as predicted? Why is that first world problems are exclusively listed but basic problems like world hunger are never even approached?
Granted, I only skimmed some high-line numbers, but isn't their only profitable project Starlink? SpaceX is functionally a satellite internet company that happens to make rockets.
> What has actually gotten better in practical terms for the average American?
Starlink has made connectivity cheaper and more available. Earth imaging has made various food production processes more efficient. Weather forecasts have become more accurate.
If you’ve genuinely missed the massive economy that LEO has become, it will be a fun thing to catch up on.
> Earth imaging has made various food production processes more efficient.
I'm not even going to bother sourcing the fact that food prices have only massively gone up negating any gains in productivity. The average American struggling to buy basics like eggs and meat aren't feasting on more efficient food production.
> Weather forecasts have become more accurate.
I'm sure the growing homeless population is happy to know they can better predict the weather they'll be sleeping in.
This is all totally worth supporting a nazi billionaire
weather forecasts is really good right now (in my experience forecast for rain/cloud cover/wind speed at hour granularity is amazingly good) and earth imaging for food production has been done for decades. I do not think SpaceX has improved nor will improve on these.
SpaceX’s main customer is Starlink. With that in mind: if Starlink takes over all the ISPs in the world its market value should be comparable to Comcast - $89 Billion.
Do we apply a bar this high for any other company/job/business? Saving gov/tax money aka "billing NASA 1/20th what SLS does" doesn't count as worth it to you?
Reusing rockets reliably rather than "throwing them away" is a great achievement and I'm surprised people have to justify it on HN
Stock prices indicate the present value of all future dividends, so it's not about what has happened but about the risk-adjusted expected value of all which is to come.
What probability you assign to arrive at that expected value and how you adjust for risk is on you.
Sorry but SpaceX has done absulutely nothing for space other than take billions in GOV funding and never delivering what they promised years ago. Hell the only cargo they ever shipped was a banana...
They've shipped lots of satellites into low earth orbit, that's their starlink business and it's where all of the revenue in spacex comes from, and it is a good business in itself.
Comments like these make me feel like we're living in different worlds. I use LLMs multiple times a day and they've significantly improved my quality of life. They are also steadily becoming more useful over time (e.g. now solving math problems).
I haven't found anything out of LLM's that has improved my life. It was a fun little toy but could never find a use case. But clearly, your mileage varies greatly from mine. That's cool.
I just personally don't the use in more when what I think many need is less. But that comes from essentially this point of view - “Better than a thousand hollow words is one word that brings peace.” ― Buddha
I use LLMs daily, both as chat applications and "vibe coding".
I wouldn't say it "significantly improved my life" however. Everything AI has done for me right now is a "Nice to have" but it doesn't fulfill my needs.
It’s because people value different things. I could not care less if LLMs make me push code faster to prod. Couldn’t care less if they improve my emails grammar. Couldn’t care less if they crack one unsolved math problem.
Enterprises are paying API prices, which are ~9x the price of the plan for the same usage. A lot of people on the plans are not maxing them out either.
My wife was diagnosed with several chronic conditions in the last year. AI tools both diagnosed her before a doctor did (which helped us find the right docs to care for her by figuring out what to look for). One of her conditions (Mast Cell Activation Syndrome) comes with a ton of dietary restrictions. Its helped us immensely in planning meals and identifing food triggers. All of this would have possible with out AI as a tool but would have led to much more pain and suffering and likely taken much longer to figure it out. It's easy to dismiss (especially given the hallucinations) but it's been legitimatly life changing over the last year
- Significantly increased my productivity as a software engineer.
- Using it daily for Chinese-English translation. Significantly better than pre-LLM translation software. Also, great at teaching grammar, nuances, etc.
- General Q&A. Like "Googling" but much faster. This is probably the most common use case for me.
> - Significantly increased my productivity as a software engineer.
This is exactly the point that keeps coming up that folks are struggling to grasp, myself included. How are you measuring this? It certainly makes me feel productive, but I'm not sure I can confidently say it has actually made me more productive. It's made the easy stuff a no-brainer (e.g. boilerplate, simple logic) and the moderate stuff really hard. Never mind the hard stuff. Vetting the code has become a whole other job on its own. The only folks I've found who confidently claim it increases productivity appear to be online (and without evidence), because no one in person is willing to claim that and show it.
I've been able to build things that I otherwise would not have been able to build, in the free time that I have:
- a VST audio plugin
- a wedding website with RSVP functionality
- a relaxing game for my wife
At work, I've been able to build much more than I would have been capable of in the past. I'm a backend eng, and it allows me to build much much nicer frontends than I've ever been able to do in the past.
And before you tell me that the code is crap - it doesn't matter! It may or may not be good code, but it works and serves it's purpose very well. Anyways, I'm I'm not launching a rocket, or putting software into cars.
> It's made the easy stuff a no-brainer (e.g. boilerplate, simple logic) and the moderate stuff really hard. Never mind the hard stuff. Vetting the code has become a whole other job on its own.
Not everyone has the same requirements, skills, usage patterns, and outcomes. It's that simple.
I can agree with the skeptics that LLM generated code is usually crap. I rarely accept its output without significant edits unless it's truly boilerplate, and I want to avoid the need for that kind of code in the first place.
For me, the killer use case is debugging. I hate wasting time debugging something that should work except for mistakes, and now I do that probably 75% less than I used to because AI does it for me.
I don't know if it makes me that much more productive, but I certainly enjoy my work more not having to do as much tedious debugging, and it feels like I waste a lot less time doing it.
I've never been a developer. Dabbled in frontend web for a bit (HTML/CSS/JS, no large frameworks) and felt like if I really dedicated some time to learning how to code, I'd be pretty decent at it. It's always intrigued me, and I've always had an itch to build things, but just never found the time. I'm in marketing now - I own an agency.
Over the last 6 months since the coding models really began to step up and get good, I've built several dedicated apps to support my business:
-Profitability optimizer and forecaster based on unit economics and current ad efficiency.
-Creative strategy tool that ingests brand and product data and helps explore primary and secondary personas and emotional motivators.
-Reporting tool that processes natural language queries and connects to multiple data sources to fetch results. Can schedule reports to post directly to Slack or email.
All robust and hosted on Railway. Team members can use them. Clients can use them. OAuth via Google.
Would any of this have been possible for me before the rise of frontier LLMs? Absolutely not. Learning the frameworks alone would have taken me longer than it's taken to just... build. Rapidly build and deploy. Total game changer for me.
Oh - and I'm building a game on the side. LLMs know Godot.
I linked to an example in the comment. In that particular case, I'd say probably 10-20x faster. I do embedded, backend, web and mobile app development.
I also notice these things. Otoh i spend definitely less than 50% of my time typing in code so it is impossible that it gives more than 2x speedup. And sometimes i lose time babysitting and rewriting stuff so all in all it is kinda no productivity gain.
> Significantly increased my productivity as a software engineer.
You’re going to have to define productivity as it applies to software engineering. With LLMs we’ve primarily seen the number of PRs over time being discussed as a proxy for LoC, as well as the speed of bootstrapping a small project. None of these have a known correlation with economic output. They just feel good, to the programmer, their manager, or both.
> Using it daily for Chinese-English translation. Significantly better than pre-LLM translation software. Also, great at teaching grammar, nuances, etc.
Yes dealing with language is the one area LLMs are actually designed for. But what’s the TAM for machine translation?
> General Q&A. Like "Googling" but much faster. This is probably the most common use case for me.
And now you’re missing any kind of traceability for the information that you “learn,” since it all gets spaghettified and then recombined into a pile of plausible slop with no attribution. Where before you had to do slightly more work to find the information you needed, now it’s available faster but you’re at complete mercy of literally 3 American companies plus the CCP for the accuracy of that information. Most people somehow seem happy with this arrangement.
> You’re going to have to define productivity as it applies to software engineering.
I meant it in a colloquial way. I just get more done, faster.
> And now you’re missing any kind of traceability for the information
Modern LLM assistants provide sources and references. While it can sometimes be just "slightly faster", it can genuinely save hours of research on complex ones. Also the "slightly faster" can add up to hours saved with frequent use.
We have some exotic chicks the kids picked out, and 4 were going to die of brooder pneumonia.
An LLM correctly diagnosed it, and figure out that we could treat them with Nutri-drench Sheep Supplement, since Tractor Supply was sold out of the chicken version, and they are very similar.
Of course it then immediately recommended we use hemp bedding that would kill them a different way, but the saleswoman sanity checked all of the above,
100% survival rate.
Everyone’s thriving. Chickens would follow the medical advice again, I guess.
I used Gemini to fix my new boiler by taking various photos and asking it for help. It saved me a plumber call-out (this was a user error issue, nothing safety critical).
Gemini also told me about some obscure procedures to fix my wedding paperwork after it’d been submitted with typos.
> - Significantly increased my productivity as a software engineer
I don't understand this. It increased productivity of every developer in the western world, so it didn't really give you an advantage. Your output is more valuable, but your colleagues' output is more valuable too, and your competitors' output too, and so on. So you're doing more things at the same salary and it's not like your company or your employer is making more money than usual or awarding you more eoy bonus. If your "life-change" is "I'm writing more code" without any other advantage (and with the possible disadvantage of your role changing, or being at risk), why is it desirable?
From experience, whenever someone asks in that particular tone and is actually provided with examples, they proceed to bend over backwards to "prove" that it's secretly not much of an improvement at all/AI psychosis/a mirage/actually harmful/<insert other substitute for "I don't like it therefore you must be wrong" reason here>.
I asked - I don't have an opinion either way. I use LLMs, I just don't find them life changing, but I would never deny that in a world with infinite data something that can do a pretty good first pass at parsing and summarizing and organizing it with little effort on the creation end is a good thing.
Some guy vibe coded a tasks app client that I really like. Not life changing but I couldn't find one that suited my needs since de-iPhoning before this one.
It does have to be an LLM; when people talk about AI these days, they're talking about LLMs; that's the common framing of the discussion. Linking to unrelated ML to argue that AI has benefits is disingenuous.
Immediate medical and childcare advice from LLM are pretty life changing.
Interpreting reports, avoiding drug interactions, or knowing when to seek medical care. And before people object- I can literally use the same LLM my doctor does to check these things, without waiting 2 weeks for an appointment.
I helped my parents work through bacterial culture results when my dad was hospitalized with sepsis, and had them ask their doctor for specific follow up tests.
I rebuilt my gas furnace and fixed my dishwasher with AI as an assistant.
Those aren't the fun parts tho. My favorite is touring art museums ancient historical sites with an LLM guide. It can give me a short academic essay about every artist, painting, or artifact. It can pull out details quirky stories about the history that I specifically would find interesting.
I cant recommend this enough. Its like visiting with a 10 PhD docents in art history.
How do you trust a book, blog, tour guide, or art history teacher?
How do you trust the placards under a piece of art?
The short answer is you accept that it isn't perfect and move on with life. I have found multiple errors in all of those things. Human tour guides are especially the worst at making things up.
Part of navigating life is dealing with imperfect information and uncertainty.
Just like with a friend, coworker, or spouse, you use your judgment and track records to decide when to trust what is being said based on subject matter and stakes.
Domain matters. I have found it good at history, but less trustworthy in others. For examle, the llm gave me a bunch of bogus advice as I repaired my dishwasher based on weather models that weren't accurate. There is also a lot of bad information on Reddit and Appliance blogs. Repairman are almost as bad as the tour guides, willing to lie straight to your face. I deal with it the same way.
Because generally speaking people have a firm grasp on truth and lies are intentional, predictable, and rare. LLMs have a tenuous grasp on reality at best and make things up constantly.
I think it is a typical example of where N% (N tends to zero) of the population GREATLY benefits AI models, while the next bracket (casual users) enjoy some benefit, but the vast majority would not feel any difference if they lost the tech tomorrow.
Let me rephrase that to you: The vast, vast majority of people, even in the western world, even the white-collar part of the population, are not whales or power users of AI models.
I use ChatGPT daily. And I never spend more than $25/month. If I lost it, it would suck, but it would not affect my life significantly. I then see people spending $100 / day on Claude Code tokens, programmers in startups / tech companies rack up thousands a month in bills. These people are literally spending 100x more than me, a casual user.
Yeah, I suspect they follow some sort of whale economics - where a relatively small userbase (in the big picture) and providing them with a huge chunk of their revenue.
But still these companies are being valued as if they're some omnipresent companies which humanity simply can't live without.
The Grok app had over 100 million downloads in 2025, over 60 million active users, and generated $350 million in revenue. That’s a lot of people being forced to use it.
I don't know if its really improved my life at all. Sure I can put together quick and dirty single-use programs faster I guess, but I feel like losing that practice has actively made me a worse developer.
Even if they are, it still doesn't justify the ridiculous levels of overvaluation. They are not essentials and their consumer demand is extremely elastic.
So, let's see. LLMs made my overall coding output significantly faster, even factoring in review time and tech debt. My employer should technically benefit from this, but it doesn't really, because all its competitors use the same AIs and all their engineers increased their throughput in a similar way. So I'm not sure that I, my colleagues or the whole segment I work in really benefited from AI in any measurable way.
Clients - I don't see anyone delighted that apps are better, or cheaper, or more secure. If anything, I see more enshittification, more half-baked ideas and more fear that security is worse now that we let AIs write almost all code.
Employers - They didn't really sell more or expanded their customer base. They would have, if they had the exclusive advantage, but now everyone has AI. They can cram more features in their software quicker, but so can their competitors, and AI is not magically opening any untapped market. If anything, everyone is now doing the same thing - trying to get their software on the AI train, with mediocre results so far.
You - did you benefit really? The job market is shit due to the death of ZIRP, the nature of the job itself is changing and there's a lot of uncertainty around. If anything, employees are now laid off more, not less, and salary and bonuses are not increased in any measurable way.
It looks like to me that we have to dance this particular dance because if we don't do we're left behind. That's fine, it happens every now and then. It might even be that in the future we will have tangible advantages from LLMs - better automated health care, better learning opportunities come to mind. That has to be demonstrated. But now, in year 2026, what's one advantage of AI? Having less and pricier RAM? Being able (and expected) to write more code in less time?
Starlink a generational leap in Internet connectivity. The Starlink satellite constellation is over 10,000 satellites. It is hard to comprehend. Also, they will soon add mobile phone service. That will be yet another generational leap. I watched a (sadly) short YouTube video about the SpaceX factory in Seattle (area) that produces one Starlink satellite per day. That is incredibly fast. That alone sounds like a generational leap in satellite manufacturing. (Oh yeah, and they have a somewhat less technically impressive factory in Texas that produces millions of Starlink antennas per year.)
Final sad note about Starlink: It is helping Ukraine to win the war. It makes their mid- and long-range drones almost impossible to jam. (Most short-range drones use fibre optics these days to avoid jamming.)
Id be more enthusiastic if I could buy starlink at a valuation based on starlink. Instead we’re getting a shitsandwich of a combo stock with a pile of regulatory manipulation on top
Why is this comment downvoted? It is factually correct. The reason why Ukraine has such an upper hand in the last 3-6 months with mid- to long-range drones is access to Starlink, even within Russian territory. Russia does not have the same, so it is harder to navigate their one way attack drones.
Try to keep perspective, these valuations are just functions of the stock market the end result of some spreadsheet. They have nothing to do with quality of life. Why would you relate those two things in the first place?
They are fundamentally different, but people desire they be aligned. The public expects the economy to producing higher quality of life for us, otherwise what is it doing? And for whom? But whether it actually does so is a function of other things. That gap seems bigger than usual right now with AI and tech eating the whole economy.
It would be very nice if we had a system where the money was backed by some kind of consensus about quality of life. But what we have has more to do with compulsion.
The more dollars there are, the more deeply in debt we are. If these were interpersonal debts where we all owe the dollars to each other such that they go away when whatever promise is eventually kept, that would be a tight knit society. But instead we're all indebted to the banks, so instead we have a lot of collateral at risk, and a lot of uncertainty about whether it's a stable arrangement.
If there isn't enough money to satisfy the asking prices set by the owners of these abstractions, then we can always go deeper into debt until there is. Or we could have a debt jubilee and let the prices re-settle to something more in tune with reality.
1. Valuation is based on the estimate of future profits. It has absolutely nothing to do with what have already been delivered. It's not a prize, it's an estimate.
2. There's a potential to optimize a lot of economic activity in there.
Isn't that the market cap of the company? That doesn't mean the company creates trillions of dollars of value. It just means the number of shares times the last per share trading price is trillions of dollars.
One would assume that the "market cap" of the company is equivalent to it's *worth*. Asking how Anthropic is worth $1tn+ is a valid question when it doesn't do much, apart from the promise of making a large fraction of the world unemployed and the rest under the thumb of unethical American tech supremacy. It's arguably built on the largest intellectual property theft in the history of mankind. That's generally what people worry about. Whether that's "true" or not I guess is how you frame your world view.
High valuations and other people's wealth doesn't need to improve _your_ individual quality of life - just the quality of life of someone who's willing to pay and the participants of that system.
> Where's the trillions, or hundreds of billions worth in improved quality of life?
I think these IPOs are going to mint tens of thousands of new millionaires or something. That, in turn, will generate massive tax windfalls for all levels of government.
> other than the ability to produce more crap?
This is a big "other than." (And to be clear, the jury is still out on whether AI will let us produce more in the long run.)
If jury is still out on positivity, long term, of AI, I'd really like to see arguments for that. Historically all - almost? - technical improvements were net positive; even some blunders had upside. AI is dangerous, yes, but e.g. fission was developed for the bomb, and now powers significant numbers of households worldwide - the tech less than 90 years old.
I think this is the story of tech in general. In my life, I've seen 3 really big steps down for the middle class: 2001, 2008 and then covid. Basic necessities are expensive today - people point to high GDP but what I see is high prices and poverty. And Tech, we've built a dystopian surveillance state.
A shitshow for whom? I see it as extremely unlikely for the United States of America to not allow individuals to purchase things for whatever money they can pull together.
The only answer is to make it unacceptable socially, more costly economically (taxes, etc), or the third option which involves pitchforks (perhaps that also falls under "unacceptable socially") that I hope we can avoid at all costs. (is this the show you mention?)
Feels like folks used to understand the balance a bit better - but I think I made that up. This next governance cycle is going to be a trust-busting, wealth-confiscating one I think.
I think there will be a tremendous political opportunity in the next 6 months to capitalize on rage in cities against new tech wealth driving up housing costs.
Housing prices aren't going up. They peaked in late 2022. Boomers are a huge generation, with homes millennials and Gen Z can't afford to buy. And they are smaller generations.
Not for apartments / condos in Seattle. I looked today on Zillow and lots of apartment rentals advertised 2 weeks or 1 month free rent. Lets see what happens.
Quality of life doesnt matter. What matters is the choices people make to spend their money on. This is what drives profits.
If you are upset about people spending their extra productivity and labor hours on poision and mental laxitives, i would mostly agree. This is a failure of culture to adapt to distratcions and shiny objects
this sounds like a reddit comment too much. why would trillions of dollars improve your quality of life. a bunch of companies get investments from a bunch of VCs who took out loans... and that means your quality of life should improve?
And what's more crap exactly? it feels like your grasping at straws to take one set of things and associate them with others. yeah, lots of terrible products out there, lots of enshittification, lots of topics of discussion there. But AI and GPUs are being used in such a diverse way it is impossible to have one opinion on it all like how you're trying to.
I'm not even disagreeing (or agreeing with you), I'm just saying that's a lazy comment to make. if these companies making profits without paying taxes, that's a voter problem (not even politics, just people being shitty voters, self not excluded).
For everyone else who might think they have a better formed opinion on this topic, I only ask that you apply the same level of passion to how the US national debt is now 120% of the GDP. The government is fighting wars and printing money, devaluing your wealth, and indebting your country to previously unseen levels. At least the banks and VCs are using their money (unless they get a bail out again), not your actual tax money, and the tax money and wealth of generations of Americans. You have a president literally stealing billions of dollars in broad day light from literally you.
The stock market is just a game that rich people use to manipulate money. It is not a reflection of the real world. Consider for example Google, one of the companies with highest valuation in the market. If Google stops working now, the only problem we'll have is getting a few minutes back of our time. Nobody will have big issues in life because one cannot find a web page, view more ads, and watch silly videos! However they will swear that Google is the most important company in the world to justify the money people throw at it. I won't even go to Meta, which is like celebrating that people are using crack cocaine...
you can replace “google” with every company that exists or has ever existed so no sure what the purpose of your comment is unless you are pitching abolishing the stock market. google is what they are because they make shitton of money and will continue to do so (more and more) into foreseeable future. that is stock market, always has been, always will be
Raven, Raven.. that's for those who can borrow against that to know and you to likely never find out.
What you thought your life would improve? Didn't you hear, wages are only increasing, why don't you invest some of that sweet cash into @JumpCrissCross' fund, it'll be alright. What were you going to do with healthcare anyway?
My own lived experience tells me they deserve more.
The vast majority of people I've known who have worked for minimum wage were much harder workers and frankly just much better humans (who happened to have less privileged starts in life) than the vast majority of people I've known who are financially secure.
But even if you don't believe they deserve more inherently, it would still be dumb for us to continue to let income inequality grow at the ridiculous rates it has been over the last 40 years. This pattern never turns out well for society.
0. You are really trying to say that one group of people are “much better humans”…? I think people should fear this type of attitude. It _never_ turns out well for society when we go this route.
1. The federal minimum wage is not the solution to any of your complaints.
Nominal global financial wealth is about $350 trillion. If you include real estate global nominal wealth is about $600 trillion.
A good portion of that[1] is what alot of people might call fake money--valuation inflation, etc. And global wealth, even just financial wealth, isn't quite as mobile across borders as one might assume. So marshalling a trillion dollars stateside is gonna make at least some moderate waves. Still, in the grand, global scheme of things a trillion dollars is a rounding error. A trillion isn't what it used to be, and there's trillions to be had even without any realized productivity gains from AI.
[1] I'm no financial analyst, but judging by the last few recessions and the overall trajectory over the past 30 years, I'd ballpark at most about 1/3 of that to go up in smoke if we had a severe downturn tomorrow. It's not all fake money. The whole world has industrialized over the past 30 years on a scale that is still unfathomable for most people today.
Maybe to counter some of the apparently widely expected doom and gloom:
- bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
- large scale infrastructure spending tends to be really good for economies. These three companies are creating lots of jobs that are mostly related to construction, energy infrastructure, hardware spending, etc. That's a lot of money flowing to suppliers and regions where that spending happens.
- While overly pessimistic sentiments about AI and space companies are widespread they aren't much more rational than the overly optimistic ones. The realist scenario could actually be that, AI and especially Agentic AI is already quite useful and the total addressable market for that is obviously larger than it is today. The question is how large. Likewise, dropping the cost of launching stuff into orbit by one or two orders of magnitude, should create a much larger market for launching stuff there. Including possibly some AI relevant compute.
The valuations of these companies are probably on the high side and I'd expect post IPO share values to drop quite a bit and would not personally consider buying anything until after that happens. But that won't necessarily trigger a stock market crisis or a collapse of these well financed companies. All the spending these companies are doing is very real and the profits of their suppliers are going to be equally real. So some of those share value losses might be offset by gains for other stocks and economic growth. The stock market and economy aren't zero sum games.
However, there are worrying macroeconomic trends happening at the same time (Iran conflict, Ukraine war) that are disrupting global markets already. But you could argue that dumping tens or hundreds of billions into e.g. energy infrastructure and data centers isn't the worst way to counter those for a country like the US. The big picture might actually be pretty positive. Especially if we can dodge global economic misery via a prolonged Gulf conflict that at this point seems to serve no point whatsoever for anyone except perhaps Israel.
I have no crystal ball, but I feel uneasy when they change basic rules about indizes right before these IPOs. There are a lot of retirements on the line just by this fact. Maybe big tech gambled too close to the sun and found a way out? Whether something pops or not, it leaves a bad taste in my mouth this can be done so easily, don't you think?
This is it entirely. I don't really care if the pessimists or optimists or somewhere in between ends up being correct. What possible reason is there to change the rules around the indexes unless these companies and their backers know that time in the market is going to expose that they're overvalued and they want to force someone else to be holding the bag when that happens.
> There are a lot of retirements on the line just by this fact
1) I would expect anyone close to retirement to have a fairly balanced portfolio.
2) if they don't include SpaceX and the stock does >10x in the next year, they'll end up doing terribly on the benchmarks. SpaceX is big, but if they invest early, it won't be a ridiculous % of the portfolio. Even if one overpays by 2x, since it's under .1% of the total portfolio. If it went to zero nobody would lose their shirts, they'd lose <.1% of their portfolio.
I think so too I’m just worried about how unequally these gains will be distributed, for myself I am quite pessimistic thinking that all these gains will not benefit my life, if at all it will move the needle more towards making my expertise and skills easily replaceable by switching human capital for agentic capital. So yeah really happy for Musk to finally make his one millionth million dollars but personally I’m middle aged and still struggling financially wondering if I can ever live comfortably or retire.
> when they are loudly and widely proclaimed to happen any minute now
Thats not true. For the dotcom bubble people loudly and widely proclaimed them for a couple years until the narrative changed to "I guess this time is different?" ... and then it popped.
> bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
Is that true? It seemed to me that the most common opinion before the recent Chinese real estate crash was that it was a bubble; architect friends of mine who worked in China said the government had no doubt prices were unreasonably high; the thing they remained hopeful about is whether a soft landing was possible. Similarly it seems like it was by no means an uncommon opinion in the Japanese asset bubble, NFTs, beanie babies, and even the dotcom boom that this is (to use Greenspan’s phrase leading up to the dotcom bubble) “irrational exuberance”.
I also think its hard to know when it will pop. The Chinese real state bubble you are quoting is indeed a very good example. Everyone knew the prices were super high but no one really knew when it would blow. The state had a problem and they knew they had to stop it eventually. After/during the covid pandemic the state decided to start a slogan "houses are for living not for speculating" and they started to set redlines for leveraging and developing. If you know how financing works in china you know many of it flows through the state and related companies and financial structures. Then also when one of the biggest developers in the country blew up they left it to blow instead of buying it. They essentially popped it with policy.
So many would say the saw it coming but the truth is only people with inside info really knew when it would happen for sure.
Same happens today. Capital is being heavily allocated towards AI inference and infra because of the promised productivity. Nobody knows if its early or late and also nobody knows how will the state react to a possible bubble exploding. Some people would say maybe AI is too big to fall already and its better if we save it when it falls. Some people would say its better to let it blow up but again nobody knows what will truly happen until we get there.
> large scale infrastructure spending tends to be really good for economies
All infrastructure is not created equal. It requires a lot of mental gymnastics to argue that datacenters are public good with net positive externalities.
Actually, you could argue that these are anti-infrastructure since they strain the electric grid for everyone and reportedly make the surrounding area unlivable with noise pollution.
Huge data centers and energy infrastructure projects mean lots of potential for local businesses to benefit, employment opportunities, etc. These companies are raising an unprecedented amount of funding and are looking for places to spend it.
With the right policy and legislation, this level of investment should be welcomed rather than opposed in most sensibly run places.
For example California and Germany have a lot in common when it comes to the locals blocking all forms of large scale infrastructure for mostly selfish reasons. Both places have broken energy infrastructure, high energy prices, high taxes, very bad roads, etc. Both have decades of backlog in terms of outdated infrastructure in need of major upgrading/fixing. Everybody is wringing their hands about fixing these issues because there is no money and tax pressure is already too high.
And here are some of the wealthiest companies in the world looking for places to spend their many billions. Surely, that's something that could be mutually beneficial. All states need to do is set some sensible terms and conditions for this. But instead you get people campaigning against this. I really don't get that negativity.
Anthropic at $1t for an IPO vs Google at $23b in 2004 sounds insane but Google's revenue at the time was $2.7b while Anthropic's already at $47b, so a valuation at about 20x vs 10x revenue. Anthropic also has very high revenue growth (50x since 2024), it doesn't seems quite as insane as it could be.
If you are growing revenue at a high rate then taking profit is a misallocation of resources. That is short-term thinking. It is much better to reinvest in revenue growth.
You can take small profit now or much larger profit later. Insisting that companies need to be profitable even when growing revenue rapidly is failing the marshmallow test.
If you give me $100, I will give you back $101, funded by equity raises.
Very high growth, very high revenue, huge customer satisfaction.
We hope to be profitable one day, already foresee a mechanism to double profitability per transaction and also double the number of transactions our customers perform.
Now let’s see you do this with 40B. The f you can do that I will be intrigued, since it sounds like you solved a bunch of complicated economic problems.
But we don't have visibility on the COGS until they IPO and file, right? So where is all this premature judgement coming from about their unit economics?
(not pointing the finger only at you, at least you identified that gross margins is the correct thing to look at rather than net profit!)
I think a lot of us are calling it out because it's a contrast to SaaS/ads businesses where incremental goods sold are practically free compared to R&D, so spending can be looked at as one-time investments. There's very little additional COGS per additional customer in those businesses, so the default assumption to treat AI like other tech businesses has a blind spot.
> But we don't have visibility on the COGS until they IPO and file, right? So where is all this premature judgement coming from about their unit economics?
It's the lack of visibility that causes the judgement; Were the numbers good, it's quite unlikely that Anthropic would be so reluctant to share them.
Were it just Anthropic doing this, it's not much evidence. But it's EVERYONE that obfuscates their numbers, even the publicly traded companies.
Why would Amazon and Microsoft obfuscate the revenues and costs of their AI products? Even their cloud numbers are less clear than desired. And beyond those two, why would the datacenter companies obfuscate their numbers, when everyone desperately needs them to raise debt and investment to build more DCs?
Pretty much the only company showing clear numbers is Nvidia & GPU orders. But immediately beyond that, it's all obfuscated. How many GPUs are sitting in datacenters? They ain't telling.
Isn't it illegal for publicly traded companies to hide such information from their shareholders? What do you mean by "obfuscated"? The numbers are disclosed, but you think they're unclear somehow?
But what they can (and do) do is structure (in the not financial jargon sense) the reports such that the given datapoint does not exist individually.
E.g. If you want to hide AI revenues or costs, the SEC won't let you just _not report them_, but you can just group the AI revenues with the SaaS/Cloud numbers under a new division, and report only the combined figure for that division.
This works especially well if the grouped components already fluctuate a bit, so one cannot simply substract known SaaS/Cloud numbers from the new total.
I buy 3. But 1, 2, and 4 rely on models continuing to improve at the same rate, such that you need the latest version to stay competitive. At the cut below frontier models, there's already robust competition between open source models, cheaper providers like Deepseek, more local AI alternatives, etc.
I think the case for the unit economics being fine starts to fall apart if you can't charge a large premium for your best in class model.
"Best in class" is a broad definition. Anthropic can easily charge a large premium for their "best in small class" and "best in medium class" models, for any given definition of "small" and "medium"
Inference has dropped by like 75% from a year ago. While anthropic does offer more tokens now for the same money, the value of the business is based on an expectation of future profits. There are dozens, if not hundreds of examples of companies being valued this way.
You could be right but the unit economics matter to this business in a way they don't for a SaaS or ads business, they're not free and you can't just point at revenue.
If a system can perform or positively augment the work done by a human, especially knowledge workers, then it’s got value, it’s just quite hard to put a finger on what the extent of that value is even now, let alone next month.
That's not how classical valuations worked though. I was taught the rough shorthand for valuing a company was profits / real_interest_rate, treating the company like a perpetuity. Revenue ain't in it. Now we have a bunch of "We'll make it up on volume companies!" like https://www.youtube.com/watch?v=CXDxNCzUspM
> Doesn't inference have very good profit margins* but all the losses come from training?
There is no source for this. Amodei just pulled a hypothetical explicitly distanced from Anthropic out of his ass and kickstarted some citogenesis when people half-remembered that number and started quoting it as truth.
The only material claim of Anthropic is that they would "turn an operating profit of $559 million in the June quarter ... The company might not remain profitable for the full year as it plans spending increases due to its vast computing needs." with an explicit disclaimer that: "It is unclear what accounting methods Anthropic has used to book revenue and costs, as the company isn’t yet required to follow the financial-reporting requirements of a public company."
This is the exact same quarter where xAI is giving them deeply discounted compute, as such the numbers cannot be projected out to the later quarters once Anthropic has to actually pay xAI for the compute they use.
Finally, there's the reality that were the revenue numbers any good, Anthropic would just publish them and leapfrog OpenAI. That they do not provide clear GAAP numbers suggests the numbers are bad.
I don't know if it is a chess move but Elon certainly will take every possible opportunity to fk over Sam. Have to admit watching these two sociopaths duking it out is somewhat entertaining.
What’s defensible about Anthropic’s revenue? It seems like OpenAI and others are equivalent. Open weight models are catching up. Google has ads networks, video platforms, and so much more.
I am skeptical that Anthropic and OpenAI can defend their dominance for long enough to make meaningful gaap accounted profits
Anthropic seems to have clawed its way to being the best AI and charging for itself. Microsoft had to slash the Anthropic budget… which it exceeded while being the exclusive host of OpenAI.
Google seems to have a good B2B and internal leveraging AI to make $. OpenAI/Microsoft seems to have squandered an early product lead.
And then you have the Muskiverse, where we have an rocket ship company that buys surplus cyber trucks, operates a space ISP, an AI company that produces virtual fetish porn and makes money renting GPUs to Anthropic, a rando dying social network and a tunnel company to cock-block public transit.
I may be underestimating the market for AI anime porn, but I think Anthropic is probably the best in class product right now. Google and AWS are probably the best positioned sellers of AI. SpaceXAI is the dark horse because they are likely enriching the dear leader more. OpenAI is fucked.
> an AI company that produces virtual fetish porn and makes money renting GPUs to Anthropic
Whatever Anthropic is paying is too much, since it means xAI will get to observe Anthropic's software, weights and operations in detail. It's probably contractually prohibited from doing so, but I doubt that would stop Musk, given what's at stake.
Anthropic is profitable unlike OpenAI though. Sure they'll owe a lot of money for probably decades, but if they remain profitable moving forward, it will be worthwhile.
That profit figure is a pre IPO marketing claim, not an audited and GAAP accounted number. And there is already a lot written about how Anthropic exaggerated revenue compared to OpenAI.
This seems like it's because openAI actually partnered with Microsoft and has to give them 20% of their revenue. Anthropic isn't partnering with their cloud providers so it makes sense to me they count top line revenue and then give Amazon payment as an expense. Also the numbers seem pretty minor compared to anthropic $49B run rate. The article mentioned an openAI payment of around $500M.
The question still remains whether they will be defensively profitable when things settle down.
I don't think open weight models are likely to overtake or match frontier models in the next year or so when it comes to doing the most difficult tasks, but I do expect a lot of people who are currently funneling wheelbarrows of money to Anthropic to realize that they can achieve the vast majority of things they are doing with LLMs just as well with much cheaper open weight models.
They will defend it the way any good monopoly always does: buying the competition. Case in point is Facebook: it is just a social network, the way they really stay on top is buying other companies and paying for people to spend even more time on their properties.
They bought insta and WhatsApp but at the time neither were really social networks. Insta was a popular filtering app. WhatsApp is just recently turning into a social network with their status updates.
At least on SpaceX the float is really low. The Market only needs to "swallow" ~$100Bn in volume of shares (across the 3), which the NYSE does _daily_.
the really interesting thing will be how much will other stocks go down because the passive dollars are chasing the new shares and have to sell to rebalance?
So they're not just racing to gain dominance in AI, they're also racing to IPO before the music stops?
IPOing and getting a bunch of cash, even if your stock subsequently suffers in the crash, is a lot better than being unable to get that capital infusion before the house of cards collapses.
I don't think OpenAI or Anthropic are predicting that the AI market is going to collapse. In fact, I think both are bullish that the public still isn't pricing in exponential growth.
I think what is happening is that OpenAI is racing to IPO before Anthropic because their growth isn't as impressive. If you are the weaker company, you should IPO first to lock up the cash.
I can’t imagine them actually being bullish about exponential growth, when both seem instead to be stagnating. I’m more inclined to believe they’re just maintaining a level of hype in public because that’s what you do.
They’ve claimed a big revenue run rate for this quarter. But it’s non-GAAP, so you kind of have to assume shenanigans. Earlier this year they were telling a court their revenue was like 1/4 of what they had told the public. I consider the number they came up with when they had to worry about committing perjury to be more trustworthy (because I’m a pill), so that would also indicate shenanigans. My guess is they are inflating that revenue run rate figure by booking token pre-payments from enterprise contracts now instead of spreading it over time as GAAP would mandate. And at the same time their big enterprise clients are talking about scaling back their usage.
So we’ve got a combination of signs that they’ve been inflating their revenue growth, and signs that their customers are losing their appetite for contributing to that revenue growth. I suppose it’s not a slam dunk, but it feels to me like as strong an indicator as one could hope for a private blitzscaler startup like this.
Oh, to be clear, I'm not saying there is evidence they're all a-okay. I just hadn't seen any evidence that they were stalling out. (I have for OpenAI.)
"Although the company has generated substantial revenue since entering the commercial market—exceeding $5 billion to date—it has nonetheless had to raise more than $60 billion in outside capital to fund its operations".
The AI market might not collapse but the stock market could! Even if the AI companies only need to downgrade their investments and a healthy correction is underway, a fire sale of AI-related stocks will bring the stock market to its knees.
I don't really see this happening in the way that most people are envisioning. It's clear that Anthropic and OpenAI have found product market fit. They've gotten companies hooked and personally I cannot go back to the old way of coding.
However, I do see a bit of reduced demand for hardware and datacenters which could reprice these companies to more sane multiples. There will be winners and losers.
But will you need overpriced Codex and Claude? Most business code is crappy SaaS and glorified CRUD apps & I can build those with Sonnet / DeepSeek just fine …
Short term, nations with a high rate of white collar employment and fewer social services will suffer greatly.
Eventually, and likely in the lifetimes of most people living today, we would have to see something akin to universal basic income (UBI) that covers the necessities in order to stave off massive civil unrest.
If the white collar labor of human beings can’t compete with the output of AI, we either all become blue collar workers or we re-invent the concepts of work and play.
I’m not aware of any existing or proposed economy framework that adequately accounts for the automation that is nearly here at scale. We are not just automating away jobs - we are automating away the value that human beings have within a productive community. Before the mass starvation will come the mass suicide. Our culture teaches us that a feeling of self worth is derived from our perceived productivity. If we cannot feel successful, we may lose our wills to live.
> Perhaps they’re afraid announcement would trigger divestment
S&P don't get a choice around whether they announce their methodology or not.
That said, the rule change at the NASDAQ 100 doesn't seem to have impacted pricing or allocation. I can't imagine that many people are that concerned about this. (I posted the public-comment request from S&P to HN [1]. The response was crickets.)
It's worse for the new investors. (If it crashes.) It's great for the old investors. They got an opportunity to sell if they wanted. If they didn't, they still own their shares, except in a company that has that IPO cash sitting in its account.
I'm not sure how long we can continue being negative about these AI companies. This idea that there will be a crash has often burned the bears in a way that has become an Internet meme.
In reality, corporations as a whole are seeing record profits continuing through 2026. Whether or not the average person is doing well is pretty irrelevant to the stock market: if companies are increasingly profitable, stocks go up.
Everything I hear about Anthropic points to a company that is actually closer to profitability and possibly already profitable, unlike many of its other peers.
We don't really look at YouTube as a failure and that product was unprofitable for many years. Nobody thinks the Uber bubble is going to burst even though it has never made back its investment money.
I think OpenAI is undisciplined and poorly run hence the insane burning of cash. Sam Altman is a terrible CEO and a conman. Anthropic is run by legit people.
Companies like Google, Microsoft, and Meta face essentially no negative consequence for burning cash. They have no urgent need to be efficient about their AI investments, even if they could be.
SpaceX is of course not profitable and has a lot of baggage but they still have a major asset, which is that Starlink prints utility company levels of money and is expanding both customer base and profit margins rapidly. Are they overvalued? Yeah, of course.
People keep predicting "house of cards" and keep being wrong. AI bubble was supposed to burst as far back as 2023. When was the last time since 2009 there was a $500+ billion tech valuation that lost 90% or more? After a certain point , 100% market penetration is achieved and these products become mainstream and profitability follows. See Uber and Tesla for examples.
The old saying goes, the market can remain irrational longer than you can remain solvent.
I’m not necessarily expecting a crash any time soon. (But we average a major correction, what? every 8 years? So if you keep predicting one long enough you will eventually have been right all along.) But I do feel comfortable saying OpenAI and Anthropic are overpriced. For more or less the same reason Cisco was overpriced in the late ‘90s. It’s not that what they were making wasn’t valuable; it’s that we got out over our skis a bit over how much of it the world could actually manage to consume in the immediate future.
> After a certain point , 100% market penetration is achieved and these products become mainstream and profitability follows. See Uber and Tesla for examples.
Groupon got to pretty much 100% penetration, still crashed and burned right after IPO. I think Zynga followed a similar trajectory.
> people always think everything is fine ... until it isn't
History is also replete with people constantly predicting collapses that don't come. Timing the market is very hard with numbers, it's total nonsense if one is just going off vibes.
Anthropic, SpaceX and OpenAI are not banks. (Also, we had the largest bank runs in American history three years ago. The ordinary American barely noticed.)
And these equity-investors, do they use their own money to buy the (presumably non-voting) stocks?
Cause if that's the case, I see no reason for a government bailout should things go south. Nobody's pension would be affected by some private investor losing money on a bad investment.
But if that's not the case, then someone somewhere along the chain is acting as a bank, subject to a vibe-driven run.
> these equity-investors, do they use their own money to buy the (presumably non-voting) stocks?
Yes [1].
> Nobody's pension would be affected by some private investor losing money on a bad investment
...pensions also invest in the stock market.
> if that's not the case, then someone somewhere along the chain is acting as a bank, subject to a vibe-driven run
You're confusing deeply unrelated concepts. Whether or not someone who loses money is politically sympathetic has nothing to do with whether they're at risk of a bank run.
I made no mention of anyone being politically sympathetic or otherwise. A private investor is _private_ and thus not subject to a government bailout. The argument for government bailouts used to be that "grandpa would lose his pension", I merely stated the terms that would make this non-applicable.
If pensions invest in the stock market, then they are de-facto acting as a bank. And last I checked, in the land of the free, you get to withdraw your 401k should you vibe with the decision to do so [please don't do this based on this post alone].
If note the dotcom boom lasted from about 1995 until 2000. Housing bubble longer. Theres no time table on when the bubble bursts, and the web didn’t die and neither did housing when the burst happened. It is just a reset and consolidation of overtly excessive speculation. It’s not like the bust leads to an end of civilization.
Net buying of corporate equities by American households, trusts, funds and non-profits has averaged $660bn per year for the last few years [1]. $200bn is not fundamentally a stretch for the American equity markets, let alone capital markets more broadly.
30% above the average. Households bought $1.6 trillion in Q3 of 2025, for example. (Foreigners bought a further $650 and $700 billion in Q3 and Q4, respectively.)
Everyone knows one is stock and the other is flow. It doesn't mean that we can't measuring the ratio between them. Actually, measuring ratios between "stock" and "flow" values is one of the favorite things analysts and economists do! (e.g., rent vs house price, P/E, fixed cost vs marginal cost...)
There is even a name for marketcap/GDP, Buffett Indicator. And historically the current value is very high.
> A third of all spending is not fundamentally a stretch?
Where did you get spending? That's net buying of stocks by non-financial Americans. It's the new money that has, on average, gone into the U.S. stock market from that section of investors every year. A third of it going into these new issuances doesn't need to break anything.
Dumb question here, but would it necessarily mean the other stocks they might've bought (i.e. the rest of the market) will not get the cash infusion and will thus likely drop in valuation?
> would it necessarily mean the other stocks they might've bought (i.e. the rest of the market) will not get the cash infusion and will thus likely drop in valuation?
¯\_(ツ)_/¯.
Almost certainly, to some degree. But that doesn’t mean anything has to drop. Just not rise, or not rise as much as it would have. Or potentially some other company that would have gone public or sold shares doesn’t do it now.
> Firms in the broad Russell 3000 share index have a total market value of $79trn
I sometimes try to get people to worry about the catastrophic state of American public finances by pointing out that the net national debt, including unfunded liabilities, is estimated to be $175T [0]. The government could appropriate all the equity from the top 3000 largest companies, and also the entire real estate market, and it still would not be able to pay its debt (RE market is $55T).
The $175T number is unfair because it treats Social Security and Medicare/aid as a liability instead of the service that they are. You might as well say the US is in infinite debt, because we'll always be paying something for our military every year, so infinity years * any dollars = infinite debt.
Also: All of those numbers you use to scare people are way, way off.
The NATO treaty says that we have to maintain our ability to resist armed attack, so there is some minimum. And we’ve made public commitments to spend at least 2% of GDP (though that isn’t part of the treaty).
Surely NATO has enough competent people to know that the biggest and only threat remains the USA and pretty much any othed conflict is a direct result of provocation or invasion by the US, right? Or do we all watch Jarhead 2-5 on repeat until all we can say is OORAH
Germany is in the middle of a massive military build up because the primary threat they’re concerned with is Russia and they’re worried that the US won’t back them up anymore.
SS and Medicare aren’t debts either in that sense. Congress can reduce benefits if they please.
In Flemming v. Nestor SCOTUS ruled that SS benefits are not guaranteed contractual rights but are instead statutory entitlements that Congress may modify or revoke.
Including all of the Social Security obligations for the current population is nonsense. For one it is money that will be paid from now for another ~60 years, and for 2 it's something that probably will just get cut as the trust fund starts getting into dire straits. It's not really an obligation if it's one act of congress away from being fixed (and without doing something like a debt jubilee that would destroy the dollar).
The rest of your article is complete bogus and the economic equivalent of climate change denial.
This misunderstands the power of monetization, or mistakes "dollars" having some kind of fixed "value." They do not. Whether one agrees with that or not, thinking of this as a "debt" problem where a hypothetical move is to appropriate equity- setting aside the fact that equity ALSO is not in a fixed unit of measure- anyway, thinking of appropriating equity to solve a public debt problem is a category error. That is how accounting works for business structures that exist within a monetary system but NOT for government and currency printers that define the monetary system. The MMT people are right about this. Public debt is a measure of private sector wealth. That is how the machine works.
The U.S. Treasury publishes a daily total of the national debt, which as of May 2026 was $39 trillion.
a little less than half of the total national debt is owed to the "Federal Reserve and intragovernmental holdings"
In December 2020, foreigners held 33% ($7 trillion out of $21.6 trillion) of publicly held U.S. debt
39T is just the outstanding value of all the Treasury instruments (T-bills, etc). The entitlement programs (SSA and Medicare) have made commitments to certain levels of service and payments that are far in excess of the revenues they bring in, that's what is meant by "unfunded liabilities".
It goes beyond that. $175 trillion includes all future entitlement spending not debt, it’s crazy to call all future entitlement spending for every living person debt. By that metric there’s essentially no such thing as a solvent government anywhere in the world and there never has been in modern history.
Repayment isn't a goal that anyone in the system should reasonably want. Federal debt is not like credit card debt. Debt is a product that the US Government sells. Me, being a big corporation or human, go to the USG and say "I need somewhere to park my money that is safeish from inflation". The USG sells me debt at X.Y% interest. The money now generates safe interest, which means its safeish from inflation. A world where the USG "repays the debt" is a world where this essential product is no longer available.
High levels of debt only signals high demand for this product.
This is super-counterintuitive, but the debt has little to do with the deficit. We could run a surplus and still be in the same level of debt (in fact, this would be a tremendous place to be). We could run a deficit and have no debt (just print money, duh). The decisions that go into column A generally do not impact the decisions our leaders have to make in column B, though there are of course convenient relationships between the two.
> Repayment isn't a goal that anyone in the system should reasonably want.
Repayment to $0 isn't a reasonable goal but there are a lot of problems with your argument.
The biggest question is about sustainability. Is the debt-to-GDP ratio stable/manageable and is the interest rate on the debt below the economy's growth rate? If the answer is no, you have a problem.
> High levels of debt only signals high demand for this product.
This is backwards. The amount of debt is set mostly by government supply, which is driven by deficits. The demand signal is the price, which in this case is the yield. If the demand was high, yields would drop as the amount of debt grew. Instead, we have rising debt and rising yields, which means supply outstrips demand.
The US no longer has a AAA sovereign credit rating for a reason. When Moody's (the last agency to downgrade the US) stripped the US of its AAA rating, it cited "rising debt and interest costs 'that are significantly higher than similarly rated sovereigns.'"
The biggest issue at this point isn't the principal, it's the interest. Interest is the fastest-growing line item in the federal budget. It's almost at $1 trillion/year now and expected to nearly double by 2035. You either have to cut from other spending or borrow more to pay the interest.
Your comment implies that this doesn't have a real cost, which is silly.
Government debt isn't like personal debt or business debt. The treasury can choose to not honur it, and there's nothing anybody can do about it. Of course they're not going to find a market to sell more debt to after that, but wouldn't you say they already have enough?
No sympathy for people and institutions who make deals with the devil and expect the government to forever enslave taxpayers to honour those deals and pay back with interest.
As mentioned defaults do shockingly little to change future funding. Its been years since i looked but its something like a few years of “cool down” on issuance and a few points of coupon premium. The economist has done some great, very accessible, articles on this over the years.
Second, its critical that treasury bonds are denominated in USD. The us gov controls the monetary policy and can choose to inflate away the debt over time. This is in contrast to EM debt where they get trapped with foreign denominated bonds. See also the tensions around EU debt, greece, etc.
The way I understand my money market settlement account at vanguard, is that it's all, or nearly all, treasuries. Treasury not honoring government debt would be the worst bank failure in the history of the world.
It would be bad for you, but you also deserve that because you have made a deal with the government to enslave young people to pay taxes on their labour in order to pay interest to you. Loosing all your investments in a bond default would be a very fitting consequence for what you have done so wickedly.
Everything else is up around 3% YoY. And if energy and transportation are up double digits, and producer prices are up double digits, other consumer prices will follow.
The faster your cash loses value, the stronger your incentive to trade it for something else. That something else can be financial assets.
> It's not got loads to do with large-scale, institutional investments
For investors, particularly retail investors, the consumer price index is most relevant. But for whatever it's worth, producer prices are up over 16% in April (7% excluding "foods, energy, and trade services," which jumped over 50% annualized) [1].
To be clear, I'm floating a hypothesis here. I have seen no evidence linking inflation to demand for these companies' shares. (If anything, it should be the inverse.)
That depends. Inflation is a measure of the cost of living in terms of currency. It can be high either if goods and services required for living become scarce, or if currency supply increases. Currency supply increasing does affect asset prices.
Yes, but they're not directly correlated. Of course events can affect them both! Going to war would both increase the cost of living and (some) asset prices would go way up. But that doesn't mean they should be measured together like that.
Right now SPY not be such a great idea with SpaceX launch upcoming since it will be included into it immediately. Retail investors will be bearing that particular flop's cost.
I was old enough to remember the 08 crash. Then the market starting recovering in 2011/2012 and the sentiment was that the system would crash again soon like 08. Turns out, it was an amazing time to invest.
Post 08 crash, all sorts of conspiracy websites like Zero Hedge were popular saying how the world economy would keep crashing.
The only reason this happened was due to taxpayers bailing out financial institutions. This only exacerbated an insane amount of moral hazard already present in the market following previous bailouts.
Unfortunately, the US Government continued to run themselves into the ground spending-wise and may have a difficult time with another bailout, unless everyone pretty much agrees that we cannot have a USG failure, so they all pretend like nothing happened.
Eventually the merry-go-round stops, I'm just not sure what the catalyst will be, and it might be 100 years from now.
I am old enough to have had multiple career changes since starting on a major firm’s rates floor in 2008. These IPOs are tiny compared to the overall stock market and the stock market is absolutely tiny compared to debt markets. People consistently underestimate the size of the world economy or even their local economy. The world may look small from an orion capsule near the moon but almost every aspect of human society is bigger than most people can reason about. It is possible these IPOs have an outsized impact on sentiment for weird reasons. But it won’t be an actual outsized impact on capital markets.
Edit: I should add the AI bubble can absolutely burst but there is no reason to believe these IPOs are the end of the ride. If I knew I would be…
The thing is that the IPOs necessitate a full release of their actual costs for inference and training. This by itself should be enough to pop the bubble, if the occasional bits of it we get are anything to go by.
There is a reason anthropic is still hiding those details:
> key details typically included in that form about a company’s operations — like potential risks to its business, executive compensation, and other financials — won’t become public until later on in the process
no one is going to get wealthy buying SPY/VOO. you might get rich, but not wealthy. things have changed now in a sense that handful of companies are large percentage of the stock market to the point where one has to question why invest in “s&p 500” vs “s&p 25-ish”
while going with the tried&true makes some sense, I think we have to open our eyes to a different reality of our stock market… and this market concentration into few companies is going to get a lot worse…
> things have changed now in a sense that handful of companies are large percentage of the stock market to the point where one has to question why invest in “s&p 500” vs “s&p 25-ish”
A small number of companies have always driven most stock-market gains. Betting on size isn't fundamentally a bad bet. But it is a bet against value and the historical tendency for small companies to be higher risk and higher reward.
you may be technically correct but today’s concentration in say top 10-15 companies is historic and by significant margin. I have been self-employed for a long time and somewhat “forced” into being “an investor” and starting in 2021-2022-ish I took my money out of all the “funds” … while I do not disagree that it is “a bet” - it is a calculated bet. things are different now even if historically you are right, no question
I very much disagree that it's coming. I think we need to completely reset our expectations of how the market works. There's been nearly an entire generation working in this "new" bull market, where things like EPS mean absolutely nothing and speculation no longer requires actual returns.
> the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up
Stock prices don't have to crash. They can just stagnate while profits catch up and multiples compress.
Debt binges, on the other hand, tend to go bust with a bang. But after the recent private-credit scare, the AI build-out has been predominantly financed with stock. (I think.)
Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I follow this stuff somewhat closely and it feels intentionally confusing, so I've likely lost track.
> Hasn't there been a _lot_ of debt to buy up Nvidia GPUs?
I believe that's been concentrated at the hyperscaler layer, and subsided when the aforementioned private-credit scare reared its head. (I haven't heard a big datacenter debt deal announced in a while. Though of course that doesn't mean they aren't being done.)
> Equity bubbles don't have to crash. Prices can just stagnate while profits catch up and multiples compress.
Is there is historical evidence for that? As someone who used to follow Jeremy Grantham a lot (he considered himself a "bubble historian"), IIRC every bubble he studied always mean reverted, and it usually (maybe always, can't remember) overshot on the downside during the correction.
> IIRC every bubble he studied always mean reverted
This really depends on how we're defining these things. Let's call a stock-market bubble a period of elevated multiples. That can mean revert by prices decreasing while earnings stay constant or by prices staying constant and earnings rising. (Alternatively, both earnings and multiples can rise and fall.)
Yes, for equity prices in particular he talks about P/E ratios (among some other metrics like corporate profit margins), and so you're right, it would be possible for this to mean revert by prices holding stagnant and earnings catching up. However, as far as I can remember (primarily because a big emphasis of his was how unchecked bubbles can cause a lot of damage on the downside) all the historical bubbles he studied (something like 50) always crashed with a big price drop. Not 100% sure though, which is why I was curious if you had any contrary examples.
Corporations across the board are experiencing record profitability. That's the reason behind the high valuations.
This isn't true of AI companies...yet. But these are companies entering the market with pre-IPO userbase (including lots of B2B) numbers that Meta and YouTube would have dreamed of before their acquisition/IPO.
I think this whole situation is very sleazy and corrupt, but ultimately my prediction is that nothing serious will come of it. Even the exposure of index and passive investing is overstated.
> The index demand is not 100% of the stock available in the IPO, or 110%, or even 50%. But it’s plausibly more than 25%. It’s not a short squeeze, but it’s a lot. Add a reported 30% allocation to retail, and arguably a majority of the IPO is being sold to price-insensitive investors. That is one way to get a high IPO price.
two thoughts, the top three s&P 500 etf's have $2.7t in aum (and there are a lot of other etfs, mutual funds, and direct indexers on top of that) - so the dollars don't seem to be the problem.
I think its a little insane to have the seasoning rule for an index be inside the lockup period
Mercedes would have a market cap of $2 trillion according to the ARR valuations. Instead, it has $150 billion revenue, $5 billion profit and a $50 billion market cap.
Like Mercedes, Anthropic is not a growth stock because it has already been foisted on everyone.
LLMs are getting better at a rapid pace and in a year or two, Chinese LLMs should easily catch up with the best of the models. Models have kind of reached a saturation point and that’s why OpenAI and Anthropic are doing an IPO now. Because a year down the line when their lead diminishes even more, they would be worth lesser money.
SpaceX has clients to put payloads into space, but those clients have always looked for good low cost alternatives. It is going to have competition in the future and will lose customers.
SpaceX would tell you to look at how profitable is Starlink. Two things about that: you have to replace the infrastructure every five years while terrestrial infrastructure electronics lasts at least twice as long, and inert stuff like towers and fiber lasts for decades. And you can drive a truck to where it's located if there is a problem.
Secondly, terrestrial infrastructure keeps expanding into the rural areas that Starlink counts on for most of their TAM. Except for ships at sea and extremely remote places, the Starlink TAM is chronically shrinking.
1) The short lifespan is intentional. There is no reason to keep satellites beyond a few years because older satellites are quickly becoming obsolete. The first generation Starlink sats are now 4 generations old, and are practically ancient at this point. SpaceX wants the satellites to fall, so they can be replaced by updated ones.
2) SpaceX could easily increase the lifespan of Starlink satellites to 10-15+ years, but they don't want to, because of (1), and because they are waiting for Starship to launch larger satellites at 10x lower cost.
3) Despite continually replacing satellites every ~5 years, Starlink is operating at a very profitable 40%+ profit margin.
4) Starlink is expanding to direct-to-cell 5G at speeds up to 150Mbps, which vastly expands the TAM from just broadband usage to all cellular data usage. Rural areas may never get a terrestrial cellular buildout, since it will be cheaper for companies to partner with SpaceX for coverage than to build their own towers. A cellular tower can cost upwards of >$250k.
Back in 2008, we'd perfected the art of combining high-grade and dogshit Mortgages into one Security which could be sold on to, of course, Pension Funds.
Took almost 20 years for someone to find a way to scale up the basic Scam Mechanics and try again.
If you like SpaceX's launch business (the Grade A mortgage that you personally hold and pay), know that you can't get it without xAI (The dogshit that's already delinquent)
Maybe we changed the rules so that our capital markets can protect our champions from large Chinese buy pressure at lower post-IPO valuations. Plus, these companies have probably had to demonstrate earnings stability (yes, unaudited) in order for the rules to be waived.
Is the text of the waiver and its reasoning anywhere? I guess I'll read tfa.
Of course the market can and this is a silly question. These issues are tiny amount of money for the global capital markets to swallow. Masa Son has endangered ostrich eggs for breakfast worth more on the daily. I kid, but seriously this is a very small amount of money to the global markets. It is more of a worry on the psychology than the size.
Remember they arent selling the entire floats of these companies. I cant read the article because Im not willing to pay for the Economist, but 400-500b in equity issuance is not a big deal to the global financial markets even though it sounds big.
Is there an index fund that intentionally only focuses on actually profitable companies? It would actually be nice to hedge some funds into non speculative assets.
No doubt these companies are woefully overvalued. But this won’t stop me from putting in orders for several thousand dollars of shares with at market open. There will undoubtedly be plenty of buyers and I expect them to gain rapid entry into the indexes which will unlock a flood of additional capital from 401ks and pensions
Is SpaceX going to eat Tesla? As in, are a bunch of Tesla investors going to be migrating across to SpaceX since that seems to be getting more of Elon's attention these days, especially with xAI barnacled onto the side of it?
The money to participate in the IPO has to come from somewhere...
Yes. Elon has a massive controlling share in SpaceX, complete control over the board. SpaceX will be double the size of Tesla after a successful IPO, then they can swallow it and then he has the control over Tesla he’s constantly fighting for.
I don't think the market will swallow the stock offerings until we see early signs of GDP growth attributable to these entities. But until then, I think the cost is higher than the benefit, which "The dead economy theory" essay covered it well [0]
> don't think the market will swallow the stock offerings until we see early signs of GDP growth attributable to these entities
Investors in these companies are going to be looking for revenue and pathway to profitability. I'm not sure anyone needs to see an impact on GDP to invest.
Several guidelines make it clear that this kind of comment is unwelcome here. Corruption and conspiracies are easy to insinuate, but we need more than insinuations to have intellectually gratifying discussions. https://news.ycombinator.com/newsguidelines.html
It’s often telling what sort of thing is deserving of moderation. The timing is well documented as being extremely favorable to Musk and Altman and indeed directly benefits them. Suspicion is not only warranted it should be demanded.
It defeats the purpose of the value setting part of the IPO if there are guaranteed buyers. It would be better for the market and for the indices if they only hopped onto new entries of the market after any initial instability has passed.
> defeats the purpose of the value setting part of the IPO if there are guaranteed buyers
The indices don't buy into the IPO, but a few days afterwards. That's obviously easier to bridge than 6 months. But IPO buyers are still taking a risk.
Yes, but a stock market index is just that. It is intended to track stocks, not meth sales or the phase of the moon.
Most of these indicies intend to match the largest companies on the market - going up when they do and going down when they do.
If someone doesnt want that, they can pick a different index or invest in a managed fund. Companies like vanguard also offer custom EFTs where you can exclude certian companies if you want - probably the simplest option.
But then you cant complain if they go up and you miss out.
PS: Yes, there are several cannabis ETFs if you are into that kinda thing. look into MJ, WEED, MSOS, and YOLO.
Because they think that a lot of people will want to get in on the historically massive and well-known companies, which would lead to outflows if the index doesn't pick them up fast enough?
It will lead to outflows either way. And I say that as someone who has been an Index fund evangelist for years, strongly considering selling my index funds to build my own collection of companies that I believe in long term.
So why not just stick to the roles we agreed on when buying in?
I find it to be genuinely more likely some level of corruption, and while my insinuation may be overly specific or illustrative, I still hold to it as an ironic statement meant to speak the truth.
In this age of AI marketing taking over the minds and imaginations of most of our businesses leaders in the name of greed and fear, I’ll hold to the more likely truth given the circumstances, regardless of this appeal to some invented tale of uncorruptable corporate governance. Have you never seen decisions being made?
I think that better matches the original spirit of this forum. The progenitors have become the people they once disrupted.
You're claiming without evidence that the bureaucracy and regulators are corrupt to the core? No way I refuse to hear another bad word about the government, they are above reproach sir.
I was a lawyer in 2008 representing banks in the financial crisis. Multiple bankers wives set up companies to by mortgage backed securities using government loans and government guarantees on payment upon default. That let the banks get the toxic mortgages off their balance sheet.
These wives were yoga teachers and socialites. And I say that as a man that is a feminist and upmost respect for the amazing women I have worked with that were absolutely world renowned professionals. The bankers wives were not in that category and were shells to eliminate the “conflict of interest”. The CEO of Goldman Sachs did this. You can find the records if you want to be on a government watch list.
We’ve really hit that point, where our institutions are transparently corrupt, and everyone knows it, and both the guilty and the public just say “yep, we’re doing the corrupt thing”.
It’s depressing as hell, and it’s going to go out with the proverbial whimper, but at least we’ve got to be close to rock bottom, right?
From someone who lives in a country that is still more corrupt than America.
You need to vote for the next several years, no matter what, because you still have a chance.
Once corruption becomes the default, then you are REALLY screwed. Because it kills hope and the faith in the future in the most corrosive way possible.
The death of morale is a far worse and insidious fate that will make today look like a high point.
I appreciate the perspective. From where I sit in America, morale is as dead as it gets. The president wrote himself a $2B check, and both his supporters and opponents are resigned to this massive theft. Restrictions on voting are nonsensical, the Supreme Court is transparently ruling based on who will benefit rather than what the laws say, and masked “police” are terrorizing communities.
Of course I’ll vote, and be more active in protests and campaigns, but TBH the general vibe is that it’s already too late. It’s that bad.
To be fair, these are not regulators, just private companies making up rules, so technically this is not corruption just something that looks like it but it's just business™
> To be fair, these are not regulators, just private companies making up rules, so technically this is not corruption just something that looks like it but it's just business™
What I find odd is that the comments are critical of how the police didn't caught thieves, but there is absolute silence towards thieves and the fact they have been engaged in thieving for ever.
Another comparison is people blaming the fire department for not inspecting sprinklers after an arsonist torched the place. It seems to me that the arsonist is the root cause, isn't it?
Police are only useful so long as they are effective as policing. It’s insanely difficult to put a price on a cost center which doesn’t add value, but only has a chance to reduce the loss of value if they do their job well.
The problem with the fire department analogy is that there’s a lens through which the fire department IS the arsonist here, or is at least pouring accelerant at the future site of the arson. If you don’t know why I would call the bankers at S&P, Nasdaq the arsonists in this case, you aren’t equipped with the background info about SpaceX’s fast track + goalpost moving to index funds.
I guess we should be thankful there aren’t more Luigi jokes in the comments.
This seems to be the problem. Thieves get a free pass but the very few guardrails that said thieves haven't dismantled yet suffer the blunt of the criticism, to the point people argue they don't need guardrails at all.
Don't you feel you are unwittingly aiding thieves to go unpunished?
> Thieving behavior is deterred by the police doing their job.
Wouldn't it be more productive to place the blame on thieving? Police is a mitigation, and your complain boils down to complaining that police is influenced by thieves. Yet, I don't see people complaining about thieves.
> You're claiming without evidence that the bureaucracy and regulators are corrupt to the core?
The "bureaucracy and regulators" are at most engaged in passive corruption.
For passive corruption to exist, you need massive active corruption effort.
Why is everyone focusing on vilifying passive corruption while completely ignoring active corruption? I mean, I'm hearing lots of conspiratorial remarks directed at regulators but... Who stood to benefit? Aren't those responsible?
I mean, why was regulation required to begin with?
Can the stock market remain legitimate after such a brazen example of dumping? Regular everyday people can’t access private shares and participate in upside even if they want to. They don’t have the connections like VCs, and aren’t accredited investors. And companies ban secondary transactions, which should be forced by law to be always allowed.
And then after all that, the public have to deal with their index funds, ETFs, mutual funds, pensions, 401ks, etc buying up these overpriced stocks. You have a space company that also acquired a failing social media platform and failing AI company with little revenue justification for the valuation, and a lot of other obligations that make it financially a disaster (like payments owed for spectrum). And two frontier labs with no real moats, each looking for regulatory capture based on safety or ethics or whatever.
To the everyday person, the stock market after the fast listing rule, these three IPOs, and AI job loss, will feel no more legitimate than prediction markets or crypto.
> then they have to deal with their index funds, ETFs, mutual funds, pensions, 401ks, etc buying up overpriced stocks
Only about a third of American stocks are held by passive capital [1]. Out of that, index funds are about 16%, and most of those in America reference the S&P 500, which has not yet announced whether it is changing its rules.
Sure, but it's the Americans that can least afford to be stood up as exit liquidity that have the most exposure here relative to their net worth. The ultra wealthy are going to be heavily overrepresented in the active basket. Meanwhile the folks lower down on the income scale are more likely to have their money in passive funds.
> The ultra wealthy are going to be heavily overrepresented in the active basket.
Do you have evidence to substantiate this claim? My brief research has shown the wealthier the investor, the likelier they are to use a passive strategy.
I did have few days ago conversation with AI to research how the economical environment was just before Great Depression and this doesn't look good if true. Definitely feels like someone try to dump their bags to retails investors and main street.
- Trailing P/E: 1929 peak was 32.6 vs. 32.67 today.
- Shiller PE (CAPE): 1929 peak was ~30 vs. 42.66 today (2nd highest in history).
- Buffett Indicator: Market cap was 124% of GNP in 1929 vs. 259.6% of GDP today.
- Margin Debt to GDP: 3.0% in 1929 vs. 4.1% ($1.304T) today.
- Systemic Risk: 1929 margin debt was 10-12% of total market cap vs. 1-2% today. Modern leverage has structurally shifted from retail to sovereign debt and shadow banking.
They're doing an IPO now because the war in Europe with Ukraine is almost over it seems, and after that a big percentage of capital will relocate from the USA to Europe again. They are just cashing out right before the tide turns.
There is a reason they IPO now I feel like. Markets at ATH, greed is bigger than fear. Now is the perfect time to IPO. Could very well be a bubble burst after that...
I don’t understand why there is so much pushback and skepticisim about SpaceX. They actually have a functioning product, a market where they sell the product and virtually no competition at their pricepoint.
Because they lobbied for a rule change to get fast tracked to an index forcing passive investors to buy it at IPO price instead of being included after market value corrections.
This is completely wrong. Passive funds don't buy at IPO price. They buy after the inclusion rebalance which happens weeks later, at whatever price the market has already set. Plus the S&P500 rule change hasn't even happened yet, it's unclear if the rules in the current form will go through.
How come? On the books or they're actually selling internet cheaper than they source it?
> xAI is a money burning furnace
So far in the AI business, it looks like only Anthropic might be profitable in the near future. On the other hand, a lot of nonprofitable companies have IPOd for billions with the hopes that one day they will become profitable.
One crucial thing we've learned for the past few years:
- You can't blindly trust the US, or US businesses. Even less when it comes to critical infrastructure.
- You can't rely on underwater cables to be safe.
Starlink is a proven technology. They were the first major mover. But they will not be the last.
It'll be sort of like Tesla cars. For a long time they completely dominated the EV market, but now others are catching up. Yet Tesla is valued more than all other EV manufacturers combined. Some of this is of course from their vertical integration, but most of it is just hopium.
Same will happen with both Starlink, SpaceX, and other products under the Musk umbrella.
I just had this thought:
This is the story of the Great Western Desert eXploration Railway Company. Let's call it WestX for simplicity. They are building a 2000 miles railway line from the east coast into the great western desert. There is nothing there in this desert, but its a great place to set up antennas. The place is called Sunshine Plateau. Unfortunately, there is also absolutely nothing on the entire 2000 miles going there, no water, no coal, no midwest, no great planes, no gold, just empty, barren desert. So every train going out there has to haul all the coal and water it needs for the 2000 miles trip along with it. It needs about 200 wagons of water and coal to pull one wagon of antenna stuff out into the desert, but in the future, they'll build an engine so powerful, it can haul 2000 wagons of coal and water into the desert along with 10 wagons of antennas. Its a big leap forward. In the future, this super steam engine will also be able to roll back to the east coast all on its own, because its all downhill from Sunshine Plateau. The antennas need replacement every couple of years, but there is enough demand for antenna signal to run the train operation at a small profit. Also, the government likes to place some spy stuff there every once in a while, also some science stuff, and every now and then a tourist takes the journey because the view from Sunshine Plateau is really great. But thats not all! In the future, once the super engine works perfectly as promised, they will not roll all of them back down to the east coast, but they will keep an entire train at Sunshine Plateau. Then they will haul a looot of trains with a looot of coal and water into the desert to refill this one single trains 2000 fuel wagons, so it can haul 10 wagons of stuff even further out into the desert. 10 wagons! Sadly, there is no California after the desert, just another desert named Moon Hole and then behind that another desert, named Mars Basin, but thats okay because there may be gold there to exploit. WestX just has to find a way to produce coal and water out in the desert to haul that potential gold back to the east coast. But thats still not all! WestX operates a newspaper where every jerk is allowed to publish racist stuff. It runs at a loss but that doesnt matter, because trains and newspapers go well together. There is also a new hype at the east coast, named thinking machines. They're amazing and are almost always right in their answers. Other companies are at the forefront with those thinking machines, but WestX also has a little sidehustle in this business, even though their thinking machines suck. BUT! They could install those thinking machines up on Sunshine Plateau! Takes only 2000 wagons of coal to put 10 wagons of thinking machines 2000 miles out there into the void, but there is a lot of sunshine up on the plateau. The competitors just install their superior thinking machines back at the east coast, where there is also sunshine, but also cheap coal and lots of other energy resources. Anyhow, thinking machines! The Great Western Desert eXploration Railway Company will soon open up to investors at the good old Wall Street and they value themselves at $15'000'000'000'000 to $20'000'000'000'000. Some grumpy naysayers say thats quite a lot of money for a railway company that doesn't make any profit, but if all their plans work out exactly as promised, you may even not make a loss! The founder, Elon Rockefeller, who is mostly busy publishing racist articles in his newspaper every single day, and also runs a horse carriage business, has a great track record of delivering on promises, and is a well respected man.
The index fund thing seems to me to be an overhyped nothingburger. The seasoning period would just delay the inevitable when a company is launching with a trillion dollar valuation.
The big story is that that is happening at all. It wasn’t that long ago when Facebook had to get special permission from the government to stay private until they got to $100 billion.
The issue here is that public investors are missing out on so much upside.
I expect it to be catastrophic or at least chaotic and we have removed our investments from the american market and untied ourselves from the dollar as best as we can. We are sitting this one out.
According to SpaceX's own S100 filed to the SEC their future revenue is projected to be 93% AI and there's also where the overwhelming majority of the CAPEX will go.
I don't really see anything that really matches their valuation. Yes there is some value in launching stuff in space. But it ain't not trillion.
And for starlink. There is some market. But if terrestrial options got their stuff together it is not that big either. Userbase is marginal. As they operate in areas that are not served by other options. And that market has real limit in size.
So what people seem to be unaware of or are purposely ignoring is that OpenAI and Anthropic have invested trillions in a rapdily depreciating asset. There was a HN post from a day or two ago where someone bought a V100 for 150 pounds and connected it to their computer. Well that was a $10k GPU in 2017. That's the fate of H100/B100 GPUs in 5-10 years (and I suspect closer to 5). What do you do if you've invested $1 trillion that will be worth $100 billion or less in 5 years? I think it'll be worse than that because modern hardware at that time will still probably be the same Wattage but have much higher performance so you'll be getting much higher performance-per-Watt and that's going to really matter.
The only company I'm confident will survive this hardware crunch and still be relatively successful in this space is Google.
OpenAI in particular is a bet that there will be an AI moat and that OpenAI will "win". I don't think there will be a moat and China is a big reason why (eg DeepSeek).
SpaceX is a little different. Yes, launching rockets is a business but it's not a trillion dollar business. 100 Falcon 9 launches doesn't even break $10 billion in revenue. Plus, Starship faces cost overruns, delays and significant headwinds.
But the real kicker is that SpaceX was used to bail out Elon from the Twitter purchase and the xAI investors from the first Twitter bailout. That's a problem because xAI is burning $1 billion a month in a company where that really matters and I don't think Grok will "win" here. Like, at all. SpaceX would be a significantly more attractive company without xAI.
The big potential growth area is Starlink. For that to justify this valuation I think you need handheld Starlink phones. That requires a lot of satellites at a relatively low orbit, which also means they have a relatively short life (because they burn up in the atmosphere). And for that Starship must succeed.
All the AI data center in space stuff is complete bullshit. It makes no sense. It'll never be viable. It's not going to happen.
EDIT: let me clarify because I was careless in my wording. So, Anthropic individually has not spent "trillions". That was more of a general statement on AI spending. Anthropic has raised ~$100B, the last round of which was $65B (at $965B post-money IIRC). This industry as a whole needs to recoup trillions.
Anthropic seems to be in a better position (as a business) than OpeNAI is but I do think the it's a race to cash out before depreciating assets, well, drepreciate and there's the real risk as compute becomes cheaper and the AI craze wears off, Claude just may not have the growth trajectory that is built into the price.
As I was reading the start of your argument, I thought you were gonna call the models a depreciating asset! Totally agree about GPUs too, but literally everything they’re spending money on has to be rebuilt to stay competitive. They have to go for the moonshot of training a full new model when better tech comes, they have to upgrade GPUs to keep their data centers efficient.
Technically, the model is a depreciating asset too. Just consider the difference between a model you need a B200 cluster to run vs one you can run on a Raspberry Pi. One's going to have a moat around it that gives it value and the other isn't. It's a hyperbolic argument to be sure but the nature of "enthusiast" hardware is that we're currently running, say, ~27B parameter models on hardware for a few thousand. What's that going to look like in 2 years?
Anthropic/OpenAI really need to train ever-bigger models to keep their moat. But that assumes there isn't a law of diminishing returns and also that a compressed model isn't sufficient for what many people need.
You mihgt say that the training is a barrier. And it is, kind of. Notice how it's Chinese companies coming out with open-source models like DeepSeek and Qwen? That's no accident. As soon as DeepSeek came out I knew what was going on: China is going to make sure no single Western company "owns" AI. It's in their national interest for that not to happen.
I wouldn't be surprised if the rush-to-IPO is motivated, at least in part, by getting ahead of Chinese AI commoditization.
How many failed foundation model training run cycles do you think these companies can tank before the bubble pops and deepseek/etc. catch up to frontier quality?
If Ant, OAI, etc. aren't able to make 20-30% improvements on Opus 4.6 in 2026, does the music stop playing altogether? It seems like they'd lose their ability to charge >10% gross margin on inference in a span of 3-6 months.
"OpenAI and Anthropic have invested trillions in a rapdily depreciating asset".
Anthropic raised a bit over 100B and has 47B ARR. Where are you getting trillions from ?
Now that Moores law is dead I think GPUs will depreciate a lot slower. I mean there's already a lot of hardware that has gotten more expensive in the last 5 years.
> I mean there's already a lot of hardware that has gotten more expensive in the last 5 years.
The vast majority of the price rise is mainly due to AI companies sucking all the air out of the room and everyone investing in "AI" regardless.
If China gets their process down to match US/Korea/Taiwan and they decide to flood the market to drown out competitors then hardware is going to be an order of magnitude (or two) cheaper than it is today.
Starlink Mobile (i.e. Starlink direct-to-cellphone without modifications) is already happening, and fast. Phones that have the recently announced Qualcomm X105 modem will support Starlink Mobile 5G at speeds up to 150Mbps, direct from satellite. The Qualcomm X105 modem will be in most Android flagship phones coming later this year, and by 2027 most new phones will support Starlink direct-to-cell. The next iPhone that supports the 3GPP Rel-19 standard will too.
The rollout relies on Starlink V3 sats, which can only be launched Starship, but Starship progress is going well and is already able to deploy satellites from orbit. SpaceX is capable of launching Starlink V3 on the current iteration of Starship, but they want more testing. We'll probably see Starlink V3 launching late this year or early next year.
How long have the SpaceX, OpenAI and Anthropic investors been waiting for an IPO (excluding tender offers)? 24 years, 10 years, and 5 years.
You really think they are going to hold off against selling for multi-millions for another year, especially SpaceX?
OpenAI (and especially) Anthropic are at risk from being undercut by the Chinese labs and their open-weight models and may cause their valuations to be questioned.
If that doesn't cause a correction, then SpaceX will do it for them. There is no lock up for the 5% of shares being available.
Spacex is worth buying. The best chance to make a lot of money is buying stock before the economics make sense. By the time SpaceX looks like a good company on paper with strong profits… the price will be so high you have little chance of making anything significant. If it’s a long term hold, consider how far away retirement is for you. Also, moon bases are coming.
The AI companies IMO are fucked. In the next few years computer hardware should advance to the point that local LLMs are good enough for everyday workloads. Not everyone needs top of the line flagship models in a cloud to see productivity gains. Companies will actually save money just buying employees top of the line laptops for AI enabled work than blowing that same amount on tokens every month.
Why wouldn't it? There huge demand for these shares. It's not like $3+ trillion is dumped at once. It's a tiny percentage of it, and the high multiple does the rest of the work.
One other angle to think of is the midterm elections.
There will be chaos and potential stall for another 2 years following the elections and if the democrats win. There will be natural vested interest in showing economic decline or bad things to win next elections.
Both parties do it.
This is the best time to get to a safe place for all these companies.
For SpaceX (and possible the others):
Yes it can, since they changed the rules to force over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.
From https://x.com/Hedgeye/status/2060435253928604065:
"Rule changes for the SpaceX $SPCX IPO:
Index providers waived the profitability requirement and cut the seasoning window from 90 days to 5.
This forces over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.
Bloomberg Intelligence estimates S&P 500 funds must absorb 19% of SpaceX's float within 6 months.
Russell 1000 and Nasdaq 100 funds will absorb 24%.
The rules built to protect passive investors:
1. S&P 500 has required 12 months of trading and 4 quarters of GAAP profitability since 2002. Both waived.
2. Nasdaq cut its inclusion window from 90 trading days to 15.
3. FTSE Russell cut its to 5.
All three benchmarks are now structured to buy SpaceX at IPO pricing."
This should be a 5 alarm fire. It reminds me of nothing more than organized crime rackets that targeted control of union retirement funds
I've been told the following (obviously negative) narrative. Can someone verify/refute some of these? I've put (?) next to questionable claims.
1. Twitter is purchased with debt
2. Debt is transferred to xAI via acquisition of X/Twitter
3. Debt is further transferred to SpaceX via acquisition of xAI
4. SpaceX IPO offered at extreme valuation
5. Index fund inclusion rules waived for SpaceX IPO: profitability requirement, inclusion period cut from 90 to 5 days
6. Index funds are largely held by passive investors such as pension funds.
7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?)
8. Holders of original X/Twitter debt (banks) incentivized to support the rule waiver since post IPO, SpaceX will have liquidity to service/pay the debt.
9. Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?)
10. SpaceX is in Texas jurisdiction, where shareholder lawsuits are not possible and must instead go for arbitration. (?)
> 7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?)
Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.
side effect: they'll have to sell other stocks, pushing their prices and weighting in market cap weighted indexes down.
> Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?)
For some active investors, yes. For passive investors (say you through your employer's pension fund), the tax isn't the problem. It's that the market has such a short time to adjust the price of these companies before indexes are forced to include them--and so might buy them at wildly inflated prices. Then, not too long after, the early investors can sell at still-high prices as soon as their lockup periods end. It's a massive transfer of wealth from pension funds and index investors to the early investors in those companies.
> Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.
Maybe, most indexes do not have to follow the index. they just need to match the returns. An index fund manager has choice of what stocks to buy. However an index fund doesn't have enough managers to make many choices and so they normally buy just what is in the index. However all index fund managers know they are large enough that if they change their holdings "instantly" when the index it self changes the market will collapse and so the fund will under perform. Thus index fund managers are always trying to figure out what the index will do so they can start buying/selling stocks in smaller amounts before the change happens.
How each fund handles this is up to the managers. (and "total market" funds have less ability and need to do this)
The whole point of index funds is that you don't have to pay management fees to managers. It's very expensive to hire a team of people to analyze the entire stock market in detail and chose the best 500 companies, and historically people who did that on average didn't beat the S&P500.
Just look up the performance of Mutual Funds vs S&P500.
That is the point, and index funds pay many less managers. However they all have a few managers to handle the various paperwork needed and those managers do make some decisions. They have much less influence vs a traditional funds, but it is slightly above zero.
I think the point is that they don't have the influence to intentionally deviate from the index because they think they know better. If your mandate is to be passive, then you need an index to follow. If you are that sure the S&P 500 index is wrong for some reason, or whatever other index you follow, then you need to invent a new index. Then, you can follow the new index.
At least my index funds do that. They don't get to constantly trade like non-index funds do, and they typically stick with the index, but every index fund I own has a line about "we select stocks that we think will match the index", which is different from buying the stocks from the index.
Again, the vast majority of the time they are matching the index stocks. However they have the right.
So are they incentivized to allow an obvious grift and let the index have middling returns so they can skim the difference?
but any upside to second guessing the index gets allocated to the management, right? just like any downside, so its kind of immaterial for the end users, they're effectively bought into to SpaceX anyways
They are judged by how close to the index their returns are. If there a significant deviation either way they are judged harshly. Each fund is different, but they typical thing they will do is buy a competitor of some company in the index once in a while.
Typically managers pay is such that they don't get awards for guessing correctly, so they won't get any upside from a correct second guess, and they will see downsides from incorrect guesses.
Also unlike traditional funds, there are not enough managers to follow every company, so they can't pick stocks that will win just because they don't have enough to time research the stock. When they pick a stock they are just looking at the high level will this company perform like the other peers in the industry long term.
But surely the managers of those pension funds can see this happening, and will not likely take on the risk of shares that are that young, no? The index funds hands are tied, i agree, but passive retirement funds are largely managed by people who are motivated for them to succeed. If this were not the case, then pension funds could have been looted long ago...
Pension funds that are actively tweaking the mix of stocks they hold likely might decide to play it safe.
On the other hand, do you want to be the one who says, "As a rule we follow the index, but this time we decided to break our own rule, and as a result we lost X% of returns"?
Better wrong with everybody else than wrong on my own.
The reason pension funds include index funds in their mix of investments is because those funds have two features that are exactly what pension funds are aiming for: (1) broad diversification, and (2) conservative inclusion rules that avoid undue exposure to highly volatile firms.
Changing one of those features undermines the reasons for including the index. Doing it specifically for the purpose of including a firm where large pension funds have also been extraordinarily critical of the governance structure as a particular source of risk [0] even moreso.
[0] https://www.reuters.com/legal/government/new-york-california...
Mmmm legalized theft: the new Tech Industry!
>Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.
Right, if they've advertised as an S&P 500 index fund, they have to robotically follow the S&P 500, stupid inclusions and all. Changing that strategy would require ... a lengthy process involving input from shareholders.
However, someone can still start e.g. a "classic S&P 500" fund that follows the old rules for inclusion, and I suspect we'll see that in response to these recent decision.
The twitter debt is a negligible portion of the money at stake here. It’s a footnote compared to the trillions of dollars in wealth that are moving around. We are only talking about it because the internet commentariat has special interest in twitter. Not worth wasting time thinking about it if you are deciding how to allocate your portfolio.
Nevertheless it is part of a pattern of weird deals in Elon’s companies. He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross.
Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.
These are indices created by private entities. They are free to change their rules are they not? Maybe this is the wake up call to the risks of concentrated passive investment vehicles the public needed.
If you think it's a wakeup call about passive investment I think you're asking the wrong question. The vast majority of people do not want to become experts in the financials of 800 different companies in order to maximize their account return on investment over the next 20 years. It's a part time job to do that. Some people do that successfully but most people recognize that they won't. Passive investment was supposed to be a tool for those people. If you ignore all of that, then sure they can just change the rules whenever they like. But that totally ignores the reason a lot of these rules exist in the first place. In my book we're about to get a taste of why we don't want private enterprise responsible for this stuff in the first place.
Exactly all this. The whole idea of passing investing is "hardly any of us know better than the market as a whole." If you don't agree with that, then you don't agree with passive investing. Which, whatever. Live your life.
But the story is not about all indices being wrong, the story is about index management being corrupted. Like bond ratings on mortgages in the run-up to 2008.
If you dont like it, you need to choose something else. I dont know how people can keep throwing money at the thing they dont like and then complain it isnt doing what they want.
"Im too busy to spend 30 minutes to move my retirement somewhere I trust" just doesnt cut it.
It was never safe, he's exposed the system's design was never intended to be safe for anyone but those in charge.
This. People are locked in their 401k and penalized when taking it out says a lot about what it is.
People should honestly read Killing the Sacred Cows it’s an eye-opener for anyone invested in 401k.
A "401(k)" is not a monolithic entity. In practice, most employers offer a choice of funds, with the most popular being a year-targeted fund that rebalances between equities and bonds as you get closer to retirement. Having said that, you can probably dump your entire portfolio into government bonds, small cap stocks, or euro futures.
And your proposed alternative? Please provide at least 50 years of historic returns
If I could pick from any possible retirement plan, I'd want in on the UK pension system that's guaranteed to beat inflation and earnings growth. Until the money runs out, at least!
> …says a lot about what it is
Doesn’t it say that it’s a retirement fund, intended to be saved until retirement age? The 10% penalty is little more than a wrist slap level deterrent, too. It’s usually like ~1 year of returns. Not a huge deal if you need to dip into it.
(There’s plenty to criticize about the whole 401k system of retirement accounts. But these criticisms seem misguided)
I mean put it in context of the OP.
People putting retirement funds in a pile of companies that often have little impact on local communities they live in.
They’re changing laws to fast-track sketchy IPOs, putting hard earned money at risk why? So we can send people on a death-mission to Mars?
Point being, they are doing what they will with other people’s money and won’t suffer the consequences. Removing the checks and balances is exactly how financial disasters happen.
You can move your 401k money between several funds at any time.
Exactly right, there's even ones so conservative they market themselves as cash equivalent. Basically zero gain/loss in those funds. If you're so worried then go login to your 401k and change it.
This was always the endgame of moving away from managed pensions to 401k's. First you get everyone's retirement income into the stock market, and then you use the stock market to take it all away from them.
It's inherently about him because he is the one behind these changes.
"It's a big club... and you ain't in it."
No, they absolutely don't fear prison (but they should).
It's just the aggregate behaviour of a group of people optimizing for short term profit and self-enrichment over everything and without any need for long-term careful planning because for various reasons they are pursuing the short term at all costs.
Twitter was 40 billion ish overpriced purchase and SpaceX is seeking to raise 75billion
Let’s not make billions into a footnote?
Space is raising $75B at an expected valuation of $750B so the Twitter value is just 5% of SpaceX’s IPO valuation and if it goes up then the fraction gets smaller.
Is 5% a footnote, maybe.
It’s a footnote because SpaceX is going to be worth trillions. If Twitter were fully written down right after IPO SpaceX’s shares might not even have a bad day.
It may or may not be worth trillions. But the valuation right now based on the IPO sale price is .75 trillion. Which makes it vastly bigger than Twitter regardless.
It could nonetheless be worth trillions by the end of the day.
Map out the road to trillions for us here, please.
Space is the next great frontier and right now every single other company, and even country, remain orders of magnitude behind SpaceX. This could change in the future and viable competitors could emerge, public ownership could ruin SpaceX, or humanity's further entry into the cosmos could be delayed (Americans circa 1969 certainly probably also felt they were on the cusp of something great). But at current trajectories you're looking at something akin to there being one company that made ships better way better than everybody else, right before the Age of Sail kicked off.
"Worth" here means market cap. Which is almost completely divorced from its potential earnings.
A similar path to Microsoft. Being the primary gate holder to a developing market segment aka space. In our modern overvalued stock indexes they are worth 750 billion before considering future growth.
UFO soft-disclosure is already underway (the Pentagon releases more and more evidence). The USA will go full disclosure before the end of Trump's second term. SpaceX will be granted monopoly on the reverse-engineered alien spacetime propulsion tech, becoming the most valuable company ever. The SpaceX IPO is the final act of the plan that was set in motion when president Eisenhower signed the pact with the Zeta Reticulans (aka "the greys") at Holloman Air Force Base in 1954.
Simple as.
Oh man, I really hope this is sarcasm :)
To explore this (hopefully parody) alt history, I don't know why the us gov wouldn't waited 70 some years for spacex to reach this point to grant that monopoly versus handing it off to the usual collection of defense contractors, eg raytheon (or whatever they're called now), Rand, etc.
The Holloman Pact made the alien technology transfer contingent on launching an alien-human hybrid program. You see, the Zeta Reticulans mandate their technology to be stewarded by hybrids (similar to how China requires a 50% Chinese joint venture to gain access to their markets). The two species' geneticists started working together, and in 1971 the first viable hybrid was born: Elon Musk. Then we had to wait for the hybrid to mature, before it could be given stewardship of this sensitive technology. Meanwhile a generations-long cultural manipulation program was also underway, to prepare humanity for disclosure.
This is the most rational argument in this entire discussion.
It's just the plot to the X-Files, upgraded to the social media age.
X-Files was always part of the soft-disclosure.
I want to believe.
So what you're saying is we need tariffs on alien goods.
Of course it's sarcasm, but if it WAS true, it would be because the government was working in cahoots with all those defense contractors all along, until the Trump administration came along and decided to privatize it, at which point SpaceX seized its opportunity.
Hahahahahha. I love this. Brilliant work.
"He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross."
Unfortunately, if you really start digging in to what is going on in the financial world, you will find he has violated no norms here. This is not a defense of Elon; this is a condemnation of the entire financial industry.
The whole thing scares me, honestly. It has never been a clean happy market where lots of honest people get together and are just honestly trying to make a better world for each other, there is no golden past where people were just nice or anything, but damn if computers don't let people build some structures that the robber barons of old could only have dreamt of. I'm really concerned that "index and chill" doesn't just have a "best by" date but that the best-by date could be in the past; I've heard of an awful lot of ways of exploiting it and other retirements schemes we have, this is just one. I find it implausible that these ideas exist but nobody is doing them.
We Uncovered a Hidden Wealth Transfer in the SpaceX IPO. You're Holding the Bag.
https://youtu.be/sYA-z0Y8WRQ
There is video explaining the process
I’ve always suspected the “index funds are the safest investment” system is ripe for exploitation.
Thanks. That's pretty shady and grim :(
See also:
https://www.youtube.com/watch?v=IHD8BDFYyGI
> Index funds are largely held by passive investors such as pension funds.
Pension operators are not typically passive. It's a different story to say that maybe they should be given that their returns don't always match up with index funds.
All the big banking players are in on this IPO
Morgan Stanley, Goldman Sachs, JPMorgan, Bank of America, and Citigroup
They all know how idiotic Tesla investors are, and they all want those idiots to pick up their bags.
Also: Musk's shares have 10x voting power, he can not be overruled by anybody (he will retain ~80% of the votes).
Also: SpaceX debt is $20 billion.
But the SPCX float is a small fraction of its overall shares. So it will end up being around 0.08% to 0.12% of the weight of the SP500 [1]. Nothing to write home about.
Personally, I do think SpaceX is overvalued at these proposed IPO numbers and I will trade accordingly. So should anyone else who is confident and competent at taking appropriate market positions.
1. https://www.investmentnews.com/practice-management/spacexs-i...
There are many valid complaints about public markets undervaluing businesses in comparison to private markets, now that everyone is putting their money on the line we start to see a different view being taken
which is exactly why public markets have always been a superior price discovery mechanism in comparison to private markets
The ability to short stocks in public markets also helps.
Have you contacted your government representatives yet? I will be doing so. The federal government can probably stop this but we need to act now.
Okay before we set off the alarm though, can someone tell me What percentage of these index funds will be SPCX and TSLA?
Like if both these stocks become penny stocks what happens to the indices?
Isn’t the whole point that they are hedged across the whole market?
As of January, TSLA was somewhere around 2.3% of the S&P [1]. Because SpaceX will have so little float available, it would be somewhere around 0.7% if included.
[1] https://en.wikipedia.org/wiki/S%26P_500
Ya, but this is a proof-of-concept rip-off. The fact that the indexes don't have our back is a huge problem.
> The fact that the indexes don't have our back is a huge problem
how could an index fund possibly have anyone's back? It's in index of the top 500 publicly traded companies. that's all. If SpaceX or Tesla or Anthropic or anyone else fall out of the top 500 then they fall off the index by definition.
I think a lot of these comments are coming from extreme emotions associated with AI and Elon Musk and not so much the way things work and will play out.
It's only a problem for the ones left holding the bag. I'm at an all-time low allocation percentage in the US stock market and considering pulling more out still. Full on casino vibes at this point.
Assuming $75B float for SpaceX
* S&P500: 0.08% – 0.12%
* NASDAQ-100: 0.47% – 0.70%
* Russell 1000: 0.1%
A key point to look out for is how much money Anthropic and later OpenAI will go for in their IPO, which will utilise the same (updated) rules.
If Al Capone were alive today he'd seem like an honest man compared to these crooks that are running rackets on a global scale.
I read "AI Capone", fittingly
count me in !
Should one sell their 401ks ahead of the forced buying
Definitely not.
What Spacex/Elon are doing is sketchy as hell. But the numbers involved here are not terribly meaningful for your portfolio.
At IPO, $75B of Spacex shares will be bought/sold. The S&P 500 uses float-adjusted weightings, and the current float-adjusted total is $54T. If you are 100% invested in SPY, then about 0.14% of your holdings will be spacex on IPO day (75B/54T~=0.14%).
Obviously Musk and friends will start dumping some of the locked up float (~1.65T) when they can. But they definitely will not be doing so in a way that crashes the price or the market. That's in nobody's interest.
If you assume that half of the shares end up as float eventually (post-lockup), you'd end up owning around 1.6% of spacex in your S&P 500 etf (875B/~55T~=1.6%). That's not nothing but it's not significant enough that you should consider liquidating your 401k.
I'm picking on Spacex specifically because they are the biggest and imo, have the sketchiest/worst finances of the 3.
I think the idea here isn't the absolute numbers, but that if Elon manages to successfully fleece everyone's retirement, it will collapse confidence in the market, which could wipe out far more value than SpaceX alone.
IF SpaceX is actually worth 400-500bn and it's a few hundred billion dollars of fleece, sure, that's a "small" amount (still.. lord almighty it is never enough for these people). But the hazard is that it is a fleece. That would shake confidence in the system, the bear case is basically unlimited at that point.
I dunno won't index funds be forced to sell other stocks to buy these IPOs? Won't that possibly trigger a market crash if the IPO stocks loses a lot of value very fast after the IPO on top of investors predicting this fact and selling shares of other companies?
I dunno, the logical explanation makes sense, but markets don't work on logic especially on the short term. People fearing what other people will do and act in anticipation is known to happen.
Read the find print, but probably not. Index funds are aware of the issue you raise and they all have plans to handle it. Plans range from "not a problem, ignore", to "we don't even try to have the same stocks as the index, just similar stocks that we think will match the index performance". Most are someplace in between those extremes.
Yes selling will happen, and in the case of the S&P 500, it will be weighted selling across the whole index.
Spacex/Anthropic/OpenAI almost certainly won't crash the market. The most probable thing to happen is that all 3 of these rally a surprising amount on their opening day, because there will be so much forced buying of the shares.
In my opinion, the most likely bagholders will be any retail traders that buy these stocks before the lockups expire.
I think it's very likely that we see the following:
IPO day -> all 3 close higher than opening price.
1 month -> price settles into a range 20-30% higher than IPO price.
6-12 months -> price is back near IPO price +-5%. Anyone who bought and held in the first 3 months has unrealized losses.
Didn't every single large IPO in the past 15 years tanked the stock in the short term compared to the IPO time? Why wouldn't that happen again?
Not completely sure what you mean by "short term compared to the IPO time"
IPO's fairly reliably pop on day one. The performance in the first 6 months is mixed but skews slightly negative.
But the size of these 3, combined with the rule changes that are allowing them to be included in the indices much quicker than normal, means this time is very different than what we've seen before.
In general you should never "sell your 401k." Period. (Short of using it for income during retirement.)
What you should do is have an Investor Policy Statement[0].
This should contain at least two things:
- your desired Asset Allocation (e.g. 30% U.S. stocks, 30% International stocks, 20% U.S. bonds, 20% International bonds) which should be decided upon based on specific, personal goals and risk tolerance
- your strict policy rules for if and when to do anything, if ever, e.g. (don't sell anything ever, or... rebalance your portfolio if one of your allocations is more than 2% from the desired goal)
Now... if say U.S. stocks took a big dump in the next 6 months (while other asset classes either grew, held steady, or simply didn't drop as much), when it would drop below 28% of your allocation, and you'd open a spreadsheet and figure out which other asset classes to sell a few percentage of, to buy the reduced price U.S. stock funds. (This is a policy-driven buy low, sell high strategy.)
[0] https://www.bogleheads.org/wiki/Investment_policy_statement
Thanks for being the voice of reason here. So many people make their investment/allocation decisions on the fly... it's only going to get magnified by these 3 big IPOs. (and their unexpected consequences)
Firms will look at your $600k 401k AUM, Investor Policy Statements, and laugh you out the door. They won't care, you have no say. Your 401k plan is between them and your employer.
Not sure if OP meant literally sell, or just rebalance out of stocks. TBH I've been considering sliding over to all bonds for a time, since there is no tax event if funds stay in the account. But the numbers don't seem that high at the end of the day.
If you try to time the market and you sell at the exact peak you still have to time the market again and buy back at the correct bottom. If you miss either of these you're likely leaving long term performance on the table.
"Be fearful when others are greedy". Greed is at an all-time high, so be careful. Whether that means buying or selling or staying put is for you to decide.
Any advice that confidently ends with "but whether you do A, B, or C, is for you to decide" can generally be safely avoided. This is providing 0 bits of guidance.
401ks probably have limited control, but in proportion to their share of your index funds, you could short these stocks or use options or buy an inverse ETF (if one will exist).
this is not an option for the majority of people
This should trigger all of us to be spinning up lawsuits. This whole thing is an absurd grift.
I don’t have the fucking money for lawfare in this economy.
class action is the average person's best bet here. You should expect to get $.75 while the lawyers make big money.
Hopefully you didn't accidentally waive your right to class action by signing something at some point in the last 15 years that survived multiple buy-outs to land in the hands of some company tertiary to the lawsuit.
> This should trigger all of us to be spinning up lawsuits
On what grounds? What tort have you suffered?
If you want change (and who wouldn't?) you need to talk to your representatives, not the courts.
i read it as most likely people will lose their retirements if the companies goes bust. is that correct? in my country now they move to new pension model which will allow more aggressive investments with them. i am worried it will just get sent to these bros and i'll work until i die.
I don't know about your country, but in Sweden you can choose where part of your investment money (I think 40%) gets allocated. On top of that you can choose where 100% of your private pensions are allocated.
Also some EU pension funds are already in the process of divesting from US markets...
> Also some EU pension funds are already in the process of divesting from US markets...
And where will they go to?
maybe they will sell our pensions to BRICS :')
I mean, the US public markets is about 49% of the worlds market so it is not like there aren't other options. Divesting doesn't mean moving everything out and pension funds also invest in non-public markets.
https://www.visualcapitalist.com/124-trillion-global-stock-m...
No, it's wrong.
Amazon is worth $2.81T right now and only represents 4.03% of the S&P500.
So a $1T share would represent less than 2% of the S&P500. This is significant for a single company, and 6% for 3 shit-tier companies (SpaceX, OpenAI and Anthropic) is even more significant, but we're far from "losing retirement if they go bust"-levels.
I wish we would start paying proportional attention to business news, instead of treating AI (or any other "cutting edge") companies as economy-defining and giving these 50+% of the attention.
It is especially telling if we try to list out all the psychological biases at play:
I've recently learned a new finance term, "float", and I want to check if this makes a difference to this discussion?
https://en.wikipedia.org/wiki/Public_float
I hear S&P 500 is weighted on float rather than on market cap, while Nasdaq 100 is based on market cap.
Yes, that's mostly correct. Many indices are weighted by something like free float.
Yes, and in this case, it means that SpaceX will only be approximately 0.1% of the SP500.
One of the places you could have learned this would be the article itself:
> most share indices weight firms in proportion to the value only of shares they have released for public trading (the “free float”). For SpaceX, this means just the $75bn or so of stock it intends to issue in June—so its initial weight in the S&P 500 will be around 0.1%. The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk. Even so, SpaceX’s probable initial weight in this $40trn index will still only be around 0.5%.
You're not modelling the contagion here. The problem is that while any single one isn't that big a share of the S&P 500, similar companies do make up a lot collectively. Excl some non-tech/AI firms:
NVIDIA Corp NVDA 8.02%
Apple Inc AAPL 6.53%
Microsoft Corp MSFT 4.84%
Amazon.com Inc AMZN 4.01%
Broadcom Inc AVGO 3.36%
Alphabet Inc GOOGL 3.32%
Alphabet Inc GOOG 3.09%
Meta Platforms Inc META 2.23%
Micron Technology Inc MU 1.71%
Advanced Micro Devices Inc AMD 1.19%
Oracle Corp ORCL 0.99%
That's 40% of the S&P 500.
And if anything happens to the AI bubble all of these go down together. While they won't all go to zero and cause a "-40%" overnight, Nvidia's rise is so meteoric that they will trigger a -8% and the rest's valuation has more than doubled since 2023. Even Apple, which isn't much of an "AI company", is still following the AI-tech hype.
If Nvidia eats shit, and the others go -50%, that translates to an overall ~-24% on the stock market.
Before any contagion outside the tech industry is considered. Look at the Dotcom Bubble and a -40% to -50% crash is quite plausible.
Unlike OpenAI or SpaceX, a lot of those tech companies are raking in the money. meta, google, amazon, apple all have huge cash flows. They will be buffered by this money - in dot com time, the money wasn’t already there, just the eyeballs. And while Cisco, which like Nvidia sold actual things, took a long time to regain their stock price, they made money selling actual things all along. On the other hand, there is more debt now than in dot com. I wouldn’t be surprised by a fifty percent decline, but it will be different than dot com for sure.
> And while Cisco, which like Nvidia sold actual things, took a long time to regain their stock price, they made money selling actual things all along.
This is the key comparison. It's not the "Pets dot com" side of the DotCom bubble, but the Telecom Bubble that followed. (All the AI startups that just repackage someone else's inference will go the way of Pets dot com, but their economic impact is minimal)
Certainly, Big Tech has massive cashflows. But those cashflows were priced into the 2023 valuations.
That is what makes the current valuations so ominous. Just a correction back to 2023 would be enormous. And as you note, a lot of these companies are taking on debt, dumping huge investments into AI. They're worse off than they were in 2023. Oracle may straight up go bankrupt.
The issue with nvidia is that they're "selling" most of their product to companies taking out debt to fund the purchases. The company explodes, nvidia's booked but not-yet-existing profits go poof. They're also giving most of these companies the money to buy their own products. Looks sweet on a balance sheet, doesn't represent reality in any sense.
> Oracle may straight up go bankrupt.
And nothing of value would be lost.
I wish I could upvote this more. This is the point. Everything is so incestuous now that the problem isn't 2% here or 3% there, it'll be a catastrophe of epic proportions.
I do not want things to go kaboom, the CAPE index seems to indicate that what I want isn't relevant.
That's if everyone were acting perfectly rationally, but a world in which those three companies go bankrupt would have everyone panic selling every equity possible like it's the endtimes.
Anthropic and OpenAI maybe, but I don't think anyone gives a flying fuck about SpaceX, and everyone knows its value is nowhere near a trillion.
Unfortunately not everyone knows that. See some comments in this thread.
They will drag the rest with it.
thank you
If they go bust won't it likely trigger a massive market crash? Afterall index funds will be forced to sell other US stocks to buy them, bringing their values down. Non-passive investors will predict that and divest even more and so on...
And that is on top of the IPO companies losing value themselves, this seems likely to trigger a doom-loop until the market reaches a low enough value. This will likely trigger layoffs and companies reducing spending and investments further depressing the economy. Added inflation from oil prices and war.
This doesn't seem like one big balloon ready to burst, but more like a house suspended by hundreds of balloons and they are about to be ran over by an airplane.
Yeah, think dot-com crash all over again, but probably worse IMO. Problem is, there really isn't a safe place to hide when this all happens. Some are less unsafe, like funds which track dividend-yielding stocks, or gold I guess (but that's just a speculative value store like bitcoin).
The reason they're doing that is because traditional European ponzi scheme pension systems don't work with shrinking populations, so actually we're working till we die in either case unless automation taxes pay for it.
You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits. If we had a reasonable tax system that captured more of that surplus value (which mostly goes offshore and does not in fact "generate more jobs"), then we'd have no problem at all funding the pension systems, and much more.
> You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits.
You mean our pension funds?
Surplus value is a propaganda myth from Marx along with other trivially disproven delusions like LVT. Tell me what work is being done by whom in a wine cellar as the vintage matures after harvest?
"Reasonable" is doing herculean amounts of work as usual, as it is implicitly operating under a thief's logic that the target didn't really deserve it anyway therefore if I steal all of it I will be justified.
We see the same shit when regiemes 'nationalize' segments of the economy and then wonder why instead of miraculously getting better without the 'exploiters' things turn to shit and absolutely nobody wants to trade with them. Empathy such a foreign concept to them that they don’t understand why merchants refuse to trade with those who steal businesses wholesale. Whose only response when confronted about their crimes is lame whataboutisms and victim blaming.
each few years the pension age rises 69 for me now, but it will likely go up further. much further up is beyond the average life expectancy...
Yep, I'm sure in 25 years time, when I "should" retire, the retirement age will be 75, meaning another 10 years of work, so I have 35 left :) At least!
Too bad it's getting harder and harder to find employment after you're in your 50s
Welcome to Costco, I love you.
Which is why I have several different sets of savings for retirement. I have no choice about working now, but I hope to retire early in a few years, and my other savings just need to get me through until the official retirement income starts.
> unless automation taxes pay for it
But this doesn't solve the problem in any way; it simply leads to production drop.
I mean, this is literally the logic of every communist government in the 20th century. They had the same logic that "given the mechanization of agriculture, food practically produces itself; you just need to throw a seed in the ground and give it a couple of tractor rides, and the earth will do the rest. Therefore, we need a tax on such activity, because we have enough resources to feed everyone".
In other words, it's literally a pure tax on automation. The results were mass deaths from starvation every single time.
There were so many contributing factors to those famines but my understanding is that it was far and away the broken incentives for reporting failures as successes to avoid immediate head chopping.
There has yet to be an attempt at a centrally planned economy that actually had accurate data to plan with.
Not advocating for central planning but the important point is that these failure modes are possible under any tyrannical regime. For an example of where capitalist competition fell down in a similar way, look no further than the Irish potato famines.
> it was far and away the broken incentives for reporting failures as successes to avoid immediate head chopping
Actually, no. What you're describing is more of a part of the next stage, designed to solve the already existing problem of famine, rather than its cause.
When communists come to power, they don't try in the first place to reorganize food production under strict centralization; this directly contradicts Marxism, according to which the state gradually withers away as a communist society is built. They simply try to redistribute what is already being produced in a more fair manner, to force peasants to contribute their "fair share" to society.
This causes production to plummet, people are dying of hunger, and only then the government takes control of organization of food production, and only after that do the factors you mentioned become relevant.
But the famine itself under communism, at least in its initial, most massive iteration, is not a consequence of a tyrannical regime, but is a consequence of the "taxation policy" being pursued.
Surely redistributing food (still effectively central planning) produced by a large number of peasant farmers is exactly equivalent to redistributive taxes on a very small number of very wealthy people who have captured the productivity gains of automation. Let's just dispense with the entire field of economics, all that fussy declining marginal utility and indifference curves, and just make a real zinger of an analogy.
Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?
It's absolutely correct that we can easily feed, clothe, house everyone. We can even give everyone comforts. It's mostly greed that prevents it. Greed that capitalism spends $trillions cultivating by brain-washing us all to want more and never be satisfied.
You are correct but
> It's mostly greed that prevents it
Greed is a human axiom. Anything that depends on humans not being greedy isn't worth the paper it's printed on. That's why capitalism won, despite its many faults: it requires human greed to function.
If that were the case why so much brainwashing is needed?
Because its the only way the people who would like to be in power and can't manage to produce anything anyone else wants can see to get themselves put in charge: convince enough other people that despite their freedom, high standard of living, etc. they are somehow oppressed.
Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?
No, I don't think so. From a historical point of view, everything is quite clear: after communists came to power, the most severe famines occurred even before this totalitarian dictatorship is build, as a consequence of these very tax policies, the purpose of which is "easily feed, clothe, house everyone".
Totalitarian dictatorship comes later, as the problem transform to "we can easily feed, clothe, house everyone, but they don't want to, so we should force them"
Pretty sure the Bolsheviks developed their bloodthirsty authoritarian tendencies well before the revolution was even won.
Could you expand on your second paragraph - I'm not sure I understand your position. Are you saying you think we're not able to provide for basic necessities with our current level of technical ability and available workforce?
Originally pensions were created so people who could not work would not be destitute.
The fact it became an all-inclusive all-year-round vacation reward is an anomaly which is getting corrected. Too bad for us we're the generations holding the bag.
At 60/65 (women/men) years old pensioners could contribute a lot to society in their last decade or more of active life.
Caring for grandchildren, running clubs and societies, giving their experience to local politics.
At 60, women who had daughters at 30, whose daughters just had children would be well placed to help with childrearing.
These sorts of things got lost in UK with equality and the pensions crisis.
There was a response about starting businesses. I consider those in their 60s to be capable of contributing to financial systems (eg businesses), I was just focusing on social aspects that have seemingly been lost with societal/political changes. So it was contribution in the non-financial sense I was particularly thinking of.
I suppose when we look at things like the 4-day week, we imagine more time and energy available for social cohesion. Or I do at least.
The gamble is that you either succeed or fail. If you try nothing you'll work until you die regardless.
Current system: Work until you die.
New system collapses: Work until you die.
New system lucks out: Probably get returns (pension).
I doubt that a FAANG programmer from hacker news has to work till they die. You are doing something wrong.
Current system isnt great but works. Just fear uncertainity doubt here.
Not everybody on HN is in a comfy FAANG role
Id go so far as to say that the majority are not.
I'd go so far as to say the VAST majority are not.
"back of the napkin" logic:
~2M FAANG employees (source: Gemini & this includes all types of employees...is your avg Amazon delivery driver regularly reading HN?)
~10M HN users (source: Gemini (via HN post :)) )
You mean 22k unique visitors per day making 13k comments and tons of web scraping bots?
Data from 2022, so if we multiply it by 2 I would say 26k real hacker news users.
Wasnt the stat that for 1 creator there are 10 commenters and 1000 viewers?
Why? An index fund represents the market (usually top 100 or 500 companies), and SpaceX will certainly be in the top few companies. I would argue it's a lot riskier to buy it after the IPO price (if you're buying it secondary it would be easier to spike prices by accident), plus then it's not representative of the actual market until you've purchased the stock.
Unless I'm misunderstanding this, buying at the sale price is the least risky way of purchasing the stock, which is what index funds should do. They should pursue the least risky way of indexing the market
Because nothing about the IPO price has any resemblance to a fair market valuation, and if it's being propped up by this forced inclusion, even less so? The rules existed to fundamentally protect against a Potemkin village situation where an underwriter and some early round investors whip the valuation into a froth and raise against a rabid corps of retail investors who don't necessarily care about a PE ratio of 1,000+ because they're buying the hype.
More importantly, it allowed organic price discovery to occur. This eschews that process because the indexes are _forced_ to participate essentially at _any_ price, so rather than the market writ large having the opportunity to reward or punish the underwriter pricing of the IPO and determine any true idea of price, they're forced to buy the banker's narrative, which will intrinsically prop up the stock to some degree, but at what cost, and based on what underlying?
You know that short selling is possible? And index funds are traditionally some of the keenest participants to lend their shares out to short sellers in return for a bit of extra return (over the raw index).
Index funds are largely synonymous with passive, long term, buy-and-hold investors. That kind of investors are best served by slower changes to the index, especially since index funds are intended to piggy back on the price discovery that happens in public trading. An IPO price, which is the result of a private negotiation, is exactly what you don't want to buy stocks at if you're a passive, long term investor.
There's lots of different indices with different rules, and lots of different funds to implement these. Pick one that works with your preferences.
I did.
Then the rules were changed.
If it is actually growing company with growing valuation being a year late is not big deal over say 10 or 20 years. It is actually the smart move.
How is that the smart move? It's exactly what OP stated as undesirable for index fund investors. The price discovery of the public markets hasn't taken place yet.
Because it's a scam by the richest people in the world to steal from the retirement accounts of everyone else.
And when it happens, I suspect we'll end up having to eat austerity to avoid inflation again. Under new leadership from the Responsible Party, whoever that is where we live.
Why does SpaceX warrant a change of existing trading rules?
>Why does SpaceX warrant a change of existing trading rules?
They don't, while timing certainly benefits, and potentially was triggered by them and OpenAI and Anthropic IPOs, these rules are not specific to only apply to SpaceX.
FTSE Russell (Russell 1000/2000 etc.) Adopted "fast entry" for large IPOs. Eligible companies (investable market cap above Russell Top 500 cutoff) can join after 5 trading days (previously quarterly rebalances). Also eased float rules with carve-outs.
https://www.lseg.com/en/media-centre/press-releases/ftse-rus...
Nasdaq (Nasdaq-100): Effective May 1, 2026, top ~40 market-cap companies can enter after 15 trading days (previously 3+ months). Adjusted low-float handling.
https://spotgamma.com/spacex-ipo-index-changes-spotgamma/
S&P Dow Jones (S&P 500): Reducing seasoning from 12 months to 6 months for megacaps and waiving the 4-quarter GAAP profitability requirement for large issuers.
https://www.wsj.com/finance/stocks/stock-indexes-are-contort...
> >Why does SpaceX warrant a change of existing trading rules? They don't, while timing certainly benefits, and potentially was triggered by them
So the question remains, why do they warrant a rule change?
The answer remains, these rules do not specifically apply to only SpaceX, they apply to a range of companies that fit specific profiles. Timing happens to favor SpaceX, but will equally favor OpenAI, Anthropic and others within the same qualifiers.
The links above provide specifics as to the what's and the why.
The rules were changed with these 3 specific companies in mind. Stop weaseling about it.
And prior to that Elon did float the idea of IPOing on a non-NYC exchange, some Texas exchange. So a bit of a stick and some honey in the IPO fees and early access.
Because the people who can decide the rule change were bribed.
What is a Bribe? These indexes are all for profit companies with no obligation to you.
This is not a "why".
We all know they get paid by musk to load up on overvalued stocks so musk can get some cash from pension funds, the pay off a bit Russell’s for bending the rules. No one in their right mind would change rules to buy space x. What profit must have to compensate the valuation?
Because this time we did learn our lesson is almost 15 years ago? Its a good time to get out of the ride
> Why does SpaceX warrant a change of existing trading rules?
It does not, of course, but when oligarch corruption runs supreme, it is whatever they want.
Because twitter helped elect those who set the rules now.
Because 5 days is not enough for the market to discover the price of SpaceX. And the rules were changed so the float is weighted as if it was much much larger than it is.
Are you sure? It discovers it within seconds following a bad earnings report. It seems hard to know right now whether five days might actually be sufficient or not, seeing as the cat is out of the bag about how unprofitable and debt laden this trillion dollar enterprise is.
If price is fully discovered right after ER then you will see price stabilized right after ER. But in fact post ER prices can wildly differ from the next minute, next day and next week price. It’s speculation and anticipation.
SpaceX financials are a mess outside of the actual SpaceX part. xAI is losing money hand over fist, other random bits in there are doing the same. The valuation makes no sense.
It's basically a money transfer from the average person to the poor richest person on the planet.
The true Great Filter is mental illness, apparently.
XAI is now printing revenue thanks to the Anthropic compute deal. Moreso than SpaceX itself.
> xAI is losing money hand over fist
I wonder how much better Anthropic is doing.
I think there are around 7 people who pay for a grok subscription.
I don't find this reassuring, because Elon's playbook is to force the public to purchase anything of his which doesn't do well on its own. Maybe a nice $1.776 trillion dollar tax funded investment into "unwoke" AI. :D
Well, apparently Anthropic became "profitable" last month, because of some 1-time deal with xAI.
I wouldn't bet on either Anthropic or OpenAI being profitable, we'll find out soon enough what this house of cards has inside, as they both want to IPO.
Though with the current US administration, as proven by the SpaceX IPO, laws are mere recommendations.
Anthropic is paying xAI, not other way around.
> That’s $15 billion a year in compute costs, but reduced to an indeterminately-discounted level for the precise months that Anthropic is using to tell investors and the media that it has an operating profit. That operating profit is a result of accountancy rather than any improvements to its business model.
> While I wouldn’t say this is cooking the books, it’s definitely a shiatsu-grade massaging of the numbers. Anthropic has deliberately leaked a quarterly “profit” where it knows it can suppress its costs
https://www.wheresyoured.at/anthropics-profitability-swindle...
It turns out, there are many ways to skin a financial cat.
> Though with the current US administration, as proven by the SpaceX IPO, laws are mere recommendations.
Are they breaking laws?
If you can write the laws, nothing is illegal. This argument isn't as strong as you think it is.
I'm asking a question, not making an argument.
Moreover their filings on the matter basically correctly weight their space launch business and then go "and xAI will obviously be worth a bajilion dollars more".
they should wait for the major lockups to pass, there by skipping some of the inevitable volatility they will likely cause.
Ask yourself this question: Why were the rules there in the first place? SpaceX being big doesn't make this okay, it actually makes it more dangerous since more and significant money could be funneled.
You shouldn't be downvoted because your point is completely valid. Matt Levine made the same point in the last Money Stuff podcast. These indexes are supposed to contain the largest, most significant, and in some cases all companies so people shouldn't be mad at the indexes for pulling in a company that's going to have a 1.5T market cap at IPO. Given the market cap, it would actually be weird to not have it in an index like the S&P500 or QQQ.
Instead blame the bankers and market who are putting buying in at 1.5T valuation.
If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.
The whole point of original rule was to have market discover price over time before adding a company.
It is absurd to blame "market" that did not had enough time to settle. "Bankers" are to blame for making this rules change happen.
It is entirely valit to blame people who changed the rules to allow this to happen.
>>If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.
"People" don't know much about finance to put it mildly. ETFs are created by market demand. Even "factors" ETFs are often based on completely irrational things like dividends, P/E ratios and other meaningless metrics. This happens because people are easily seduced by narratives ("solid dividend paying stocks", "low P/E ratio - good returns") which are plainly wrong but tempting to an average person.
Most people realized they don't know anything about finance and would like to pay someone (their fund manager) to make responsible decisions and expose them to wide market while avoiding blatant manipulations. Unfortunately the incentives are misaligned here. The managers' incentives are somewhere else. They are not paid by long term performance of their fund and they are disproportionally penalized for taking contrarian decisions.
People being force feed those mega IPOs losing money on them is bad for others as well - there will be less wealth for productive investments and more in hands of "players" (or scammers if you want to call it out). There might be a crash. Trust in financial market will plummet and hostile regulation might arise which other market participants will pay for even though they are not to blame.
I will not have exposure to those mega IPOs but I am in privileged position because:
-My understanding of financial markets is much better than that of an average person.
-I have quite a bit of time to follow all of it and react in time
-I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)
-I know where and how to move my money so I don't lose advantages of wide market exposure
It took me a lot of effort to set it all up like that. An average person falls short on all of the above and is not in position to avoid donating part of their pension fund to Musk and Altman though. It is still bad for me for reasons mentioned above.
> I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)
How so?
So then, why change the rules?
What's really clever is that Musk could pull his Nazi salute at the inauguration of the president he bought, and the ensuing 'voting with your dollars' against him doesn't matter because he was able to orchestrate forcing people to pay him by cutting them out of the loop. I mean it's absolutely evil, but it's pretty clever - his team proved they can't run a country (they probably could, but don't want to), but they're incredibly adept at stealing.
I wonder if Musk chose rocketry solely because of the ability to use it to drain money from government?
> SpaceX will certainly be in the top few companies.
I'd argue that it certainly isn't.
>This should be a 5 alarm fire.
Only for people that get their news from reddit.
Initial public offerings whose market capitalizations rank within the Nasdaq 100’s top members will normally be eligible to be included after 15 days of trading, Nasdaq said in a statement. The timeline is shortened from at least three months currently.
“Industry professionals, including asset managers and institutional passive portfolio managers, were mostly supportive of the Fast Entry proposal and proposed timing,” Nasdaq said in the statement.[0]
15 days vs 90 days isn't some huge shift nor is it inherently some "flaw." These changes have been asked for long before Elon entered the White House.
[0] https://www.bloomberg.com/news/articles/2026-03-30/nasdaq-cl...
The question is whether or not those industry professionals are speaking in their own interest, in the interest of all stockholders, in the interest of the economy as a whole, or any mix of the above.
This is why non partisan financial institutes like the FED and consumer protection groups like the CPB are important and we should have them as non corrupt and robust as possible.
Because it just doesn’t seem wise to trust asset managers with these kinds of things without a lot of evidence and transparency. The 2008 crisis should have taught all of us that much.
The money still comes from somewhere. In this case, those index funds will be forced to trim holdings of other companies. So it's cannibalizing other parts of the stock market.
which, if true, would make an arbitrage opportunity for a fund that explicitly excludes these high valuation targets but buys those trimmed companies (because for trimming to have happened, they must've been sold unwillingly and thus must be under-priced).
Which, again, benefits the wealthy and well-informed and well-connected.
The suckers who have their retirement savings in some kind of index fund because all the experts have been saying, "Buy index ETFs and forget about it" for decades are gonna get fleeced, and the wealthiest get wealthier.
What to do then, if "Boogleheads" are wrong?
I suppose everyone reading this thread counts as "well-informed" then, right? All I have to do is move my 401k into the bond-heavy fund right now and then back into the stock-heavy one when everything craters is what I'm hearing. It's what you're doing, right?
I'm informed enough to see what they're doing and why, but I'm not informed enough to know how to prevent them from wrecking the economy for normal folks while enriching themselves. I don't think information alone can solve the problem for the majority of people. Retirement accounts aren't often easy to change, non-retirement accounts have tax consequences, timing the market as a normal retail investor is risky.
I don't really have advice. If I were directly holding an index that tracks the Nasdaq 100, I would get out of it, and take the tax hit. But, I suspect the impact and risk will cascade outward. Nvidia has exploded in price based on actual revenue (though I suspect it will be temporary, and have to come back to earth in time). SpaceX is entirely fantasy land. It doesn't have revenue to justify anything like the price they're launching the IPO, and when indexes are forced to buy it, everyone holding those indexes provides exit liquidity for the same scammers who've been hyping it.
If you are subject to capital gains taxes, this would likely be a bad idea? (Though I have no clue how American 401k work in this regard.)
401ks are tax exempt so there would be no tax for switching investments.
Thanks!
You are giving up equity premium for the time till everything settles. You will also not know when that is. It's going to be more like a long term ticking bomb that may take years to detonate.
Years? The way people are talking in this thread it's all an AI exit scam, which shouldn't take years to play out. It's a popping bubble, remember?
Yeah it's years because they will slowly unload it to entities that are forced to buy (and as they do those entities will be forced to buy more). If you have money invested in those ETFs I think you may want to pay a bit more attention rather than making sarcastic comments unless you want to end up with 5%+ of your portfolio being invested in hopium by the end of 2028.
The threat is to end up with the bag, not that the bag explodes this month or the next.
> Yeah it's years because they will slowly unload it to entities that are forced to buy
I get your logic, but why all the handwringing over the short time frame for inclusion in these funds (days instead of a year)? None of that should be relevant if it's going to take so long to play out.
> unless you want to end up with 5%+ of your portfolio being invested in hopium by the end of 2028.
OK so, going back to the original question: the play is what? Move into bonds around IPO time and move back in when everything craters?
>>I get your logic, but why all the handwringing over the short time frame for inclusion in these funds (days instead of a year)? None of that should be relevant if it's going to take so long to play out.
It matters at what price the forced buying starts.
>>OK so, going back to the original question: the play is what? Move into bonds around IPO time and move back in when everything craters?
It's hard to say what's the play is because:
1)For many people making any kind of "play" triggers a tax event
2)It's not clear what ETFs to choose as currently there aren't many good options.
Imo one decent choice out of available ones are ETFs based on MSCI World Quality Factor index. It's not ideal because it still excludes companies like Berkshire Hathaway (because of accounting rules) but it avoids many suspicious companies (like MSTR) as well as mega IPOs. Unfortunately those are more costly (0.3% instead of like 0.05%). If you are in EU you and want world wide exposure you still need something for emerging markets (EU based ETFs based on that methodology exclude emerging markets).
You can also become an active investor but that's a job and I don't think many people want to take on it.
The main problem with going with bonds is that you are giving up equity premium and you still need to time the market for a comeback and that's very difficult.
That's not what arbitrage means
>The money still comes from somewhere.
Can't they just be printed and massive funds borrowing money to buy shares?
> All three benchmarks are now structured to buy SpaceX at IPO pricing
S&P has not finalized a rule change yet.
Do you think it’s more or less likely that they will make the same change as the other benchmarks?
> Do you think it’s more or less likely that they will make the same change as the other benchmarks?
S&P has historically been more conservative. My personal guess is they won't adopt all of the proposals.
But you think they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?
Not true, they collectively lose investors if they become less attractive. Probably not an overnight thing, but if people are told that index funds are not attractive anymore then increasingly fewer people will put their money in them vs a hand-picked portfolio.
But also to follow the existing rules set in place to protect passive investors, no?
SpaceX will not "win". Its current investors will win by selling at IPO and in following months at inflated prices to unwilling buyers.
If the S&P adopt those rules would there be any index fund that is S&P without the new rules?
An index fund like the S&P500 is not the S&P500. It is stuck competing in a world of low margin pain.
I sincerely hope S&P and Nasdaq rollback the SpaceX-targeted changes, but unfortunately I seriously doubt it.
Dimensional funds have a type of index factor funds that roughly track these indices without strict adherence to S&Ps inclusion rules. That's the only one I'm aware of.
IZZ, or in other words fuck em.
> they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?
Yes. And I see the argument for it. It’s hard to claim you represent the market if trillions of dollars are outside it for no reason other than newness or capital-structure weirdness. (I agree with excluding unprofitable companies.)
Then why are these changes being made for these companies IPOs?
Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear.
> Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear
These indices have lots of competition. NASDAQ 100 lost basically zero money when they made these changes. If S&P makes them, I'm doubtful anyone will react either.
When S&P was still taking public comment, I put the link on HN. It got like two upvotes. This isn't something materially care about as much as like to get angry about on the internet.
Why do you consider HN upvotes to be more indicative of "materially caring" than HN comments?
Perhaps you got unlucky with the timing of your post, or title didn't grab attention in the /new feed compared to this post's. For all we know, whether or not they saw your HN submission, every critical commenter here may have also submitted a public comment to S&P.
There's quite a bit of money in, say, the cannabis business; do they have any representation in indices of note?
You clearly have no clue of the marketcap of these cannibas companies.
The minimum marketcap for S&P 500 is ~23 Billion
The highest current marketcap of cannibas companiy is $3 Billion
What was the point of your comment saying
> S&P has not finalized a rule change yet.
If you were responding to someone saying the benchmark indexes were changing their own rules?
Like the actual intent of the comment and not just observing reality like someone saying the sky is blue.
Are you actually optimistic?
> Are you actually optimistic?
Not particularly. When I posted the request for comment to HN it got crickets [1].
Not enough people care about this. And the "safe" option has kind of shifted with the other index providers having moved first. That said, there were a lot of proposals and I'm not expecting all of them to be adopted.
[1] https://news.ycombinator.com/item?id=48054324
There's no obviously correct answer here.
Not changing rules would seem quite obvious and correct at the same time.
A: posted a fact
B: but what about your emotions
Very glad to see HN stereotype being upended :)
A: This has not happened yet. B: Are you actually optimistic that it won't?
That's a request for an opinion, not an emotion.
> This forces over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.
And more importantly forces them to sell the rest of the market.
Who will be on the other side of these trades? I suspect the stock market is not sufficiently liquid for all of that to happen in a single day without the rest of the market seeing a significantly depressed price, and index holders effectively gifting value to everyone else by effectively pre-announcing their large trades.
>and cut the seasoning window from 90 days to 5.
90 days or 5 days, it doesn't really matter because the float will be tiny due to the 6 month lockup. What kind of price discovery are we expecting that would happen in the other 85 days?
If it does not matter, then don't change it.
> it doesn't really matter because the float will be tiny due to the 6 month lockup.
Not really: https://www.reuters.com/legal/government/spacex-allow-early-...
The indexes are weighted based on the float (at least most of them)... so a small float means they will buy a much smaller number of shares.
Well, they changed that rule as well. If the float is less than a set percentage, then it is weighted as a much higher percentage. Something like the minimum for weighting is 12% where SpaceX's float will be below 5% (those are the numbers I recall, but I don't have a lot of confidence in them.) That means they will be weighted as if the float was 12%.
> they changed that rule as well
S&P hasn’t changed any rules yet.
NASDAQ has, however. SpaceX will be weighted at triple its public float.
How many funds track NASDAQ vs S&P 500? Feels like the former is way more niche/sector specific than the latter.
I think that's the point the parent comment was making.
No, the parent was saying the other rule change is arbitrary.
The tiny float and just a few days before the index funds buy means they have to buy without any more revenue / earnings info than was already published pre-IPO. 90 days is a quarter, so there WILL be more price discovery before a 0 day index fund seasoning period.
How about 1 more quarter of earning reports and estimates?
SpaceX is slowly and steadily increasing the float over the first 6 months by having a rolling end to the lockup. The only major cliff will be Elons shares
> The only major cliff will be Elons shares
You can’t imagine a scenario where he goes lunatic and does something wild (again)?
Steadily starting about 60 days (Q2 earnings) after the IPO.
Off-load some of them when the valuation is _to the moon_ from AI and then later he'll force shareholders and the board to gift him even more shares then he sold.
There is a world of difference between 5 and 90 days, even if you aggressively stick to the “time in the market over timing the market” strategy. If it wasn’t of consequence, then they wouldn’t be attempting to change the rules. And if SpaceX is such a great long-term investment, then they shouldn’t need the advantages this provide. Join the index funds like any other company. Let the market sort itself out.
You're misrepresenting things a bit. S&P 500 has not approved those changes yet and they have some other protections as well. Nasdaq and FTSE Russell definitely sold out and should not be trusted as good indexes going forward.
Most popular passive indexes are S&P 500 and some total markets. Total index, like the one used by VTI, is likely the best spot in this case. They have not changed any rules, as far as I know.
What can those of us who are passive investors do to protect ourselves?
You protect yourself by understanding that this is one infinitesimally small cost (expressed as a fraction of your portfolio returns) that doesn't overcome the benefits of maximum diversification and the ultra-low fees of broad-based ETFs.
Buy MSCI World, enjoy the 0.04% p.a. fees and minimal idiosyncratic risk, and relax.
Index rebalance traders will reduce your annual returns by less (probably much less) than 0.1%, but there is no better alternative for you at this moment in time.
I broadly agree. Though I'm less pessimistic: lots of people will pay lots of attention to SpaceX and friends, and with short selling in public markets being possible, an accurate price will be established very quickly.
Remember also: index funds are some of the participants most keen to lend out their shares to short sellers. It's one of the rare ways they can boost returns above the raw index they follow.
> and with short selling in public markets being possible, an accurate price will be established very quickly.
I know very little about markets, but: aren't the short-sellers just going to provide liquidity for the big index funds? Like, if the funds HAVE to buy SpaceX, and the funds are enormous, wont every single stock sold short be immediately gobbled up, as well as pretty much anyone else wanting to sell? Even if everyone else is selling like mad, it wont affect price much at all?
Maybe this is naive, but if these enormous funds are more or less forced to buy SpaceX, it seems impossible that "actual price discovery" is going to happen in any reasonable amount of time, and the short-sellers will be screwed.
Here are some options for pre-tax retirement funds (ex. 401k):
1. Exchange your market-cap funds for S&P 500. Afaict, even with their own rules changing, they will wait up to 6 months (as opposed to 12) to let SpaceX in. This is the simplest solution that buys you time without losing other gains in the market, assuming your existing funds were broad market-cap funds. The idea here is to wait for ~5 months and see if you still want/need to exit S&P before they let SpaceX in, or pick another option.
2. Exchange your market-cap funds for RSP, an equal-weight fund. This is also simple and reduces your risk, as SpaceX's allocation of the fund would only be 0.2%.
3. Exchange your market-cap funds for a selection of different funds in order to replicate the previous allocation. Buy small-cap and mid-cap funds, and buy ETFs that cover the market without including tech. This is more complicated, but not really that complicated once you learn how to exchange funds. Still mostly passive, you're just actively managing your allocation into different indexes. Downside is you lose the gains from tech.
4. Exchange all your index funds - temporarily - for a money market fund or other low-risk, low-return investment vehicle, until SpaceX price settles down. This is the absolute simplest option, least risk, least reward. You lose all the gains from the market during this time, but a percentage of your fund doesn't disappear overnight. If you're nervous, it's safe to do this by June 11th and sit on it until July 5th and see what you'd like to do then.
You probably DO NOT want to do this for non-retirement funds, as you will get hit with capital gains taxes. You would have to estimate how much you think your portfolio would drop due to SpaceX's overinflated price falling, and compare that to your potential tax bill from rebalancing. It's almost certain that your tax hit would be higher.
I asked this the other day. The response was to buy VGT instead of QQQ https://news.ycombinator.com/item?id=48324097#48334357
Not buy these index funds. If you don’t want to own the entire market, don’t buy funds that seek to own the entire market. Funds like ESGV which exclude companies with poor governance have existed for a very long time - I can’t find a clear answer as to whether or not it will buy SpaceX, but I’m sure you can find funds that cater to your desires.
That ignores the actual issue here, which is the change in rules. Index funds already seek to own the entire market, and when most people chose these index funds there were rules about when newly listed stocks get purchased by the funds. And now those rules are being changed.
Index funds generally try to match the performance of the index, but most are not required to hold the same companies as the index itself does. They typically do, but managers often have choices.
> Index funds already seek to own the entire market, [...]
No, it depends on the index in question.
Yes, most index funds don't literally intend to own the entire market for any sufficiently broad interpretation of the word "entire."
But the point is that we have notable index funds which are marketed to customers as having the intention to own segments of the market according to certain rules, and they are changing those rules with relatively short notice and for reasons that seem suspicious to many customers.
The problem is I'm already in a S&P500-tracking ETF, for a decently large amount of money. Selling it off would be a big taxable event for me, something I don't want to do.
Could you use a prediction market (or Spread Betting in the UK) to hedge against your ETF loosing money during the period? If the ETF lost value, the hedge would gain it back and vice versa. You wouldn't need to sell the ETF and you'd only be liable for tax on gains from the prediction.
Would you be taxed even if you put it straight into another fund? Genuine question.
Yes, because when you sell it, you get cash and profit. Profit is taxable, in Germany they tax it with 25% + Solidarity Tax + Church Tax (if you are a member of a church). After, you can go ahead and buy another fund, but in between you "shed" a significant amount of money.
Details depends on jurisdiction, of course.
In the US, you would likely also have to pay capital gains taxes for such a trade. (I think.)
In Singapore, in contrast, swapping between funds like this would not have any tax implications.
However they are literally changing the rules of what "the entire market" means to include those companies sooner that they would have been when people bought those indices.
Index funds don't represent "the entire market" anyway. They are a diversified selection of stocks choosen according to some rules.
You could move your passive investment to an index that includes a great proportion of bonds or move to an entirely bond based index. You reduce the upside potential and downside potential.
I personally have moved my retirement accounts to bonds while being more aggressive with my personal investments.
If you intend to remain a passive investor, keep doing what you’re doing. If you have conviction that AI boom will bust and you want to become an active investor, follow the advice from other comments on how to prevent these companies from being part of your portfolio. If you're going to become an active trader, I suggest thinking about both upside and downside risks and look beyond the local echo chamber.
Become active investors.
There are many large cap ETFs out there:
https://etfdb.com/etfs/size/large-cap/
You could switch to one that focuses on stocks which pay dividends, for example. That should provide a bit of protection against an AI market crash:
https://etfdb.com/etf/VIG/#etf-ticker-profile
So-called "smart beta" ETFs are also interesting. https://etfdb.com/themes/smart-beta-etfs/
Here are some factors I would expect to rule out the frothiest stocks:
"Quality Factor ETFs are made up of securities deemed to exhibit strong fundamental characteristics. These ETFs screen for stocks that have healthy balance sheets, encouraging growth prospects, and consistent improvements in their earnings."
https://etfdb.com/themes/quality-factor-etfs/
"Value-centric ETFs invest in securities deemed to possess value characteristics, including those operating in stable industries with relatively low price-to-earnings ratios."
https://etfdb.com/etfs/style/value/
"Low Volatility ETFs invest in securities with low volatility characteristics. These funds tend to have relatively stable share prices, and higher than average yields."
https://etfdb.com/etfs/investment-style/low-volatility/
Be sure to check the expense ratios on smart beta ETFs. Generally, the more sophisticated the stock screening, the more they will charge you in management fees.
As long as you're thinking about your portfolio, you may wish to consider international diversification in case the US economy implodes somehow: https://etfdb.com/themes/international-equity-etfs/
Personally, I keep my portfolio extremely conservative. My bet is that if the singularity arrives, we will all either die, or get UBI. I don't particularly care about having more moons than the other guy: https://www.astralcodexten.com/p/you-have-only-x-years-to-es...
That’ll do precisely zero to protect against the effect described. In fact the opposite - the dividend paying stocks will by mathematically necessity be among those ETFs sell down to buy these IPOs
I believe you may have gotten discussion threads mixed up, but in any case: I expect that as SpaceX investors sell their SpaceX stock, they will buy ordinary equities to diversify.
Move your investments to funds that won’t automatically buy spacex stocks
Moving investments usually means taxable events, which we like to avoid if possible.
Not in retirement accounts
It is not just the passive money. Many active managers are benchmarked against those indices, and you do not want to try to explain to your clients that you lagged in performance because you did not buy these stocks when your benchmark did. Sitting out would be taking a huge risk (of losing your job, which is important to you, as opposed to losing your clients' money, which is less important if your benchmark also lost money).
I don't like this either, but from the article:
> Although Nasdaq has already shortened the “seasoning” period before index inclusion to 15 trading days and FTSE Russell has slashed its waiting time to five days (and S&P Dow Jones is reportedly considering something similar), most share indices weight firms in proportion to the value only of shares they have released for public trading (the “free float”). For SpaceX, this means just the $75bn or so of stock it intends to issue in June—so its initial weight in the S&P 500 will be around 0.1%. The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk. Even so, SpaceX’s probable initial weight in this $40trn index will still only be around 0.5%.
So people who hold ETFs that track the S&P 500 probably don't have too much to worry about. People invested in the NASDAQ 100 probably have more to be outraged about - but then again I suppose if you're invested in the NASDAQ 100, you may be consider more exposure to SpaceX to be a good thing.
This needs to be higher for more visibility, because the weighting and the float's proportions are an important aspect that most news sources or comments fail to mention.
Correct me if I'm wrong, but 0.1% of S&P 500 seems exceedingly huge when you consider how much of the economy is represented in the S&P 500.
https://www.slickcharts.com/sp500
At .1% they'll have the same weight as something like DoorDash.
>The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk.
im not a finance guy, can someone explain to me why the nasdaq would want to "woo" someone specifically? what benefit would nasdaq get? or, alternatively, what harm would befall nasdaq for not woo-ing musk?
This really makes it clear. Thank you!
how dare you come in with rationality in the face of ELON BAD
It's still extremely corrupt, and done to benefit a very small group of people. Dismissing the criticism like this is directly against the rules and spirit of hackernews to assume good faith
This fundamentally misunderstand the point of an index. The fundamental reason S&P 500 exists is to let people buy the entire market ( the top 500 companies make up most of the entire market ). That is it. Period.
They are not saying these 500 companies are going to be the most successful in 6 months or 10 years. At one point Enron was 0.6% of S&P500 because it was a large company, not because the directors at S&P500 thought the management were honest people.
If you don't like that, fine, don't buy S&P500 and buy stocks or other funds that do have companies you like.
This disregards the fundamental reason why people buy index funds in the first place. Rules for consistent GAAP profitability and cooldown periods specifically prevent retail investors from being exposed to particular malicious stock market tactics and overall risks that otherwise could significantly hurt them in the short term. So it's more like saying "you don't like extra risk? too bad."
This is simply not true and a misrepresentation of the issue. There is no issue with SP500 buying into all these companies. The issue is that “valuation” should be determined by the market before the index funds buy into it hence the original rules and policy in place. Else wise we run into the issue now where our 401K is pumping the IPO, regardless of fundamentals.
> The fundamental reason S&P 500 exists is to let people buy the entire market
And why do people want to buy the entire market in the first place? They want to diversify and insulate themselves from a single company crashing their portfolio value.
What are people afraid of right now? They're afraid of a single company crashing their portfolio value.
Why are people afraid of their portfolio value crashing? Because these 3 companies will fundamentally increase the overall risk and volatility of the index.
Do you see the problem?
The problem is people equating S&P 500 with "set and forget" investment when that's never what it was. It's an index. You're not paying anyone to balance it with a particular risk profile.
There are indexes that invest equal amounts of money into all companies, so Nvidia doesn't dominate. Or you can pick low growth high dividend indexes to insulate against AI. Or just grab Vanguard LifeStrategy if you don't want to think.
The current situation is unusual. No index can handle all situations. Either adapt or use a fund that does the thinking for you, right?
People use the dollar in business becaUse its a stable currency.
If the US does something to destabilize the dollar, will economists be running around saying “the dollar was never intended to be used for that purpose!”? No.
It doesn’t really matter if the index “wasn’t supposed” to be something it became. The problem is the same. The only difference is who you blame.
The current situation is unusual and the standard rules handled it fine. For some reason they're changing the rules. That's not "no index can handle all situations." It's a deliberate, harmful change.
Why the special rules for SpaceX though? I still do not understand why the world’s richest man and one of the most valuable companies needs an exemption? Genuinely confused.
Makes you think how he got so rich in the first place…
Why would you accept this? Who does this serve?
I want to believe the world is full of good people but I read stuff like this and realize otherwise.
nasdaq & russell, yes. but not s&p - that has a 6-month requirement for eligibility, which ensures stock is past the lock-up period.
This seems like straight up fraud? Presumably all to bail out early investors?
That’s the new paradigm of US leadership. Not laws or principles but just „who’s going to stop me“
And if it's not fraud, it's fascism
I’m actually neutral on this so far but my main question is are they changing the rules permanently or just one time?
https://news.ycombinator.com/item?id=47613231
You forgot the part where NASDAQ already enacted a rule change that normally prohibits small floats from index inclusion (and thus forced purchase by index funds), which was normally 10% [1]. SpaceX is only floating ~4.3% of their stock and they're triple-weighting it.
[1]: https://www.forbes.com/sites/garthfriesen/2026/04/25/spacex-...
Also worth asking what SpaceXLAI's plan is to make money. $22.7T of their $28.5T Total Addressable Market is... Drumroll... Enterprise AI! That's the plan, that's what we are investing in: spacex and Tesla and Twitter are all side shows, to sell AI. That's what everyone's absurdly overpriced forced passive investment is going to. https://bsky.app/profile/segyges.bsky.social/post/3mnan7hr2j...
There is nowhere near enough burning rage for this absurd fleecing of the public.
Tesla’s market cap is entirely about Optimus vaporware hopium.
Similarly Space-X’s IPO valuation is about “data centers in space” vaporware hopium and “timeshare all the GPU time that Grok isn’t using”.
There’s a trend with Musk’s companies.
And ten years of full self driving being ready in mere days.
Yes and. The new FSD is $100 /month and actually works
I used it. It doesn’t work as FSD. A driver has to pay attention and intervene. Can’t sleep. Can’t read a book. Can’t look at the scenery going by. It’s still super neat and I like it. But it’s not FSD, and I suspect why fewer than 10% of tesla owners pay $100/month or bought it.
Waymo is actual FSD.
Still needs a driver. The F in FSD is supposed to stand for "full." It's not there yet.
The problem is the stock market is more divorced from reality than we have ever seen. For instance, why does Tesla stock still sit where it is? How could it possibly not be going down at this point? So many undelivered promises, major setbacks in sales, massive decreases to their sales forecasts… literally nothing has gone well for them in years and yet the price is still outrageous. It really feels like I’m just out of the loop on something.
Jack Barker’s rather blunt monologue in SV about how the stock is the product is more true than ever. It felt very heavy handed at the time but it’s only proven to be more the case than I thought.
This probably illustrates my disconnect from reality, but I’ve never understood why a company would care about share price once they’ve left the door. I get that the co still owns its own shares and can conjure new ones for sale, but why would those very infrequent events interfere with the day-to-day operations. In my (wrong) eyes, it’s like pro-baseball players trying to increase the value of their trading cards via their participation in the game. The team doesn’t matter any more, it’s al about what the card owner wants.
Selling more stock is usually a lever a company can pull when they want. So even if a normal company in normal times doesn't have a reason to do so often, they can if circumstances change. Tesla and some other meme stocks have been extremely aggressive about selling more shares into crazy valuations, and have raised immense amounts of money doing so.
Plus as others have said, usually all of the decision makers have a bunch of stock exposure and will prioritize their own financial gains over pretty much anything else.
Company itself really shouldn't. Everyone involved in management from board to executives do. Board operates behest of stock owners, executives operate behest of board. Such to keep their job they have to do what stock owners want. And stock owners either want dividends or growth in some term.
> Board operates behest of stock owners, executives operate behest of board
These are often both weak signals, though. They'll govern very high level decisions, but all the day to day is inside the company. Just as I want a return on the money in my bank account (as I was promised) investors want a return on their money too, and as you say, the executives and board should care about making sure the people who put money into the company are getting a decent deal out of the arrangement.
People have always way overstated the power and scope of “fiduciary duty.” It doesn’t mean you have to redline your company at all times to maximize every single penny in the short term at the expense of all other considerations. That’s just a cultural thing we do in the US by choice
AI in space, for all that sweet sweet latency.
More like for all that sweet sweet cooling capacity.
EDIT: guys, it's sarcastic... since the parent was talking about latency, cooling is something that is even worse in space than latency
It is not easy to radiate heat in space. You need a significant extra mass budget to radiate heat from hardware that is easily cooled in less volume on the surface. These will also be too large of a capital investment to operate as disposable satellites at the bottom of LEO. They will necessarily be higher up.
I'm bad at sarcasm apparently.
Well, unfortunately, it's not such common knowledge that it would be considered sarcastic by default. I have learned to be explicit by appending "/s" or "/j" so it's clearer.
If putting data centers in a vacuum is a good idea why not just put them in a thermos bottle here on earth?
If it made the energy free, we’d take a very good look at it.
This has been debunked countless times. You can't cool things efficiently in space.
Space is not far away at all.
Do data centers in space still depreciate GPUs over 6 years if the datacenter falls to Earth in 3?
It's not only Grok, but also the robotics applications.
So... The US GDP in 2024 (the last one I found) was $27.8T...
They are planning to capture 100.7% of it?
Or a bit of everyone else's.
To quote a message I wrote on a finance channel on telegram:
> Or a bit of everyone else's
The world's GDP is about 100T. That would mean more than 1/4 of every expenditure in the entire world would go into buying AI or by AI providers into their consumables.
That number is just bullshit.
While I essentially agree Musk is BSing, TAM doesn't imply "we can actually get this entire market". The TAM for the food sector is *all food*, not what one particular alcopop manufacturer can sell: https://en.wikipedia.org/wiki/Total_addressable_market
AI today can't do all desk jobs, I don't know how far we even are from that given the spiky nature of ML, but it smells like this IPO is using that as the justification for the claim.
Do we know what the situation looks like with other popular indices such as MSCI World, MSCI ACWI, MSCI ACWI IMI, FTSE All-World, …? Do they have any requirement of 12 months of trading or of profitability or similar?
Very silly question but cant someone just spin up an index cutting out spacex? Like even an etf that is nothing more than an sp500 sans non profitable companies?
Yes that's definitely possible and will probably happen. The big hurdle is traction though. How many people will know about it and be willing/able to shift into it? A lot of passive investments are effectively locked in by unrealized gains or limited 401k provider options.
Absolutely nobody is forcing retirement accounts to buy S&P.
Do you have a source for the $30 million claim? It'd be nice to work out the math. Not _all_ of 401k funds / index funds are going to go to SpaceX.
As of April, the combined market cap of index funds (including ETFs) is just under $21T. [0]
Actively managed funds is $18T. And, for example, the S&P500 alone is $69T.
[0] https://www.ici.org/research/stats/combined_active_index_042...
*trillion
The 12 largest companies in the USA together have that market cap, so probably not.
yeah, trillion. 30m isn't even a vapor droplet.
> Do you have a source for the $30 million claim?
Index funds in total had about5 $7 trillion in 2021 [1].
[1] https://alexchinco.com/double-what-you-think-it-is.pdf
The crypto market is 2.5T, essentially money parked in nonproductive assets. A simple public awakening and reallocation will suffice.
This kind of doesn't make sense. You don't park "money" "in" crypto. Crypto sits there, with its value set at the last sale price. There's nothing to stop the next sale price taking its value to zero without anything happening to real money other than some of it changing hands. It's not like crypto holders can sell $2.5T of crypto and plough it into equities, for a start some other investor will have to buy it from them for $2.5T and then we're in the same position we started in.
Explain to me how crashes work then, isn't it when there is an inconsistency on supply vs. demand?
It just takes a narrative shift to tumble it - ex: quantum to break crypto security.
Well, the good times were nice while they lasted. I fully expect a meltdown.
So the obvious thing to do, for someone that's got ~$3mm to play with, is to setup an ETF that is SP500 but with the old rules. If you can convince $40mm of other people's money to go into your not-specifically-Musk-less-but-just-happens-to-be ETF, they'd come out ahead.
The S&P Shariah index fund is required to exclude SpaceX and already exists https://www.spglobal.com/spdji/en/indices/equity/sp-500-shar...
Seems bizarre to have a Shariah-compliant index fund comprising companies that are all levered with huge amounts of debt financing.
Why? Was space exploration incompatible with Sharia? Is it the pornography bit of xAI?
Advertising, presumably. But that also excludes, like, all of big tech?
One presumes it's because a huge amount of its revenue comes from defense contracts, which are haram. Here is n excerpt from the fund's exclusion criteria:
> S&P 500 Shariah Industry Exclusions. The index universe consists of all the constituents in the S&P 500 Shariah, excluding companies classified as part of GICS sub-industries 20101010 (Aerospace & Defense), 40203040 (Financial Exchanges & Data), 40201060 (Transaction & Payment Processing Services).
That is wild. Saudi Arabia which is governed by sharia law spends about 7% of its GDP per year on its military. I had no idea that ownership of defense contractors is considered haraam.
opinions vary, but this was the opinion adopted when formulating this index
it probably makes it easier to ship in europe where some private banks and pensions (eg denmark gov) ban defence investment
thanks for the explanation and digging up the exclusion criteria.
Ketamine (and pump and dumps) is haram
Looking at their exclusion criteria, which one do you believe it falls under?
Why would a Shariah index fund have to exclude SpaceX?
Wouldn't the other index stocks need to tank as funds must be shifted by large scale investors into the these new gigalistings?
Only $3mm needed?
According to https://www.etf.com/sections/news/launching-etf-no-cheap-end...
Interesting, thanks. Actually slightly cheaper than I expected.
The only good news here is that the SP500 and wide market index funds like VTI are "float weighted", meaning they will only buy based on the dollar value of SpaceX stock sold to the public. The latest numbers are something like $75B for SpaceX, which is only something like 3% of the $2T valuation, so they will only buy a small amount of this (0.1% of the SP500 fund) because the total float for the SP500 is $45-50 trillion.
Still criminal, and also, anyone buying this individually is a fool.
This is going to be very... "interesting". SpaceX will IPO with minimal float, while at the same time forcing every index fund to buy a fixed percentage. A long squeeze, so to speak.
I can't picture any scenario where this ends well.
It's honestly blown out of proportion. S&P 500 allocation is float adjusted, i.e. the allocation is based on the market cap of the floated shares, not the total market cap. SpaceX float is ~4% at IPO, and at a $1.75T valuation that's $70B in floated shares.
SpaceX will be ~0.125% of the index. The actual amount of buying is in the low tens of billions, and given these are $30 trillion+ markets, this is hardly anything to fret about.
Changing the rules to appeal to SpaceX is really really bad... especially given the historical performance of IPOs
WTF
Cutting SNP500 from you etf portfolio seems the sensible choice now. On the other hand, things haven't been sensible for over a decade, and there's still no sign the insanity will stop. The market can stay irrational longer than you can stay solvent...
It’s an index fund. It must follow the index. They’re forced to buy any company in the SP500.
They are buying it at IPO pricing
See also https://www.youtube.com/watch?v=sYA-z0Y8WRQ for a quick explanation in 10 minutes.
Wow, didn’t know that.
If SpaceX tanks and 401ks are left holding the bag, this could result in the biggest class action lawsuit ever.
Oh, SpaceX already has that covered: thanks to the TX legislature, SpaceX shareholders cannot file shareholder lawsuits, you can only complain to the "Texas Business Court" or get binding arbitration [0].
[0]: https://www.bloomberg.com/opinion/newsletters/2026-05-21/spa...
People can surely sue the index publishers for removing the safeguards, or the index funds to take more risks than they were mandated.
When money is lost in the order of billions, someone is getting sued.
> someone is getting sued.
but that doesnt mean any money gets recovered at all. Musk sure as hell aint giving anything back.
The fix is to simply not buy it - those 401k aren't completely passive, you can choose a different investment (instead of NASDAQ index).
Will take 6+ years and lots of fees lost to recover loss. Won't be anywhere close to made whole.
> People can surely sue...
Would either published indexes or investment funds exist, if suing them for poor performance was anything resembling that easy?
I'm thinking "no".
This is optimistic about binding arbitration providing protection from more traditional remedies
why? the cards are on the table. If you buy a turd from me after I disclose the composition, that is on you
Indeed. Everyone should be moving their funds out of target date funds right now and into medium and small cap stock funds.
It's quite sad that the pillar of American life that is the 401k is given to shady fund managers. The law should be that if you manage a 401k you must be a fiduciary. If that were the case then no one would be bag holding these fake valuations because they'd be liable for negligence. Right now they're just in on the scam.
The small mid caps are precisely what will get sold down here…
You can't sell these ETFs without incurring capital gains, potentially large. So it isn't really a choice.
If it's actually your 401k, sure you can. Just today I rebalanced my retirement funds away from large cap stocks to avoid this steaming turd that Elon is dumping on the public.
> Just today I rebalanced my retirement funds away from large cap stocks
Away from large cap stocks to what?
For what it's worth, I think anything selling energy or fertilizer which is not sourced from the Middle East is a pretty good bet right now. Depends on how the US/Iran conflict plays out, of course, but I'm not optimistic.
Small-cap, mid-cap and ex-US real estate? That's been floated in my circles - that and the 30 year.
If you're truly convinced there's nefarious reasons for including megacap IPOs in passive index, you can always short the stock (or use derivatives) by the same amount.
I'm not sure you'll come out ahead. (Personally I don't get the outcry, except for nasdaq which has fairly stupid rules, delaying the inclusion of megacaps won't make the problem go away, but probably increase since the float will be massively larger). It's inherent to being a passive index.
How is that their problem? That is an issue between you and the government.
Sure, the problem is trust.
Regular people want to invest so they can make money and companies want people to invest so that they can raise money. So pretty much everybody wants the 401k money to be invested in the stock market.
But the issue is that investing in the stock market is very technical, so some smart asses invented the index funds to make it easy for daddy and mummy to put their retirement accounts to work.
The index has safeguards in place to try and reduce its volatilty. So people are happy, cause they are investing in stock without having to look closely at what it is they bought.
But if suddenly some people change the safeguard rule, so that their buddy can dump their overvalued stock over people who think they are investing relatively safely, then it can be argued that there is foul play.
People are not finance specialists and they are heavily incentivized to buy index funds, so they need to trust that the people who are telling them to invest are not hiding things from them. If that trust is broken, lawsuits will follow.
It’s like: imagine you own a Toyota and have a maintenance contract with Toyota, and one day you have your car serviced and they tell you they changed the brakes. They tell you the brand of the new brakes and they tell you it’s fine while in fact, they put some cheap garbage that fail after 100 km of driving.
When the brakes fail and your car falls off a cliff, you go and see them and they tell you: “yeah those brakes were bad, but we told you we put them in, you could have looked up that these were bad, it’s all over the internet, so that’s on you”.
> People are not finance specialists and they are heavily incentivized to buy index funds, so they need to trust that the people who are telling them to invest are not hiding things from them. If that trust is broken, lawsuits will follow.
A "lawsuit" isn't a concern for the likes of Musk.
He's got the money to pay lawyers, politicians, and influencers. He's spread this risk around to the right people; if he goes down, they're going down with him, too.
At a certain point you have to start jailing people for long periods of time. I don't mean the Milken, Belfort, or Skilling treatment. I mean being placed away for 30+ years in medium-security facilities at the least.
> At a certain point you have to start jailing people for long periods of time. I don't mean the Milken, Belfort, or Skilling treatment. I mean being placed away for 30+ years in medium-security facilities at the least.
Bernie Madoff was sentenced to 150 years in prison, if that counts. But then he had committed a crime, which is the usual "certain point" we wait for.
If this is a bubble... The pop stage will be devastating...
Listen to the author of “A Brief History of Financial Bubbles” argue why it probably isn’t a bubble:
https://api.substack.com/feed/podcast/260347/s/233172.rss
https://podcasts.apple.com/us/podcast/conversations-with-col...
https://open.spotify.com/show/0Cj2lIpGxkrw1RFVIPTa6a?si=f41c...
Can you please summarize his argument?
The argument is, as I understand it:
* Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings
* Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize
* OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble
I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
> * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings
That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there.
> * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize
This does not reconcile with the large amount of empty datacenters and GPUs which have not been installed: https://www.wheresyoured.at/ais-economics-dont-make-sense-ad...
> * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble
OK? It could also mean there is.
> I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.
Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.
I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public.
Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox.
The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.
> Hyperscalers are in big trouble if the build out suddenly stalls.
How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).
but google, meta, microsoft and amazon were making a ton of money even before the AI boom.
OpenAI and Anthropic's can go bust, but ads, windows and cloud hosting would still make a ton of money without them.
Oh yes, this time it will be different, of course. (Like the last time.)
You mean "Listen to [someone who started on Wall Street at Lehman Brothers, joined PayPal in its earliest days and worked alongside Peter Thiel and Elon Musk, and eventually became a venture capitalist in Silicon Valley] argue why AI probably isn't a bubble".
Funny how this different framing of the exact same person provides a completely opposite expectation of their incentives behind commenting on whether AI valuations are a bubble.
We don't let bubbles pop anymore. We print money and borrow from the future so that no one loses money on their homes and retirement accounts. The GFC changed the rules.
It looks less like capitalism and more like socialism for the rich, marketed as free markets.
Print money. Push most of it into cheap credit for giant corporations and asset owners. Let a little trickle into the real economy so ordinary people feel temporary relief. Then let inflation quietly do the dirty work.
The public pays through higher prices, weaker savings, and future debt.
The powerful collect the upside.
That is the game: privatize the profits, socialize the losses, and call it capitalism.
And all of this is legal under the disguise of "protecting the economy for regular folks", and they can keep doing it repeatedly.
except the last bubble pop hit fast and hard with post covid inflation.
It worked. The only people upset about it are young people who don't vote. If young people don't want a continual wealth transfer from them to the old, they need to start voting. That's been the case since 2008, and here we are a generation later.
You mean the young people who cannot (or could not) vote because they are under 18?
Also very bold of you to assume voting does much.
(coming from a 22 year old who votes at every federal, state and local election).
People under 40 have much lower voter turnout than people over 40. 75% of 65+ year olds vote. Less than 50% of 18-25 year olds vote. I wasn't referring to children.
The way people voted in the last federal election did a whole lot. Granted, it’s effectively limited to people in swing states.
Old people will be the majority for the foreseeable future, though. To be honest, the only strategy that I currently see for young people is waiting and growing old, unfortunately..
This is a well-known affliction of democracy.
Logically, it seems insane that people who live on other people's taxes have the right to vote. Officials, public sector employees, and anyone else who receives money from the government rather than contributes to it shouldn't vote.
It's hard to take the "just vote" seriously after the rash of gerrymandering happening in the south. Some elections were even downright cancelled.
It’s never going to happen because too many people want it to happen.
oh yea good way to stay out of market and retire like a poor person.
> If this is a bubble... The pop stage will be devastating...
Why? It could be sudden. It could be slow and gradual. I've seen no reason it needs to be one versus the other.
Irrational exuberance rarely transitions to a rational drawn down. The minute the first selfish-actor flood-liquidates, everyone else will too. That's now runs work.
but this isn't "irrational exuberance", literally everyone I know paying and kind of attention has "rational dread".
In my opinion the amount of money poured into these companies is the definition of irrational exuberance. And even if you want to call it dread, once they start to deflate people will panic and flee.
But where else will people put their money?
That's not the problem, the problem is when they take it out of these companies, where it goes after that is irrelevant. Once the exodus starts prices will plummet and lots of people will lose a lot of value.
Somewhere safe. Gold, usually.
More: https://www.gurufocus.com/news/220058/seven-quotes-from-warr...
While this is factual, the world (and humans) haven't functioned this way since ... ever? It doesn't matter what you think logic is, if the people who are providing the services (teacher, worker, doctor, etc..) are illogical and you need these services from these people.
I heard daffodils are where it's at.
The source of your information requires more scrutiny.
Because it is deliberately extracting cash from Mom and Pop into the robber baron's wallets?
Okay? Why does that mean a devastating pop?
Where were you in 2008?
It would be karmic if fleecing led to financial crises. It doesn’t. You’ve taken N = 1 and extrapolated it wildly.
Because traditionally the pop is delayed while those who realized most of the gains attempt to offload the risk to other parties. Whether this works or not at some point it becomes an inevitable and self reenforcing feedback loop.
Just investing less in risky things on the run up means you personally perform worse so even in known bubbles you don't see reasonable slow downs instead of disastrous pops.
> traditionally the pop is delayed while those who realized most of the gains attempt to offload the risk to other parties
What? Source? Plenty of investment bubbles pop before the bag is passed.
This thread involves a lot of people looking at something they don't like and presuming karmic forces will give them what they deserve. There is no reason these companies, even if massively overvalued, have to "pop."
That's fundamentally different from e.g. the financial crisis, or the 2023 bank collapses, or even the dot-com bubble. Those did not have the ability to self correct. There was no slow deflation other than through a bailout.
> There is no reason these companies, even if massively overvalued, have to "pop."
This is a wild thing say without any qualification.
> This is a wild thing say without any qualification
It’s really not. Bubbles are notable because most elevated asset prices slowly go down. And they have common characteristics that force the reckoning. Usually debt. Sometimes operational leverage.
I'm genuinely curious why you say this is different from the dot-com bubble?
As I see it, this is the exact same situation - wildly overvalued companies based on investor exuberance, the underlying business is not capable of supporting this kind of valuation. IPO tends to be the crunch point at which this overvaluation is exposed. Once exposed, the valuation correction spreads to other similar businesses quickly and the bubble pops.
What's the self-correction ability that AI companies have?
> genuinely curious why you say this is different from the dot-com bubble?
A lot more revenue. Dot coms were going public pre revenue. And Anthropic is profitable. Both it and SpaceX wouldn’t be dependent on further stock sales to stay alive—that lets them weather a downturn.
As I understand the situation, Anthropic is revenue-positive but not profitable. As usual, Ed Zitron covers this well [0].
As with the dot-com bubble, there is a lot of voodoo accountancy (and flat-out lies) about the actual situation here.
As I understand it, the basic problem is that the big three can't charge enough per token to cover costs because they're in competition with each other (and one of those is Google that can afford to buy market share using its other operating revenues), and the OSS/cheap Chinese models.
And this situation is unlikely to get better in the short term because building cheaper per-token capacity is very expensive and time-consuming.
[0] https://www.wheresyoured.at/anthropics-profitability-swindle...
> this situation is unlikely to get better in the short term because building cheaper per-token capacity is very expensive and time-consuming
They don’t need to fix it in the short term.
Look, this could be total nonsense. But what won’t happen is Anthropic or SpaceX disappearing inside a year. That was true in the 90s because the only cash flow going into those companies came from investors.
I notice you left out OpenAI from that ;)
Agree, some of these are valid businesses. But they are also massively overvalued on that underlying valid business, because of investor enthusiasm. When the bubble pops they are going to have real problems because of that overvaluation. Hopefully they survive, as a lot of the dotcom businesses did.
I think the real bloodbath will be the second-tier businesses that are mostly reselling cheap tokens to a market niche with custom prompts, and also massively overvalued as "AI businesses". And that kinda mirrors what happened in the dotcom bust - all the overvalued "webscale" businesses that hadn't really worked out a solid model yet went to the wall immediately
> notice you left out OpenAI from that
OpenAI seems to have made debt-like commitments to spending on infrastructure. If those are indeed binding, they may have less flexibility than the others. (If Anthropic’s revenue growth stalls and its valuation halves, it should still be a going concern.)
If what you say is true and it predicts the future, then everyone would be selling right now. The fact is, no one knows when or if the bubble will pop, and we will only be able to say in hindsight whether your comparison is correct.
I said attempt to offload see mortgage backed securities for one such attempt.
The point is that nobody wants to be the first out of a hot market nor the last so that bubbles everyone knows are bubbles first hang on despite it being broadly believed to be so and then crash as people head for the exits.
Broadly people are taking on debt to realize profits that may not exist. Retrospectively widely acknowledged bubbles like every crash in the last century all popped im not aware of any big enough to cause a recession that petered out slowly. Since we don't need to look up 100 years of crashes together can you name some similarly large issues that were resolved slowly over time?
Once the liquidity is transferred, that's it? There is nothing there (datacenter in space, that dude is really smoking some serious stuff), so the money will be spent/transferred and then there is no revenue/new sources of money.
It's the same scenario of a ponzi scheme. Everything looks fresh and fine until everyone realizes there is nothing in there.
Why would that pop the bubble?
Robber Barrons existed from like 1860 through 1915 and extracted the wealth of many people, including Native American tribe lands.
Like this shit can keep going until we decide enough is enough and actually change our society.
Not related - many robber barons went bankrupt in the severe economic crashes of the time, such as the Panics of 1873 and 1893. The Gilded Age continued despite bubbles popping.
I mean, isn't the definition of a bubble that it pops quickly? If it slowly loses value over time, its not really a bubble.
> isn't the definition of a bubble that it pops quickly?
There is no consistent definition of a bubble. We have no fundamental reason current valuations have to collapse suddenly.
Is there any definition of bubble that doesn't involve popping? That's literally the metaphor.
> We have no fundamental reason current valuations have to collapse suddenly.
I would agree, but i think that is just saying that the current situation is potentially not a bubble. Which may be true. We will only find out after the fact.
> Is there any definition of bubble that doesn't involve popping?
I’ve seen it commonly used to refer to any period of high multiples.
One thing I have come to realize, is that worrying about bubbles will keep you poor.
If everyone is in the bubble and it pops, everyone is in the same boat, so you’re not really going to be poorer than your peers by comparison.
If it’s not a bubble and you are wrong, you will fall way behind everyone else and just watch people get richer and richer doing the exact same thing you should have done.
Also, just because something is a bubble doesn’t mean it has to end in a devastating pop. Sometimes bubbles expand and then just get diffused. The exponential rise stops and prices plateau, but it just becomes a new normal and things stagnate for a while before resuming normal upward growth.
Ask Warren Buffet how concerned he was of "missing" on bubbles... He got richer than pretty much everybody else by just avoiding bubbles and then buying assets at fire sale prices when they inevitably popped.
https://x.com/Mr_Derivatives/status/2022796755621060695
Chamath says Warren Buffett outperformed the $SPX by 2 times pre-2000’s because he used "insider info".
Berkshire Hathaway completely exited its investment in Paytm (One97 Communications) in November 2023. This divestment occurred just two months prior to the Reserve Bank of India (RBI) initiating its strict regulatory and KYC-related crackdowns on Paytm Payments Bank in early 2024.
I think Warren has been doing insider trading.
No, Warren Buffet became so rich because he was making deals to pick up stock at favorable prices the public didn’t have access to. You will not be Warren Buffet just by buying after stocks crash.
> If everyone is in the bubble and it pops, everyone is in the same boat, so you’re not really going to be poorer than your peers by comparison.
> If it’s not a bubble and you are wrong, you will fall way behind everyone else and just watch people get richer and richer doing the exact same thing you should have done.
I don't get? First scenario, you get richer vs. the average and in the second you gt poorer. So in total you average out? I don't see how not participating makes you poorer in average.
> Sometimes bubbles expand and then just get diffused.
That's not what a bubble is. A financial bubble is defined by the "burst" at the end.
Normal people generally won't be able to beat professionals in the "market timing game". So when Joe Sixpack decides to sell off his index funds with intent to buy back in at a lower price, he's usually making a mistake. Staying invested in the market is a better choice for most investors because being in cash is about -2%/year EV whereas being in stocks is about +6%/year EV.
this is disgusting corruption, a direct wealth transfer from the many to the few. shame on everyone involved
We need the opposition taking names for investigations in 2029. They're not all getting pardons.
The opposition you're talking of will hold no significant power in 2029. They currently hold a minuscule amount of power and this isn't going to skyrocket within 4 years. A meteor causing an extinction event is more likely and I don't think you're expecting that.
And significant part of those in opposition will jump the ship if they gain power. I think there is little hope for system to change unless there is total collapse and replacement.
They're just as on the take as anyone.
Think about it: you have hundreds of thousands of pages of evidence that the hyper-wealthy may have trafficked minors across state and international borders. Only one person is in prison over it, and her cell gets upgrades.
35 years ago this would have been a slam dunk for the opposition party of any republic. Instead of standing ten toes down on it, opposition leaders are doing... what exactly? Going on with business-as-usual, for the most part. They should be attempting to add language to every single bill that comes across the floor to see more done. They aren't.
I think stock trading shenanigans are far lower on the list of moral outrages, particularly given Congress' predilection for insider trading.
Not just the opposition. In other times this would have been the reason for a revolution.
There wasn't TikTok and Doordash at the time. Panem et circenses.
I’m not sure this is the answer. As you say, the concept of keeping the masses occupied is a lot older than TikTok or Doordash…
Nowhere in history we had products as addictive as those. There are people making a career studying how to exploit people's weaknesses, to induce them to buy products.
Indeed, not enough people are asking why the Biden administration sat on the Epstein files for 4 years and did nothing with it.
> this is disgusting corruption
The guy called 401(k)s a Ponzi scheme. Now, he's coming after them to loot.
He called Social Security a Ponzi scheme, not 401(k)s.
Both are your retirement funds! So…you call one, you call the other one as well.
Not really. Social security is a defined benefit plan that requires new payors to fund todays expenses. 401ks are a defined contribution plan. Very different.
See also: https://news.ycombinator.com/item?id=48363245 "The SpaceX Squeeze"
This is such a scam.
SpaceX used its massive IPO and listing fees (and the prestige of being the largest IPO ever) as leverage. Index providers and exchanges saw financial incentives: listing fees, trading volume, data sales, and long-term revenue from asset managers. Reuters reported that SpaceX advisers contacted major index providers (including Nasdaq) to discuss early index entry, and that SpaceX was leaning toward listing on Nasdaq only if it got early inclusion in the Nasdaq 100.
The rules built to protect passive investors were waived:
- S&P 500’s 12-month seasoning and 4-quarter GAAP profitability requirement → waived
- Nasdaq’s seasoning window (90 trading days) → cut to 15
- FTSE Russell’s seasoning window → cut to 5 days
Meanwhile, Danish pension fund excludes SpaceX citing governance and valuation (Musk holds approximately 42.5% of the equity, but commands roughly 83-85% of total voting control): https://www.reuters.com/legal/transactional/danish-pension-f...
> S&P 500’s 12-month seasoning and 4-quarter GAAP profitability requirement → waived
S&P hasn’t announced a final rule change yet.
Yeah, right.
> Yeah, right
Yes. Literally right.
Are you seriously under the illusion S&P is second guessing or reconsidering its plans? There's no evidence of that.
> the illusion S&P is second guessing or reconsidering its plans?
There is no second guessing because no decision has been made. A consultation was put out. I’m expecting it will be adopted in parts. Like, the market hasn’t priced in a full rebalancing.
People buying into space x are basically telling Musk to do anything he wants with their money, no questions asked...
And CRSP (VTI)
>Yes it can, since they changed the rules to force over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.
Why not just say SpaceX is being added to the SP500?
You can complain about the discretion to add it to the SP500. But that's irrelevant in terms of whether or not its "forcing" people to invest in it. Arent you upset people are forced to invest in Apple, Bank of America, etc.?
They should have to float on the market for a certain amount of time before being added to any index. This would reveal what the market value of the stocks actually is.
"Why don't you just say that this store is selling pants that smell of poop, it's irrelevant that someone pooped in them because they also sell other pants that no one pooped in. Aren't you upset that they also sell you pants without poop in them?"
All these things are apparently valued at trillions of dollars these days. Where's the trillions, or hundreds of billions worth in improved quality of life? What has gotten better other than the ability to produce more crap?
In terms of SpaceX (the space portion of it) they've produced the cheapest way to get any payload into space. If you pay anybody else, you will overpay drastically depending on who you want to take your payload into space.
In terms of AI, we've seen even here on HN everything from mathematical problems that remaind unsolved, being solved, mathematical proofs being used to disprove theories, heck we even learned more about alzheimers, new antibiotics, precision targeting in oncology, using AI to flag healthcare anomalies in imaging. The benefits are easy to miss, but they're snowballing into place, there's definitely an explosion of useless crap, but you have to look for the real things and you will come to find, that AI is giving us things we otherwise either might not have discovered or wouldn't have within our lifetimes.
I have yet to see an application outside of harnesses and LLMs itself where adaptation has happened on a larger scale. Devs are fine with babysitting their LLMs. People like to use LLMs to improve their mails and so on. But outside of that, the adaptation is not there yet.
Don't get me wrong. I love LLMs and use them myself. But the biggest gain for me is easier context switch and text manipulation. It's not the: replace X with a bunch of LLMs every CEO is dreaming of. So yes, you have higher productivity, but is the eval of those companies legit? x doubt.
Markets value future cash flows, not today's cash flows.
By the time you see the applications, the market will have moved on to value the next set of future cash flows.
If the market only valued the obvious, investors would jump in to buy the price up, until it met the average expectations.
The market might be wrong, but the question is not: "Have you yet to see?", but rather, "What do you see in the next three to five years?"
Otherwise, how could investors ever invest in a startup?
Startups never have revenues to justify their initial valuations.
It's a bet on the future.
Investors are future looking.
Consumers are present looking.
We didn't see LLM harnesses coming even two years ago. Now they generate billions per month.
Investors can't wait until reality materializes to make their estimations of the future.
That's why investing is hard.
You have to try to predict the future.
One third of all software code is written by AI. At the frontier AI labs it's 80%+. It has completely upended the software industry. How is that not a massive adaption?
> One third of all software code is written by AI.
I find it interesting that using lines of code as a metric is making a comeback.
The number of lines of code doesn't matter any more. A better metric is AI-assisted commits, which has the same statistics.
I mean if there are more bugs there are more commits no?
You couldn’t have picked a better argument to show how this bias is exactly what’s making tech people think this shift is ubiquitous. “It works extremely well for coding, in which I am a domain expert, so why wouldn’t it work for all the other domains I absolutely know nothing about?”
ChatGPT has 700 million users. What do you think they are using it for? It's upended entire industries.
How many millions of emails do you think are composed using ChatGPT? How many legal briefs were reviewed by AI? How many businesses use AI generated art? How many kids do their homework using ChatGPT?
The GP is arguing that AI has struggled to replace humans, but in so many roles AI is doing the heavy lifting and humans are copying its output.
Which “entire industries” has ChatGPT upended?
The entire education industry, so many students ask ChatGPT to help with their homework, and lots pass it off as their own work. Many students have quit going to office hours & tutoring, and ask AI for personalized answers instead. The education industry has no answer, and is struggling to deal with this.
The homework "help" industry (i.e. paying for answers) is dead. Chegg stock fell 99% because of ChatGPT.
Stock photography is rapidly dying, nobody will pay for shutterstock when ChatGPT can generate a passable image for free.
ChatGPT is killing studio photography, it can generate great looking studio photos for free.
Same with basic graphic design / custom art commissions.
SEO / copywriting has been almost fully replaced by AI. Companies no longer pay writers to churn out SEO slop, and now the web is full of AI generated SEO spam.
Customer service as a job is dying and is rapidly being replaced by AI chatbots.
I can go on, but these are the major ones.
You have no data to support what you're saying, you sound anecdotical, and on top of these flaws in your argument, you proceed to make a point mentioning "industries" that are neither formally upended, nor at all significant in the great scheme of things in terms of value produced or perceived. I believe the education industry is fundamental and one of the most important industries in the world, but it hardly moves markets, nor is filled with high-paying customers.
On top of that, you are showing another stark bias in considering the US experience as the global experience. It is not, and education in particular works way differently, aka, it's not a business wild west.
Cognitive surrender in writing emails is another shaky ground: do you honestly think that AI's worth the tens of trillion the tech bros are claiming it'll be worth as a glorified email-maker?
I will add that my point still stands. If you say this:
>>ChatGPT is killing studio photography, it can generate great looking studio photos for free. Same with basic graphic design / custom art commissions.
the only point you're proving is that you don't understand shit about photography as a business, nor about design as a business. AI is being rapidly integrated, for sure, but it has not upended those industries, and the average mediocrity it produces (because of its very nature) is not even close to replacing what you claim it is.
It doesn't even work that well for coding.
Otherwise Github wouldn't have 14% down time in the last 3 months.
Because it doesn’t work without me
What is a larger scaler for you? What is "outside harness an LLM"?
What is _the proof_ if all the proofs are not _proofs_?
I don't babysit my LLM based services which are used by coaches and clients around the world. One of my LLM based solution get 30-4k daily hits and I have users coming back on the regular to use it. without babysitting, doing things that would take them hours of manual work and research.
I don't babysit the developers I work with and our clients, which both use LLM's themselves and at scale with their clients, serving all kinds of LLM powered services to millions of users worldwide.
You are not "seeing" the large adoption because:
- The technology is "a few years old" in its usable state - The corporate adoption cycle is slow - You have to understand the technology to use it in a good way, which most corporate devs and PM's do not
So it will take a bit for the "obvious" adaptation on large scale.
But you won't "know" when the large adoption happens.
Silent inference is growing every day, and that is what real adoption looks like - not an LLM being in your face chatbox, but running in the background, sorting, finding, fixing things, aligning data, figuring out analytics, tuning the ads, cleaning the datasets.
Isn't AI routinely making significant mistakes in analyzing medical imaging?
My understanding is that it’s better than doctors themselves. But it’s probably the same as with autonomous driving: the bar isn’t just “be as good as humans”, it’s “be flawless”.
It’s actually quite a lot worse than even doctors in training except for highly constrained experimental settings and a few very nice applications that are mostly too tedious/impractical for a human to do or are very basic detection tasks.
I am a radiologist and researcher predominately focused on AI.
I work with pathologists and radiology is way ahead of us with AI use in clinical setting (but still not very far). Only things that get serious use are lab-developed (ie not commercial) image analysis algorithms for very limited (tedious, error-prone and ultimately not that often used) biomarkers. Don't believe the hype.
You could also look at the market, one of the biggest players, Paige, was acquired for about 30% of the money they raised.
First I'm hearing that is a lot worse - do you have sources? Genuinely curious
Thanks for the informed take :)
Do you think this will result in more routine/boring/tedious tests? Is the bottleneck on these things the human time to analyse them?
I don’t think so, not beyond the current trend in medicine which is going up anyway.
For some things, like 3D volume segmentation of structure or disease (e.g. CVA/stroke volume, cardiac muscle mass, iron quantification) the bottleneck is the time it takes so we currently use approximations like single longest dimension, circular regions of interest, etc. AI will dramatically increase accuracy allowing for more accurate treatment and easier large scale research with quantitative endpoints.
Other things people think of like detection of aneurysms, fracture, lung nodules are not “hard” but AI has already added and will continue to add the second-reader benefit which will reduce detection errors. For this category the clinical benefit is as of yet unclear and we know that increased detection does not necessarily translate into improved patient outcomes and can in fact make them worse from over-diagnosis which means investigation related harms and over-treatment.
We were already in a phase of “over detection” in much of radiology with advances in imaging technology so the incremental benefit of current AI remains to be seen and I personally think is going to be much more limited. I had a case recently where a 2 mm brain aneurysm was missed on 3 CT scans over 10 years but was picked up by AI so now is being followed annually. This is too small to treat considering the risks and a serious argument could be made that 10 years of stability is proof enough that this is almost certainly clinically irrelevant for this patient.
Far more interesting areas of AI in imaging are in acquisition of acceleration (i.e. the medical equivalent of upscaling) which can dramatically decrease costs and increase accessibility as well as analyzing imperceptible features.
It may not be a popular take here but in my opinion the future of radiology is like what we see in software engineering today - a skilled human equipped with AI will outperform humans without AI and AI without humans, the latter of which we are still several years away from prototyping due to various technical hurdles.
Thanks :) Very interesting.
> in my opinion the future of radiology is like what we see in software engineering today - a skilled human equipped with AI will outperform humans without AI and AI without humans
I suspect this will be the case across the board. It's a useful tool, but it's just a tool. It's not a replacement.
A friend of mine, a dermatologist, told me that LLMs are quite performant for melanoma analysis. Based on their own statistics, LLMs are able to beat humans with ~10 years of experience in the field.
They will never beat the human instinct tho, but they can be great tools sometimes. Unfortunately, LLMs mostly produce garbage.
Whenever it comes to medical diagnosis I would caution anyone to be careful with what “beat humans” really means.
In real life pathology is a spectrum not a binary and physicians are not trained to be 100% accurate instead optimizing sensitivity and specificity considering pretest probability as well as the harms of overdiagnosis and under diagnosis for a given scenario.
For something like melanoma which is relatively easy to diagnose with a superficial, extremely low risk skin biopsy and where early staging dramatically improves outcomes you would want to design around overcalling (high sensitivity) rather than maximize accuracy given the significant harms with false negatives and minimal harms with false positives.
An AI may be more accurate at classifying melanoma/not melanoma but if it does not meaningfully improve on the clinical threshold of biopsy/no biopsy or result in less biopsies that accuracy is wasted and may even be detrimental.
Note: I am just using this as an example to illustrate the considerations.
I don't think your friend understands Large LANGUAGE models.
You do realize that today’s multi-modal LLMs are actually able to understand images? They’re tokenized very much like language is.
Last time I checked thoroughly (roughly two years ago), AI (in the form of small ML models) mostly outperformed radiologists in areas where the gold standard is "one level" above imagining wise. By that I mean that you train a model to detect on an X-ray what would normally need a CT. Or train it to see on a non-contrast CT what would normally need contrast or an MRI, or biopsy, and so on.
Essentially the cutting edge reaches up to 99% of human performance on the task it is trained, which is good enough for triage but not for a final diagnosis. However, magic sometimes happens when you train a model to detect something, which you already know is there, on an examination that is cheaper, faster or less invasive than the human"gold standard". Conveniently, this dataset exists since it's common to first do a cheap examination like an X-ray, and then escalate if nothing is found (or if something is found that you want to see better, or a number of other possibilities).
Examples of AI outperforming humans like this includes AI detecting sacral fractures on x-rays better than radiologists (who normally take a CT to conclusively exclude it), detecting potential precursors to pancreatic cancer on non-contrast CTs (where contrast or an MRI is usually required) and detecting an occluded coronary artery on an ECG without the archetypical "ST-elevation changes".
See the link below for references: https://pmc.ncbi.nlm.nih.gov/articles/PMC9478257/ https://www.nature.com/articles/s41591-023-02640-w https://rebelem.com/a-winning-hand-in-cardiology/
So AI, as a general rule, doesn't usually match or exceed the upper bound of the "gold standard" medical performance. But it tends to carry the quality of the upper bound downwards towards the faster, less expensive and invasive methods. In some cases, like in the case of EKGs, that's huge. In some cases it saves time, in some cases it decreases miss rates from tired radiologists or triages their review feed. And in some cases it's not very useful.
LLMs doesn't come close to specialized radiology models at the moment, because LLMs are more about applying knowledge than creating new correlations. Of course that's also hugely useful, but that's a bit of a different topic to unpack.
What are the premiums like for this AI radiologists malpractice insurance?
With these kinds of things, I want to see comparisons to trained, alert humans. Cut out all the distracted, stressed, tired, incompetent, intoxicated cases from the baseline. That includes rushed doctors at the end of a long shift.
A self driving car doing better than a drunk on the freeway doesn't reassure me that it'll do better than sober me in a snowstorm.
That would be a fine bar if you could ensure your doctors or nearby drivers aren't distracted, stressed, tired, incompetent, or intoxicated.
How does sober you in a snowstorm cause the drunk on the freeway not to drive?
Non sequitur. The core idea is that if you have just self-driving cars you won't be trained enough to drive properly next time you're caught in a blizzard, because you never drove for the last 5 years.
I also question if the kind of person who actually drives while drunk - knowing perfectly by thousand of society inputs and peer pressure that it is wrong - will care enough to buy a self-driving car.
It doesn't, but I'm not going to trust my own safety to a self driving car that can only be said to be better than the worst drivers. It's a bad baseline.
I’ve seen the same. But I don’t see that as a glowing beacon of progress.
A whole lot of doctors, if not most, didn’t pick their profession out of an interest in medicine…
It’s so good it even sees things that are not there!
> In terms of AI, we've seen even here on HN everything from mathematical problems that remaind unsolved, being solved, mathematical proofs being used to disprove theories, heck we even learned more about alzheimers
What a story this is
What part is wrong?
People want to buy SpaceX, not Twitter, Tesla, xAI. Unfortunately Elon has been conflating the three.
Plenty of people want to buy Tesla. Not saying they're prescient, but the market cap represents that.
You'll overpay -- but not by trillions.
Sure but SpaceX can get you into orbit for $1400 per kilogram, and future projection and goal is $100 per kilogram. The competition is at $15,000 per kilogram. I think it's a no-brainer for anybody trying to get anything into orbit. Unless someone figures out superior tech that surpasses SpaceX, I'm just not seeing why anyone would spend more for less capable and costly rockets.
Doesn't SpaceX charge 2 to 3 times their internal cost to external customers? ISRO is still more expensive, IIRC they charged ~US$60 million (roughly $6000/kg) for the OneWeb launches whereas after the recent price hikes SpaceX is supposedly charging ~US$74 million on a larger rocket (~$4200/kg), but that's far from an order of magnitude difference like your comment suggests, which I assume would be using the $25 million they charge Starlink internally (IIRC ISRO's internal cost is much higher, around $40 to 50 million, but that's still not anywhere near an order of magnitude). Using internal cost from one provider and external price for another is somewhat misleading.
> future projection and goal is $100 per kilogram
This can't be treated as meaningful, given other projections and goals (Mars colony, etc.).
how many packages have you shipped so far to space? SpaceX could disappear tomorrow and most people wouldn't notice. Your satellite TV might get slightly more expensive. Those rare people that don't have LTE internet access and need starlink are exception.
At the rates you quote, $1 T (the size of the market) is 714,285 tons of stuff in the space each year. I don’t think there is enough space in space for that much cargo.
Let me introduce you to the 30 km long rotating O'Neill Cylinder: https://en.wikipedia.org/wiki/O%27Neill_cylinder
Although realistically this will be built from lunar materials, you still need to lift a lot of mass to build the necessary industrial processing and mass drivers to launch it from the Moon to some Lagrange point.
And there are many other useful space megastructures that can be built in space from common materials, like giant solar arrays beaming power down via microwaves: https://en.wikipedia.org/wiki/Space-based_solar_power
Most of these proposals date from even 1980s.
I guess for a trillion dollars vine can built Elysium. Generating solar power in space (vs. on the ground) makes as much sense as running AI inference in data centers in space.
On one order, correct, but it's still on the order of hundreds of millions to billions.
Also, keep in mind that a stock price discounts expected future cash flows. Is it likely that SpaceX will have a near-peer competitor within a few years? No, it's not, and that market share is being priced-in.
Is it likely that SpaceX will have actual reasonable demand? Their major customer is Starlink. How legitimately confident are we in the numbers with regard to price reduction vs creative accounting to offload costs to Starlink and subsidize the launches to appear to offer huge cost reductions?
If there exists sufficient demand for the product of space launches then it's probably reasonable to expect their to be a near-peer competitor soon, but that's only if SpaceX were to be profitable, which it isn't, even with the subsidization by Starlink on the order of many billions.
> If there exists sufficient demand for the product of space launches then it's probably reasonable to expect their to be a near-peer competitor soon
Space is not that easy. Even with unlimited money, it'll probably take 10 years to build a rocket like starship. Going from nothing to orbit needs a lot of money but more money doesn't make that faster.
There is about 3 chinese orbitallaunchers with some reusability support flying & about as much scheduled to debut this year.
But other than that, yeah - outside of China, progress has been horrendously slow & Blue Origin, the only other US company that demonstrated a partially reusable rocket just had a devastating pad explosion, destroying one of their 2 rockets and their only launchpad.
> they've produced the cheapest way
Were we struggling to do this before? Was the overall percentage reduction in costs? Was some other achievement held back because we couldn't accomplish this? What is now enabled?
> to get any payload into space.
A limited set of payloads into space. No vehicle can get "any payload" to space at a fixed price.
> The benefits are easy to miss,
You've listed a bunch of reasons to publish papers. What is the actual ground level change that's occurred? Are those antibiotics produced? Do they actually work just as predicted? Why is that first world problems are exclusively listed but basic problems like world hunger are never even approached?
> or wouldn't have within our lifetimes.
And your life, your actual life, benefits, how?
> Were we struggling to do this before?
We literally couldn't.
> Was the overall percentage reduction in costs?
Starship will bill NASA 1/20th what SLS does.
> What is now enabled?
LEO. Artemis. Out of all of these companies, being confused about SpaceX is super weird.
> Starship will bill NASA 1/20th what SLS does
Is that before or after the program achieves profitability?
If SpaceX was only Starlink or only Starlink and rockets it would be an horrible circumvention of the rules.
But now he's also trying to get the indexes to pay for the giant cash fire called X.ai and the far right huddle Twitter too.
I have zero interest in owning anything of either of those companies.
Granted, I only skimmed some high-line numbers, but isn't their only profitable project Starlink? SpaceX is functionally a satellite internet company that happens to make rockets.
> isn't their only profitable project Starlink? SpaceX is functionally a satellite internet company that happens to make rockets
Yes. The thing that’s going public is almost entirely an AI play.
They seems to have decent revenue leasing compute to Anthropic.
I think you missed the core of their question: What has actually gotten better in practical terms for the average American?
> What has actually gotten better in practical terms for the average American?
Starlink has made connectivity cheaper and more available. Earth imaging has made various food production processes more efficient. Weather forecasts have become more accurate.
If you’ve genuinely missed the massive economy that LEO has become, it will be a fun thing to catch up on.
> Starlink has made connectivity cheaper and more available.
Yeah that's working out great for the average American isn't it (https://natlawreview.com/press-releases/2026-consumer-trust-...)
> Earth imaging has made various food production processes more efficient.
I'm not even going to bother sourcing the fact that food prices have only massively gone up negating any gains in productivity. The average American struggling to buy basics like eggs and meat aren't feasting on more efficient food production.
> Weather forecasts have become more accurate.
I'm sure the growing homeless population is happy to know they can better predict the weather they'll be sleeping in.
This is all totally worth supporting a nazi billionaire
> that's working out great for the average American isn't it
Yeah. It did. My neighbour’s rates went up. He switched to Starlink.
> not even going to bother sourcing the fact that food prices have only massively gone up negating
This is like arguing fertilisers are useless because prices went up.
> homeless population
Not super relevant!
> all totally worth supporting a nazi billionaire
Nobody said that. But it doesn’t mean the benefits go away.
weather forecasts is really good right now (in my experience forecast for rain/cloud cover/wind speed at hour granularity is amazingly good) and earth imaging for food production has been done for decades. I do not think SpaceX has improved nor will improve on these.
SpaceX’s main customer is Starlink. With that in mind: if Starlink takes over all the ISPs in the world its market value should be comparable to Comcast - $89 Billion.
> do not think SpaceX has improved nor will improve on these
It has massively improved both. The cost, resolution and frequency of imaging has decreased alongside launch cost.
> if Starlink takes over all the ISPs in the world its market value should be comparable to Comcast - $89 Billion
Why? Comcast isn't "all the ISPs in the world." (And Comcast doesn't get defence contracts to build and maintain military networks.)
Do we apply a bar this high for any other company/job/business? Saving gov/tax money aka "billing NASA 1/20th what SLS does" doesn't count as worth it to you?
Reusing rockets reliably rather than "throwing them away" is a great achievement and I'm surprised people have to justify it on HN
> Reusing rockets reliably rather than "throwing them away" is a great achievement and I'm surprised people have to justify it on HN
You can milk a cow only a set number of times!
Yes, because you're not designing the cow. Progress on rocketry (and reusability) is not completed, btw, there's a lot still to improve.
Stock prices indicate the present value of all future dividends, so it's not about what has happened but about the risk-adjusted expected value of all which is to come.
What probability you assign to arrive at that expected value and how you adjust for risk is on you.
Sorry but SpaceX has done absulutely nothing for space other than take billions in GOV funding and never delivering what they promised years ago. Hell the only cargo they ever shipped was a banana...
They've shipped lots of satellites into low earth orbit, that's their starlink business and it's where all of the revenue in spacex comes from, and it is a good business in itself.
Comments like these make me feel like we're living in different worlds. I use LLMs multiple times a day and they've significantly improved my quality of life. They are also steadily becoming more useful over time (e.g. now solving math problems).
I suppose many do live in different worlds.
I haven't found anything out of LLM's that has improved my life. It was a fun little toy but could never find a use case. But clearly, your mileage varies greatly from mine. That's cool.
I just personally don't the use in more when what I think many need is less. But that comes from essentially this point of view - “Better than a thousand hollow words is one word that brings peace.” ― Buddha
I use LLMs daily, both as chat applications and "vibe coding".
I wouldn't say it "significantly improved my life" however. Everything AI has done for me right now is a "Nice to have" but it doesn't fulfill my needs.
It’s because people value different things. I could not care less if LLMs make me push code faster to prod. Couldn’t care less if they improve my emails grammar. Couldn’t care less if they crack one unsolved math problem.
You do not care about these things in general or it's the idea that an LLM is involved that makes you not value them?
I do too, and pay $200/month, but anthropic’s margins on that revenue are negative.
What’s the long term plan? Make it up on margin? 100% tariffs on Chinese open weight models?
I don’t plan on pulling from my 401k for decades, so the long term plan is the part I care about.
Enterprises are paying API prices, which are ~9x the price of the plan for the same usage. A lot of people on the plans are not maxing them out either.
Why would Anthropic margin's be negative? Inference is practically free for them, so what costs do they have for an additional subscription?
amortized training costs
I’d love it if for once someone on here saying LLMs are some life changing apparatus would give a single example.
My wife was diagnosed with several chronic conditions in the last year. AI tools both diagnosed her before a doctor did (which helped us find the right docs to care for her by figuring out what to look for). One of her conditions (Mast Cell Activation Syndrome) comes with a ton of dietary restrictions. Its helped us immensely in planning meals and identifing food triggers. All of this would have possible with out AI as a tool but would have led to much more pain and suffering and likely taken much longer to figure it out. It's easy to dismiss (especially given the hallucinations) but it's been legitimatly life changing over the last year
I can give some recent examples.
- Significantly increased my productivity as a software engineer.
- Using it daily for Chinese-English translation. Significantly better than pre-LLM translation software. Also, great at teaching grammar, nuances, etc.
- General Q&A. Like "Googling" but much faster. This is probably the most common use case for me.
> - Significantly increased my productivity as a software engineer.
This is exactly the point that keeps coming up that folks are struggling to grasp, myself included. How are you measuring this? It certainly makes me feel productive, but I'm not sure I can confidently say it has actually made me more productive. It's made the easy stuff a no-brainer (e.g. boilerplate, simple logic) and the moderate stuff really hard. Never mind the hard stuff. Vetting the code has become a whole other job on its own. The only folks I've found who confidently claim it increases productivity appear to be online (and without evidence), because no one in person is willing to claim that and show it.
I've been able to build things that I otherwise would not have been able to build, in the free time that I have:
- a VST audio plugin
- a wedding website with RSVP functionality
- a relaxing game for my wife
At work, I've been able to build much more than I would have been capable of in the past. I'm a backend eng, and it allows me to build much much nicer frontends than I've ever been able to do in the past.
And before you tell me that the code is crap - it doesn't matter! It may or may not be good code, but it works and serves it's purpose very well. Anyways, I'm I'm not launching a rocket, or putting software into cars.
> It's made the easy stuff a no-brainer (e.g. boilerplate, simple logic) and the moderate stuff really hard. Never mind the hard stuff. Vetting the code has become a whole other job on its own.
Not everyone has the same requirements, skills, usage patterns, and outcomes. It's that simple.
I can agree with the skeptics that LLM generated code is usually crap. I rarely accept its output without significant edits unless it's truly boilerplate, and I want to avoid the need for that kind of code in the first place.
For me, the killer use case is debugging. I hate wasting time debugging something that should work except for mistakes, and now I do that probably 75% less than I used to because AI does it for me.
I don't know if it makes me that much more productive, but I certainly enjoy my work more not having to do as much tedious debugging, and it feels like I waste a lot less time doing it.
I'll share my experience.
I've never been a developer. Dabbled in frontend web for a bit (HTML/CSS/JS, no large frameworks) and felt like if I really dedicated some time to learning how to code, I'd be pretty decent at it. It's always intrigued me, and I've always had an itch to build things, but just never found the time. I'm in marketing now - I own an agency.
Over the last 6 months since the coding models really began to step up and get good, I've built several dedicated apps to support my business:
-Profitability optimizer and forecaster based on unit economics and current ad efficiency.
-Creative strategy tool that ingests brand and product data and helps explore primary and secondary personas and emotional motivators.
-Reporting tool that processes natural language queries and connects to multiple data sources to fetch results. Can schedule reports to post directly to Slack or email.
All robust and hosted on Railway. Team members can use them. Clients can use them. OAuth via Google.
Would any of this have been possible for me before the rise of frontier LLMs? Absolutely not. Learning the frameworks alone would have taken me longer than it's taken to just... build. Rapidly build and deploy. Total game changer for me.
Oh - and I'm building a game on the side. LLMs know Godot.
> How are you measuring this?
I attempt a programming task with and without LLM assistance. The attempt with LLM assistance is pretty much always completed faster and cleaner.
Another example: https://news.ycombinator.com/item?id=43991777
How much faster? How much cleaner? What tasks are you accomplishing?
I linked to an example in the comment. In that particular case, I'd say probably 10-20x faster. I do embedded, backend, web and mobile app development.
I also notice these things. Otoh i spend definitely less than 50% of my time typing in code so it is impossible that it gives more than 2x speedup. And sometimes i lose time babysitting and rewriting stuff so all in all it is kinda no productivity gain.
Can someone bring this man a cup of Kool-Aid, stat?
> Significantly increased my productivity as a software engineer.
You’re going to have to define productivity as it applies to software engineering. With LLMs we’ve primarily seen the number of PRs over time being discussed as a proxy for LoC, as well as the speed of bootstrapping a small project. None of these have a known correlation with economic output. They just feel good, to the programmer, their manager, or both.
> Using it daily for Chinese-English translation. Significantly better than pre-LLM translation software. Also, great at teaching grammar, nuances, etc.
Yes dealing with language is the one area LLMs are actually designed for. But what’s the TAM for machine translation?
> General Q&A. Like "Googling" but much faster. This is probably the most common use case for me.
And now you’re missing any kind of traceability for the information that you “learn,” since it all gets spaghettified and then recombined into a pile of plausible slop with no attribution. Where before you had to do slightly more work to find the information you needed, now it’s available faster but you’re at complete mercy of literally 3 American companies plus the CCP for the accuracy of that information. Most people somehow seem happy with this arrangement.
> You’re going to have to define productivity as it applies to software engineering.
I meant it in a colloquial way. I just get more done, faster.
> And now you’re missing any kind of traceability for the information
Modern LLM assistants provide sources and references. While it can sometimes be just "slightly faster", it can genuinely save hours of research on complex ones. Also the "slightly faster" can add up to hours saved with frequent use.
We have some exotic chicks the kids picked out, and 4 were going to die of brooder pneumonia.
An LLM correctly diagnosed it, and figure out that we could treat them with Nutri-drench Sheep Supplement, since Tractor Supply was sold out of the chicken version, and they are very similar.
Of course it then immediately recommended we use hemp bedding that would kill them a different way, but the saleswoman sanity checked all of the above,
100% survival rate.
Everyone’s thriving. Chickens would follow the medical advice again, I guess.
Sounds like you have only the saleswoman to thank, not the bot.
I used Gemini to fix my new boiler by taking various photos and asking it for help. It saved me a plumber call-out (this was a user error issue, nothing safety critical).
Gemini also told me about some obscure procedures to fix my wedding paperwork after it’d been submitted with typos.
> - Significantly increased my productivity as a software engineer
I don't understand this. It increased productivity of every developer in the western world, so it didn't really give you an advantage. Your output is more valuable, but your colleagues' output is more valuable too, and your competitors' output too, and so on. So you're doing more things at the same salary and it's not like your company or your employer is making more money than usual or awarding you more eoy bonus. If your "life-change" is "I'm writing more code" without any other advantage (and with the possible disadvantage of your role changing, or being at risk), why is it desirable?
Intrinsic motivation. I find developing software inherently enjoyable, and being able to build things faster with less friction simply makes me happy.
From experience, whenever someone asks in that particular tone and is actually provided with examples, they proceed to bend over backwards to "prove" that it's secretly not much of an improvement at all/AI psychosis/a mirage/actually harmful/<insert other substitute for "I don't like it therefore you must be wrong" reason here>.
I asked - I don't have an opinion either way. I use LLMs, I just don't find them life changing, but I would never deny that in a world with infinite data something that can do a pretty good first pass at parsing and summarizing and organizing it with little effort on the creation end is a good thing.
Some guy vibe coded a tasks app client that I really like. Not life changing but I couldn't find one that suited my needs since de-iPhoning before this one.
Does it have to be an LLM? https://www.independent.co.uk/news/health/ai-skin-cancer-nhs...
It does have to be an LLM; when people talk about AI these days, they're talking about LLMs; that's the common framing of the discussion. Linking to unrelated ML to argue that AI has benefits is disingenuous.
Immediate medical and childcare advice from LLM are pretty life changing.
Interpreting reports, avoiding drug interactions, or knowing when to seek medical care. And before people object- I can literally use the same LLM my doctor does to check these things, without waiting 2 weeks for an appointment.
I helped my parents work through bacterial culture results when my dad was hospitalized with sepsis, and had them ask their doctor for specific follow up tests.
I rebuilt my gas furnace and fixed my dishwasher with AI as an assistant.
Those aren't the fun parts tho. My favorite is touring art museums ancient historical sites with an LLM guide. It can give me a short academic essay about every artist, painting, or artifact. It can pull out details quirky stories about the history that I specifically would find interesting.
I cant recommend this enough. Its like visiting with a 10 PhD docents in art history.
How do you know it is not hallucinating those quirky stories :)?
How do you trust a book, blog, tour guide, or art history teacher?
How do you trust the placards under a piece of art?
The short answer is you accept that it isn't perfect and move on with life. I have found multiple errors in all of those things. Human tour guides are especially the worst at making things up.
Part of navigating life is dealing with imperfect information and uncertainty.
Just like with a friend, coworker, or spouse, you use your judgment and track records to decide when to trust what is being said based on subject matter and stakes.
Domain matters. I have found it good at history, but less trustworthy in others. For examle, the llm gave me a bunch of bogus advice as I repaired my dishwasher based on weather models that weren't accurate. There is also a lot of bad information on Reddit and Appliance blogs. Repairman are almost as bad as the tour guides, willing to lie straight to your face. I deal with it the same way.
Because generally speaking people have a firm grasp on truth and lies are intentional, predictable, and rare. LLMs have a tenuous grasp on reality at best and make things up constantly.
I trust Wikipedia- and it is available on iPhone
Try the prompt to opus 4.8:
does "das man" know they are part of the crowd?
https://www.the-scientist.com/chatgpt-and-alphafold-help-des...
Literally saved his dog's life.
I think it is a typical example of where N% (N tends to zero) of the population GREATLY benefits AI models, while the next bracket (casual users) enjoy some benefit, but the vast majority would not feel any difference if they lost the tech tomorrow.
Let me rephrase that to you: The vast, vast majority of people, even in the western world, even the white-collar part of the population, are not whales or power users of AI models.
I use ChatGPT daily. And I never spend more than $25/month. If I lost it, it would suck, but it would not affect my life significantly. I then see people spending $100 / day on Claude Code tokens, programmers in startups / tech companies rack up thousands a month in bills. These people are literally spending 100x more than me, a casual user.
Yeah, I suspect they follow some sort of whale economics - where a relatively small userbase (in the big picture) and providing them with a huge chunk of their revenue.
But still these companies are being valued as if they're some omnipresent companies which humanity simply can't live without.
Do you use Grok multiple times per day? Is Grok solving Erdos problems?
> Do you use Grok multiple times per day?
No body who has a choice is using Grok
> Is Grok solving Erdos problems?
Mēh! At a slower rate than models a fraction of the price
> No body who has a choice is using Grok
The Grok app had over 100 million downloads in 2025, over 60 million active users, and generated $350 million in revenue. That’s a lot of people being forced to use it.
Grok revenue is like 100x smaller than xai estimated capex? Doesn't look great.
Still more than I expected based on anecdotal experience
Comments like these make me feel like AI is a computer in the hands of a monkey, and that too the computer which is unreliable.
I don't know if its really improved my life at all. Sure I can put together quick and dirty single-use programs faster I guess, but I feel like losing that practice has actively made me a worse developer.
Even if they are, it still doesn't justify the ridiculous levels of overvaluation. They are not essentials and their consumer demand is extremely elastic.
So, let's see. LLMs made my overall coding output significantly faster, even factoring in review time and tech debt. My employer should technically benefit from this, but it doesn't really, because all its competitors use the same AIs and all their engineers increased their throughput in a similar way. So I'm not sure that I, my colleagues or the whole segment I work in really benefited from AI in any measurable way.
Your clients and your competitors' clients did benefit from this overall faster coding output though.
Eventually your employer benefitted too, from more & happier paying customers.
Finally you indirectly befitted as well - through continued employment, salary and bonuses and stock (if you own any).
But that didn't happen in reality, did it?
Clients - I don't see anyone delighted that apps are better, or cheaper, or more secure. If anything, I see more enshittification, more half-baked ideas and more fear that security is worse now that we let AIs write almost all code.
Employers - They didn't really sell more or expanded their customer base. They would have, if they had the exclusive advantage, but now everyone has AI. They can cram more features in their software quicker, but so can their competitors, and AI is not magically opening any untapped market. If anything, everyone is now doing the same thing - trying to get their software on the AI train, with mediocre results so far.
You - did you benefit really? The job market is shit due to the death of ZIRP, the nature of the job itself is changing and there's a lot of uncertainty around. If anything, employees are now laid off more, not less, and salary and bonuses are not increased in any measurable way.
It looks like to me that we have to dance this particular dance because if we don't do we're left behind. That's fine, it happens every now and then. It might even be that in the future we will have tangible advantages from LLMs - better automated health care, better learning opportunities come to mind. That has to be demonstrated. But now, in year 2026, what's one advantage of AI? Having less and pricier RAM? Being able (and expected) to write more code in less time?
Another generic, useless comment which absolutely refuses to mention any particular aspect, eg how your life has been improved. It's so tiring
And when pushed all we get is another teaser of "Significantly increased my productivity"
Starlink a generational leap in Internet connectivity. The Starlink satellite constellation is over 10,000 satellites. It is hard to comprehend. Also, they will soon add mobile phone service. That will be yet another generational leap. I watched a (sadly) short YouTube video about the SpaceX factory in Seattle (area) that produces one Starlink satellite per day. That is incredibly fast. That alone sounds like a generational leap in satellite manufacturing. (Oh yeah, and they have a somewhat less technically impressive factory in Texas that produces millions of Starlink antennas per year.)
Final sad note about Starlink: It is helping Ukraine to win the war. It makes their mid- and long-range drones almost impossible to jam. (Most short-range drones use fibre optics these days to avoid jamming.)
Id be more enthusiastic if I could buy starlink at a valuation based on starlink. Instead we’re getting a shitsandwich of a combo stock with a pile of regulatory manipulation on top
Yes, the help Ukraine... by not connecting Crimea by choice.
Why is this comment downvoted? It is factually correct. The reason why Ukraine has such an upper hand in the last 3-6 months with mid- to long-range drones is access to Starlink, even within Russian territory. Russia does not have the same, so it is harder to navigate their one way attack drones.
Try to keep perspective, these valuations are just functions of the stock market the end result of some spreadsheet. They have nothing to do with quality of life. Why would you relate those two things in the first place?
They are fundamentally different, but people desire they be aligned. The public expects the economy to producing higher quality of life for us, otherwise what is it doing? And for whom? But whether it actually does so is a function of other things. That gap seems bigger than usual right now with AI and tech eating the whole economy.
Yes, exactly. Many people fail to ask themselves: what is the economy for?
It would be very nice if we had a system where the money was backed by some kind of consensus about quality of life. But what we have has more to do with compulsion.
The more dollars there are, the more deeply in debt we are. If these were interpersonal debts where we all owe the dollars to each other such that they go away when whatever promise is eventually kept, that would be a tight knit society. But instead we're all indebted to the banks, so instead we have a lot of collateral at risk, and a lot of uncertainty about whether it's a stable arrangement.
If there isn't enough money to satisfy the asking prices set by the owners of these abstractions, then we can always go deeper into debt until there is. Or we could have a debt jubilee and let the prices re-settle to something more in tune with reality.
1. Valuation is based on the estimate of future profits. It has absolutely nothing to do with what have already been delivered. It's not a prize, it's an estimate.
2. There's a potential to optimize a lot of economic activity in there.
Isn't that the market cap of the company? That doesn't mean the company creates trillions of dollars of value. It just means the number of shares times the last per share trading price is trillions of dollars.
One would assume that the "market cap" of the company is equivalent to it's *worth*. Asking how Anthropic is worth $1tn+ is a valid question when it doesn't do much, apart from the promise of making a large fraction of the world unemployed and the rest under the thumb of unethical American tech supremacy. It's arguably built on the largest intellectual property theft in the history of mankind. That's generally what people worry about. Whether that's "true" or not I guess is how you frame your world view.
High valuations and other people's wealth doesn't need to improve _your_ individual quality of life - just the quality of life of someone who's willing to pay and the participants of that system.
Why don't you start a company that fixes problems you care about, then?
> Where's the trillions, or hundreds of billions worth in improved quality of life?
I think these IPOs are going to mint tens of thousands of new millionaires or something. That, in turn, will generate massive tax windfalls for all levels of government.
> other than the ability to produce more crap?
This is a big "other than." (And to be clear, the jury is still out on whether AI will let us produce more in the long run.)
It's not a pyramid scheme, it's a reverse funnel.
If jury is still out on positivity, long term, of AI, I'd really like to see arguments for that. Historically all - almost? - technical improvements were net positive; even some blunders had upside. AI is dangerous, yes, but e.g. fission was developed for the bomb, and now powers significant numbers of households worldwide - the tech less than 90 years old.
> all - almost? - technical improvements were net positive
I think it’s very likely AI is a technical improvement. But there is still a chance it’s a small improvement being massively overbuilt.
I think this is the story of tech in general. In my life, I've seen 3 really big steps down for the middle class: 2001, 2008 and then covid. Basic necessities are expensive today - people point to high GDP but what I see is high prices and poverty. And Tech, we've built a dystopian surveillance state.
> Basic necessities are expensive
There is going to be a well-deserved shitshow when these IPO proceeds start hitting real estate markets.
A shitshow for whom? I see it as extremely unlikely for the United States of America to not allow individuals to purchase things for whatever money they can pull together.
The only answer is to make it unacceptable socially, more costly economically (taxes, etc), or the third option which involves pitchforks (perhaps that also falls under "unacceptable socially") that I hope we can avoid at all costs. (is this the show you mention?)
Feels like folks used to understand the balance a bit better - but I think I made that up. This next governance cycle is going to be a trust-busting, wealth-confiscating one I think.
> shitshow for whom?
I think there will be a tremendous political opportunity in the next 6 months to capitalize on rage in cities against new tech wealth driving up housing costs.
:)
Housing prices aren't going up. They peaked in late 2022. Boomers are a huge generation, with homes millennials and Gen Z can't afford to buy. And they are smaller generations.
> Housing prices aren't going up
Where? Rents and home prices are increasing in most American markets.
Everywhere. I own a home in California - prices peaked in the state in 2022. Here is a map of home prices: https://www.reventure.app/map
Not for apartments / condos in Seattle. I looked today on Zillow and lots of apartment rentals advertised 2 weeks or 1 month free rent. Lets see what happens.
> Where's the trillions, or hundreds of billions worth in improved quality of life?
Starlink and Claude are both awesome and huge QoL improvements for me!
Quality of life doesnt matter. What matters is the choices people make to spend their money on. This is what drives profits.
If you are upset about people spending their extra productivity and labor hours on poision and mental laxitives, i would mostly agree. This is a failure of culture to adapt to distratcions and shiny objects
spacex makes starlink, which did improve quality of life. it is also allowing connectivity to drones in armed conflicts.
this sounds like a reddit comment too much. why would trillions of dollars improve your quality of life. a bunch of companies get investments from a bunch of VCs who took out loans... and that means your quality of life should improve?
And what's more crap exactly? it feels like your grasping at straws to take one set of things and associate them with others. yeah, lots of terrible products out there, lots of enshittification, lots of topics of discussion there. But AI and GPUs are being used in such a diverse way it is impossible to have one opinion on it all like how you're trying to.
I'm not even disagreeing (or agreeing with you), I'm just saying that's a lazy comment to make. if these companies making profits without paying taxes, that's a voter problem (not even politics, just people being shitty voters, self not excluded).
For everyone else who might think they have a better formed opinion on this topic, I only ask that you apply the same level of passion to how the US national debt is now 120% of the GDP. The government is fighting wars and printing money, devaluing your wealth, and indebting your country to previously unseen levels. At least the banks and VCs are using their money (unless they get a bail out again), not your actual tax money, and the tax money and wealth of generations of Americans. You have a president literally stealing billions of dollars in broad day light from literally you.
The stock market is just a game that rich people use to manipulate money. It is not a reflection of the real world. Consider for example Google, one of the companies with highest valuation in the market. If Google stops working now, the only problem we'll have is getting a few minutes back of our time. Nobody will have big issues in life because one cannot find a web page, view more ads, and watch silly videos! However they will swear that Google is the most important company in the world to justify the money people throw at it. I won't even go to Meta, which is like celebrating that people are using crack cocaine...
If everyone using Gmail permanently lost access to their gmail there’d be massive problems
you can replace “google” with every company that exists or has ever existed so no sure what the purpose of your comment is unless you are pitching abolishing the stock market. google is what they are because they make shitton of money and will continue to do so (more and more) into foreseeable future. that is stock market, always has been, always will be
if kroger shut its doors, my life would be much worse
Rest assured altman and other guys have improved their quality life significantly.
Raven, Raven.. that's for those who can borrow against that to know and you to likely never find out.
What you thought your life would improve? Didn't you hear, wages are only increasing, why don't you invest some of that sweet cash into @JumpCrissCross' fund, it'll be alright. What were you going to do with healthcare anyway?
Meanwhile the federal minimum wage is still $7.25/hr.
And how many earn this? Around 1% of hourly employees…if that. Not what I’d be concerned with right now.
Why not raise it then?
I don’t know, ask the states that have lower wages on the books (even though federal prevails).
Why shouldn't we be concerned about it?
A society should be judged by how it treats those at the bottom and by that metric our current society is pretty awful.
? Who are you to say they deserve more than that.
I come to this website everyday. And each day I lose faith in humanity a little more.
Who are you to say that they don't?
What makes you better than them?
My own lived experience tells me they deserve more.
The vast majority of people I've known who have worked for minimum wage were much harder workers and frankly just much better humans (who happened to have less privileged starts in life) than the vast majority of people I've known who are financially secure.
But even if you don't believe they deserve more inherently, it would still be dumb for us to continue to let income inequality grow at the ridiculous rates it has been over the last 40 years. This pattern never turns out well for society.
0. You are really trying to say that one group of people are “much better humans”…? I think people should fear this type of attitude. It _never_ turns out well for society when we go this route.
1. The federal minimum wage is not the solution to any of your complaints.
Nominal global financial wealth is about $350 trillion. If you include real estate global nominal wealth is about $600 trillion.
A good portion of that[1] is what alot of people might call fake money--valuation inflation, etc. And global wealth, even just financial wealth, isn't quite as mobile across borders as one might assume. So marshalling a trillion dollars stateside is gonna make at least some moderate waves. Still, in the grand, global scheme of things a trillion dollars is a rounding error. A trillion isn't what it used to be, and there's trillions to be had even without any realized productivity gains from AI.
[1] I'm no financial analyst, but judging by the last few recessions and the overall trajectory over the past 30 years, I'd ballpark at most about 1/3 of that to go up in smoke if we had a severe downturn tomorrow. It's not all fake money. The whole world has industrialized over the past 30 years on a scale that is still unfathomable for most people today.
Maybe to counter some of the apparently widely expected doom and gloom:
- bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
- large scale infrastructure spending tends to be really good for economies. These three companies are creating lots of jobs that are mostly related to construction, energy infrastructure, hardware spending, etc. That's a lot of money flowing to suppliers and regions where that spending happens.
- While overly pessimistic sentiments about AI and space companies are widespread they aren't much more rational than the overly optimistic ones. The realist scenario could actually be that, AI and especially Agentic AI is already quite useful and the total addressable market for that is obviously larger than it is today. The question is how large. Likewise, dropping the cost of launching stuff into orbit by one or two orders of magnitude, should create a much larger market for launching stuff there. Including possibly some AI relevant compute.
The valuations of these companies are probably on the high side and I'd expect post IPO share values to drop quite a bit and would not personally consider buying anything until after that happens. But that won't necessarily trigger a stock market crisis or a collapse of these well financed companies. All the spending these companies are doing is very real and the profits of their suppliers are going to be equally real. So some of those share value losses might be offset by gains for other stocks and economic growth. The stock market and economy aren't zero sum games.
However, there are worrying macroeconomic trends happening at the same time (Iran conflict, Ukraine war) that are disrupting global markets already. But you could argue that dumping tens or hundreds of billions into e.g. energy infrastructure and data centers isn't the worst way to counter those for a country like the US. The big picture might actually be pretty positive. Especially if we can dodge global economic misery via a prolonged Gulf conflict that at this point seems to serve no point whatsoever for anyone except perhaps Israel.
I have no crystal ball, but I feel uneasy when they change basic rules about indizes right before these IPOs. There are a lot of retirements on the line just by this fact. Maybe big tech gambled too close to the sun and found a way out? Whether something pops or not, it leaves a bad taste in my mouth this can be done so easily, don't you think?
This is it entirely. I don't really care if the pessimists or optimists or somewhere in between ends up being correct. What possible reason is there to change the rules around the indexes unless these companies and their backers know that time in the market is going to expose that they're overvalued and they want to force someone else to be holding the bag when that happens.
> There are a lot of retirements on the line just by this fact
1) I would expect anyone close to retirement to have a fairly balanced portfolio.
2) if they don't include SpaceX and the stock does >10x in the next year, they'll end up doing terribly on the benchmarks. SpaceX is big, but if they invest early, it won't be a ridiculous % of the portfolio. Even if one overpays by 2x, since it's under .1% of the total portfolio. If it went to zero nobody would lose their shirts, they'd lose <.1% of their portfolio.
I think so too I’m just worried about how unequally these gains will be distributed, for myself I am quite pessimistic thinking that all these gains will not benefit my life, if at all it will move the needle more towards making my expertise and skills easily replaceable by switching human capital for agentic capital. So yeah really happy for Musk to finally make his one millionth million dollars but personally I’m middle aged and still struggling financially wondering if I can ever live comfortably or retire.
> when they are loudly and widely proclaimed to happen any minute now
Thats not true. For the dotcom bubble people loudly and widely proclaimed them for a couple years until the narrative changed to "I guess this time is different?" ... and then it popped.
> bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
Is that true? It seemed to me that the most common opinion before the recent Chinese real estate crash was that it was a bubble; architect friends of mine who worked in China said the government had no doubt prices were unreasonably high; the thing they remained hopeful about is whether a soft landing was possible. Similarly it seems like it was by no means an uncommon opinion in the Japanese asset bubble, NFTs, beanie babies, and even the dotcom boom that this is (to use Greenspan’s phrase leading up to the dotcom bubble) “irrational exuberance”.
I also think its hard to know when it will pop. The Chinese real state bubble you are quoting is indeed a very good example. Everyone knew the prices were super high but no one really knew when it would blow. The state had a problem and they knew they had to stop it eventually. After/during the covid pandemic the state decided to start a slogan "houses are for living not for speculating" and they started to set redlines for leveraging and developing. If you know how financing works in china you know many of it flows through the state and related companies and financial structures. Then also when one of the biggest developers in the country blew up they left it to blow instead of buying it. They essentially popped it with policy.
So many would say the saw it coming but the truth is only people with inside info really knew when it would happen for sure.
Same happens today. Capital is being heavily allocated towards AI inference and infra because of the promised productivity. Nobody knows if its early or late and also nobody knows how will the state react to a possible bubble exploding. Some people would say maybe AI is too big to fall already and its better if we save it when it falls. Some people would say its better to let it blow up but again nobody knows what will truly happen until we get there.
Bubbles are extremely predictable. The problem is predicting when it will come crashing down.
> large scale infrastructure spending tends to be really good for economies
All infrastructure is not created equal. It requires a lot of mental gymnastics to argue that datacenters are public good with net positive externalities.
Actually, you could argue that these are anti-infrastructure since they strain the electric grid for everyone and reportedly make the surrounding area unlivable with noise pollution.
Huge data centers and energy infrastructure projects mean lots of potential for local businesses to benefit, employment opportunities, etc. These companies are raising an unprecedented amount of funding and are looking for places to spend it.
With the right policy and legislation, this level of investment should be welcomed rather than opposed in most sensibly run places.
For example California and Germany have a lot in common when it comes to the locals blocking all forms of large scale infrastructure for mostly selfish reasons. Both places have broken energy infrastructure, high energy prices, high taxes, very bad roads, etc. Both have decades of backlog in terms of outdated infrastructure in need of major upgrading/fixing. Everybody is wringing their hands about fixing these issues because there is no money and tax pressure is already too high.
And here are some of the wealthiest companies in the world looking for places to spend their many billions. Surely, that's something that could be mutually beneficial. All states need to do is set some sensible terms and conditions for this. But instead you get people campaigning against this. I really don't get that negativity.
> bubbles are notoriously unpredictable and generally don't happen when they are loudly and widely proclaimed to happen any minute now.
Non really, there are a lot of signs. What is hard to predict is "when it will happen", not "if it will happen".
EDIT: Btw, a bubble popping is not necessarily a bad thing, they are necessary for markets, kinda natural fires in big forests.
Anthropic at $1t for an IPO vs Google at $23b in 2004 sounds insane but Google's revenue at the time was $2.7b while Anthropic's already at $47b, so a valuation at about 20x vs 10x revenue. Anthropic also has very high revenue growth (50x since 2024), it doesn't seems quite as insane as it could be.
That is revenue. What is the net profit?
If you are growing revenue at a high rate then taking profit is a misallocation of resources. That is short-term thinking. It is much better to reinvest in revenue growth.
You can take small profit now or much larger profit later. Insisting that companies need to be profitable even when growing revenue rapidly is failing the marshmallow test.
I have a high revenue business opportunity.
If you give me $100, I will give you back $101, funded by equity raises.
Very high growth, very high revenue, huge customer satisfaction.
We hope to be profitable one day, already foresee a mechanism to double profitability per transaction and also double the number of transactions our customers perform.
Please let me know if you are keen to invest.
Now let’s see you do this with 40B. The f you can do that I will be intrigued, since it sounds like you solved a bunch of complicated economic problems.
The point is that the unit economics are way worse because inference is expensive. Cost of goods sold matters, even if you're reinvesting profits.
But we don't have visibility on the COGS until they IPO and file, right? So where is all this premature judgement coming from about their unit economics?
(not pointing the finger only at you, at least you identified that gross margins is the correct thing to look at rather than net profit!)
I think a lot of us are calling it out because it's a contrast to SaaS/ads businesses where incremental goods sold are practically free compared to R&D, so spending can be looked at as one-time investments. There's very little additional COGS per additional customer in those businesses, so the default assumption to treat AI like other tech businesses has a blind spot.
> But we don't have visibility on the COGS until they IPO and file, right? So where is all this premature judgement coming from about their unit economics?
It's the lack of visibility that causes the judgement; Were the numbers good, it's quite unlikely that Anthropic would be so reluctant to share them.
Were it just Anthropic doing this, it's not much evidence. But it's EVERYONE that obfuscates their numbers, even the publicly traded companies.
Why would Amazon and Microsoft obfuscate the revenues and costs of their AI products? Even their cloud numbers are less clear than desired. And beyond those two, why would the datacenter companies obfuscate their numbers, when everyone desperately needs them to raise debt and investment to build more DCs?
Pretty much the only company showing clear numbers is Nvidia & GPU orders. But immediately beyond that, it's all obfuscated. How many GPUs are sitting in datacenters? They ain't telling.
Isn't it illegal for publicly traded companies to hide such information from their shareholders? What do you mean by "obfuscated"? The numbers are disclosed, but you think they're unclear somehow?
It'd be illegal if they overtly lie.
But what they can (and do) do is structure (in the not financial jargon sense) the reports such that the given datapoint does not exist individually.
E.g. If you want to hide AI revenues or costs, the SEC won't let you just _not report them_, but you can just group the AI revenues with the SaaS/Cloud numbers under a new division, and report only the combined figure for that division.
This works especially well if the grouped components already fluctuate a bit, so one cannot simply substract known SaaS/Cloud numbers from the new total.
Anthropic is not MoviePass. Its unit economics will be fine after it decides to optimize for profitability.
All of the analysis seems to rely on:
1. Continuing to grow their share of the market.
2. Margins staying high.
3. Inference costs coming down.
4. A need for Anthropic's models specifically.
I buy 3. But 1, 2, and 4 rely on models continuing to improve at the same rate, such that you need the latest version to stay competitive. At the cut below frontier models, there's already robust competition between open source models, cheaper providers like Deepseek, more local AI alternatives, etc.
I think the case for the unit economics being fine starts to fall apart if you can't charge a large premium for your best in class model.
"Best in class" is a broad definition. Anthropic can easily charge a large premium for their "best in small class" and "best in medium class" models, for any given definition of "small" and "medium"
Inference has dropped by like 75% from a year ago. While anthropic does offer more tokens now for the same money, the value of the business is based on an expectation of future profits. There are dozens, if not hundreds of examples of companies being valued this way.
You could be right but the unit economics matter to this business in a way they don't for a SaaS or ads business, they're not free and you can't just point at revenue.
Yeah but “intelligence” is very valuable and people are willing to pay
Except this is not intelligence
It’s not AGI, but frankly that doesn’t matter.
If a system can perform or positively augment the work done by a human, especially knowledge workers, then it’s got value, it’s just quite hard to put a finger on what the extent of that value is even now, let alone next month.
I guess net isn't the relevant measure, but what are the unit economics? Are they actually making money selling tokens?
on the API, their margins are very high
That's not how classical valuations worked though. I was taught the rough shorthand for valuing a company was profits / real_interest_rate, treating the company like a perpetuity. Revenue ain't in it. Now we have a bunch of "We'll make it up on volume companies!" like https://www.youtube.com/watch?v=CXDxNCzUspM
no, it is discounted expected future cash flows
> That is short-term thinking.
Then why IPO? Isn't that even shorter term thinking?
Maybe they are struggling to put together money for datacenter buildout (Capex).
Please don't ask those rational questions, revenue is all that maters.
While good to ask, that is less relevant so long as they can maintain runway.
Doesn't inference have very good profit margins* but all the losses come from training?
* For now, when they don't have to compete much against companies like DeepSeek who supplies inference at 1/10th of the cost
> Doesn't inference have very good profit margins* but all the losses come from training?
There is no source for this. Amodei just pulled a hypothetical explicitly distanced from Anthropic out of his ass and kickstarted some citogenesis when people half-remembered that number and started quoting it as truth.
The only material claim of Anthropic is that they would "turn an operating profit of $559 million in the June quarter ... The company might not remain profitable for the full year as it plans spending increases due to its vast computing needs." with an explicit disclaimer that: "It is unclear what accounting methods Anthropic has used to book revenue and costs, as the company isn’t yet required to follow the financial-reporting requirements of a public company."
https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...
This is the exact same quarter where xAI is giving them deeply discounted compute, as such the numbers cannot be projected out to the later quarters once Anthropic has to actually pay xAI for the compute they use.
Finally, there's the reality that were the revenue numbers any good, Anthropic would just publish them and leapfrog OpenAI. That they do not provide clear GAAP numbers suggests the numbers are bad.
They reported 559 million in Q2 of this year. OpenAI on the other hand, is nowhere near this.
because of the mutual sweetheart deal with SpaceX
SpaceX gave em discount for the pre IPO quarter so they can show profit
Anthropic signed a deal to lease compute that is the bulk of SpaceX revenue
and i think here lies the chess move by Elon
he's trying to steal OpenAI's limelight and shit on their road show
I'm actually quite surprised how much money Anthropic pulls
Also surprised that OpenAI is not pulling as much as I thought
All in all it looks like OpenAI is in a bit of a vulnerable position.
I don't know if it is a chess move but Elon certainly will take every possible opportunity to fk over Sam. Have to admit watching these two sociopaths duking it out is somewhat entertaining.
Not using GAAP, so this is just PR for them.
I suspect the answer is: in the future after Moore's law somehow inevitably does its thing.
That has worked in the past for tech infrastructure, so there is clearly a gamble that it does that again here.
These AI companies will be able to jack prices way way up once companies and users are fully addicted to doing everything with their AI.
What’s defensible about Anthropic’s revenue? It seems like OpenAI and others are equivalent. Open weight models are catching up. Google has ads networks, video platforms, and so much more.
I am skeptical that Anthropic and OpenAI can defend their dominance for long enough to make meaningful gaap accounted profits
Anthropic seems to have clawed its way to being the best AI and charging for itself. Microsoft had to slash the Anthropic budget… which it exceeded while being the exclusive host of OpenAI.
Google seems to have a good B2B and internal leveraging AI to make $. OpenAI/Microsoft seems to have squandered an early product lead.
And then you have the Muskiverse, where we have an rocket ship company that buys surplus cyber trucks, operates a space ISP, an AI company that produces virtual fetish porn and makes money renting GPUs to Anthropic, a rando dying social network and a tunnel company to cock-block public transit.
I may be underestimating the market for AI anime porn, but I think Anthropic is probably the best in class product right now. Google and AWS are probably the best positioned sellers of AI. SpaceXAI is the dark horse because they are likely enriching the dear leader more. OpenAI is fucked.
> an AI company that produces virtual fetish porn and makes money renting GPUs to Anthropic
Whatever Anthropic is paying is too much, since it means xAI will get to observe Anthropic's software, weights and operations in detail. It's probably contractually prohibited from doing so, but I doubt that would stop Musk, given what's at stake.
seems to be a well understood angle inside anthropic — colossus use expands subscriber capacity; training goes to aws/gcp
https://x.ai/news/anthropic-compute-partnership https://www.anthropic.com/news/higher-limits-spacex
Anthropic is profitable unlike OpenAI though. Sure they'll owe a lot of money for probably decades, but if they remain profitable moving forward, it will be worthwhile.
That profit figure is a pre IPO marketing claim, not an audited and GAAP accounted number. And there is already a lot written about how Anthropic exaggerated revenue compared to OpenAI.
https://www.forbes.com/sites/josipamajic/2026/03/25/openai-a...
This seems like it's because openAI actually partnered with Microsoft and has to give them 20% of their revenue. Anthropic isn't partnering with their cloud providers so it makes sense to me they count top line revenue and then give Amazon payment as an expense. Also the numbers seem pretty minor compared to anthropic $49B run rate. The article mentioned an openAI payment of around $500M.
The question still remains whether they will be defensively profitable when things settle down.
I don't think open weight models are likely to overtake or match frontier models in the next year or so when it comes to doing the most difficult tasks, but I do expect a lot of people who are currently funneling wheelbarrows of money to Anthropic to realize that they can achieve the vast majority of things they are doing with LLMs just as well with much cheaper open weight models.
That is 100% valid, and I don't disagree.
I think their real moat is the grip they have in corporates.
Once they are in, they will catch most of the opportunities.
They will defend it the way any good monopoly always does: buying the competition. Case in point is Facebook: it is just a social network, the way they really stay on top is buying other companies and paying for people to spend even more time on their properties.
They bought insta and WhatsApp but at the time neither were really social networks. Insta was a popular filtering app. WhatsApp is just recently turning into a social network with their status updates.
Looks like it'll be more like $2t
https://polymarket.com/event/anthropic-ipo-closing-market-ca...
At least on SpaceX the float is really low. The Market only needs to "swallow" ~$100Bn in volume of shares (across the 3), which the NYSE does _daily_.
the really interesting thing will be how much will other stocks go down because the passive dollars are chasing the new shares and have to sell to rebalance?
interesting question, and i used the AI for help on this one:
$ value of equity purchased in indices:
- total market cap of those 3: $3.6tn
- index inclusion weights is based on free float, not full market cap
- free floats ~5%
=> 5% * 3.6tn = 180bn of these stocks in MV weight in the index
$ value of index funds: $18tn
$ value of market cap that is tracked by these index funds: $57tn
=> index funds are 18/57 = 31.6% of the market value
=> 180bn * 31.6% = $57bn of stock included in the index funds
so $57bn in sales in other companies => 57bn/18tn = 0.32% of all other stocks sold
Now for the assymmetry here:
- 57bn in sales is about 7% of daily volume for all incumbants combined
- 57bn in purchase is about 15-30 days of volume for typical stocks (hence Elon's eagerness to get them included asap)
So they're not just racing to gain dominance in AI, they're also racing to IPO before the music stops?
IPOing and getting a bunch of cash, even if your stock subsequently suffers in the crash, is a lot better than being unable to get that capital infusion before the house of cards collapses.
I don't think OpenAI or Anthropic are predicting that the AI market is going to collapse. In fact, I think both are bullish that the public still isn't pricing in exponential growth.
I think what is happening is that OpenAI is racing to IPO before Anthropic because their growth isn't as impressive. If you are the weaker company, you should IPO first to lock up the cash.
I can’t imagine them actually being bullish about exponential growth, when both seem instead to be stagnating. I’m more inclined to believe they’re just maintaining a level of hype in public because that’s what you do.
> when both seem instead to be stagnating
What's the evidence for Anthropic stagnating?
They’ve claimed a big revenue run rate for this quarter. But it’s non-GAAP, so you kind of have to assume shenanigans. Earlier this year they were telling a court their revenue was like 1/4 of what they had told the public. I consider the number they came up with when they had to worry about committing perjury to be more trustworthy (because I’m a pill), so that would also indicate shenanigans. My guess is they are inflating that revenue run rate figure by booking token pre-payments from enterprise contracts now instead of spreading it over time as GAAP would mandate. And at the same time their big enterprise clients are talking about scaling back their usage.
So we’ve got a combination of signs that they’ve been inflating their revenue growth, and signs that their customers are losing their appetite for contributing to that revenue growth. I suppose it’s not a slam dunk, but it feels to me like as strong an indicator as one could hope for a private blitzscaler startup like this.
Oh, to be clear, I'm not saying there is evidence they're all a-okay. I just hadn't seen any evidence that they were stalling out. (I have for OpenAI.)
"Although the company has generated substantial revenue since entering the commercial market—exceeding $5 billion to date—it has nonetheless had to raise more than $60 billion in outside capital to fund its operations".
https://storage.courtlistener.com/recap/gov.uscourts.cand.46...
That doesn't prove this qouote:
The same evidence that they are growing. Tea leaves.
The AI market might not collapse but the stock market could! Even if the AI companies only need to downgrade their investments and a healthy correction is underway, a fire sale of AI-related stocks will bring the stock market to its knees.
I don't really see this happening in the way that most people are envisioning. It's clear that Anthropic and OpenAI have found product market fit. They've gotten companies hooked and personally I cannot go back to the old way of coding.
However, I do see a bit of reduced demand for hardware and datacenters which could reprice these companies to more sane multiples. There will be winners and losers.
But will you need overpriced Codex and Claude? Most business code is crappy SaaS and glorified CRUD apps & I can build those with Sonnet / DeepSeek just fine …
What are they offering the public (not me and you writing code in our free time)?
They are offering the public an opportunity to become shareholders and they are giving their investors and employees liquidity.
I mean as a long-term product, not as a offer to join a hype cycle.
Automating a large portion of existing white collar work, accelerating scientific discoveries, brain for robotics, etc. These are compelling offers.
Sure, how does that benefit the public?
Short term, nations with a high rate of white collar employment and fewer social services will suffer greatly.
Eventually, and likely in the lifetimes of most people living today, we would have to see something akin to universal basic income (UBI) that covers the necessities in order to stave off massive civil unrest.
If the white collar labor of human beings can’t compete with the output of AI, we either all become blue collar workers or we re-invent the concepts of work and play.
I’m not aware of any existing or proposed economy framework that adequately accounts for the automation that is nearly here at scale. We are not just automating away jobs - we are automating away the value that human beings have within a productive community. Before the mass starvation will come the mass suicide. Our culture teaches us that a feeling of self worth is derived from our perceived productivity. If we cannot feel successful, we may lose our wills to live.
> Before the mass starvation will come the mass suicide
Maybe, but history suggests there will be massive riots instead
I don't know. Some will benefit, some will not. The topic here is the IPOs.
What have the Romans ever do for us?!
Their ruins are great tourist attractions.
where the heck are you seeing OpenAI racing to IPO before anthropic?
The only reason I can think of for the accelerated S&P 500 inclusion of SpaceX is a pump and dump
> the accelerated S&P 500 inclusion of SpaceX
To be clear, S&P hasn't announced a decision on this yet.
Perhaps they’re afraid announcement would trigger divestment
I can assure you they are already seeing divestment in preparation.
I imagine the vast majority don’t care. All they care about is trying to hit their 401k or Roth IRA contributions for the month.
> Perhaps they’re afraid announcement would trigger divestment
S&P don't get a choice around whether they announce their methodology or not.
That said, the rule change at the NASDAQ 100 doesn't seem to have impacted pricing or allocation. I can't imagine that many people are that concerned about this. (I posted the public-comment request from S&P to HN [1]. The response was crickets.)
[1] https://news.ycombinator.com/item?id=48054324
Better for whom?
The company. Worse for the investors. It's a classic bagholder play, but it can give the companies a comfortable runway post IPO.
Typically, you IPO when your private funding is drying up and/or some of your early lenders want to cash out.
> The company. Worse for the investors
It's worse for the new investors. (If it crashes.) It's great for the old investors. They got an opportunity to sell if they wanted. If they didn't, they still own their shares, except in a company that has that IPO cash sitting in its account.
Yes, correct. Although, even for some company folks, if it crashes, they get burned since they typically have blackouts post IPO.
Of course, some special souls are excluded from blackouts lol.
> if it crashes, they get burned since they typically have blackouts post IPO
In the alternate timeline they would have held shares in a private company. They're still not really getting burned other than getting a tax bill.
I'm not sure how long we can continue being negative about these AI companies. This idea that there will be a crash has often burned the bears in a way that has become an Internet meme.
In reality, corporations as a whole are seeing record profits continuing through 2026. Whether or not the average person is doing well is pretty irrelevant to the stock market: if companies are increasingly profitable, stocks go up.
Everything I hear about Anthropic points to a company that is actually closer to profitability and possibly already profitable, unlike many of its other peers.
We don't really look at YouTube as a failure and that product was unprofitable for many years. Nobody thinks the Uber bubble is going to burst even though it has never made back its investment money.
I think OpenAI is undisciplined and poorly run hence the insane burning of cash. Sam Altman is a terrible CEO and a conman. Anthropic is run by legit people.
Companies like Google, Microsoft, and Meta face essentially no negative consequence for burning cash. They have no urgent need to be efficient about their AI investments, even if they could be.
SpaceX is of course not profitable and has a lot of baggage but they still have a major asset, which is that Starlink prints utility company levels of money and is expanding both customer base and profit margins rapidly. Are they overvalued? Yeah, of course.
People keep predicting "house of cards" and keep being wrong. AI bubble was supposed to burst as far back as 2023. When was the last time since 2009 there was a $500+ billion tech valuation that lost 90% or more? After a certain point , 100% market penetration is achieved and these products become mainstream and profitability follows. See Uber and Tesla for examples.
The old saying goes, the market can remain irrational longer than you can remain solvent.
I’m not necessarily expecting a crash any time soon. (But we average a major correction, what? every 8 years? So if you keep predicting one long enough you will eventually have been right all along.) But I do feel comfortable saying OpenAI and Anthropic are overpriced. For more or less the same reason Cisco was overpriced in the late ‘90s. It’s not that what they were making wasn’t valuable; it’s that we got out over our skis a bit over how much of it the world could actually manage to consume in the immediate future.
> After a certain point , 100% market penetration is achieved and these products become mainstream and profitability follows. See Uber and Tesla for examples.
Groupon got to pretty much 100% penetration, still crashed and burned right after IPO. I think Zynga followed a similar trajectory.
Read history: people always think everything is fine ... until it isn't.
This is one of those arguments that is so vacuous you can apply it to anything and always be right.
> "There's no way you'll hurt yourself walking to the living room"
> "Read history: people always think everything is fine ... until it isn't."
And people are right most of the time. For every actual bubble, there are easily a dozen "bubbles" that aren't in fact bubbles.
> people always think everything is fine ... until it isn't
History is also replete with people constantly predicting collapses that don't come. Timing the market is very hard with numbers, it's total nonsense if one is just going off vibes.
Most bank runs tend to be driven by vibes, not numbers though.
The good news is that these folks seem to be in possession of a vibe-rator.
> bank runs
Anthropic, SpaceX and OpenAI are not banks. (Also, we had the largest bank runs in American history three years ago. The ordinary American barely noticed.)
They're not profitable either, so the money has to come from somewhere, no?
> the money has to come from somewhere, no?
Yes. Equity investors. The ones who buy hundreds of billions to trillions of dollars of American stocks a quarter.
And these equity-investors, do they use their own money to buy the (presumably non-voting) stocks?
Cause if that's the case, I see no reason for a government bailout should things go south. Nobody's pension would be affected by some private investor losing money on a bad investment.
But if that's not the case, then someone somewhere along the chain is acting as a bank, subject to a vibe-driven run.
> these equity-investors, do they use their own money to buy the (presumably non-voting) stocks?
Yes [1].
> Nobody's pension would be affected by some private investor losing money on a bad investment
...pensions also invest in the stock market.
> if that's not the case, then someone somewhere along the chain is acting as a bank, subject to a vibe-driven run
You're confusing deeply unrelated concepts. Whether or not someone who loses money is politically sympathetic has nothing to do with whether they're at risk of a bank run.
[1] https://www.federalreserve.gov/releases/z1/20260319/html/f22...
I made no mention of anyone being politically sympathetic or otherwise. A private investor is _private_ and thus not subject to a government bailout. The argument for government bailouts used to be that "grandpa would lose his pension", I merely stated the terms that would make this non-applicable.
If pensions invest in the stock market, then they are de-facto acting as a bank. And last I checked, in the land of the free, you get to withdraw your 401k should you vibe with the decision to do so [please don't do this based on this post alone].
> A private investor is _private_ and thus not subject to a government bailout
What does this mean? Who do you think benefits from a bailout?
> If pensions invest in the stock market
Pensions are private investors. And pensions invest in all kinds of things. Plenty are already shareholders in these companies.
> last I checked, in the land of the free, you get to withdraw your 401k should you vibe with the decision to do so
This is a non sequitur. Nobody disputed this. And 401(k)s are not pensions.
If much of the money comes from passive funds, presumably the other stocks in those funds will need to be sold?
Nasdaq is 5.4x higher now than peak dotcom.
So just buy the dip if it actually crashes.
The headwinds are way worse now, though. Oil is choked, war is brewing, and corruption is at an all-time high.
If note the dotcom boom lasted from about 1995 until 2000. Housing bubble longer. Theres no time table on when the bubble bursts, and the web didn’t die and neither did housing when the burst happened. It is just a reset and consolidation of overtly excessive speculation. It’s not like the bust leads to an end of civilization.
US markets will keep superpositiong S-curves upon S-curves upon S-curves. Just as Elon Musk does with his companies. Just ask Tesla/SpaceX bulls.
> People keep predicting "house of cards" and keep being wrong. AI bubble was supposed to burst as far back as 2023.
The bubble can't pop until after an IPO, and that doesn't mean "immediately after".
You can't have a run on a privately held company.
In 2004 people were predicting that the real estate bubble would burst and then nothing happened. Until it did.
If I buy the SpaceX stock it's 100% certain to go down. If I don't buy it it will rocket to the moon.
Is there some sort of way I can positively monetise this?
Keep buying single shares slowly so it keeps going down. Once it reaches $0, buy the rest for free and asset strip.
Well since SpaceX will be included in the SP500 and Nasdaq100 you'll buy it even if you don't want it.
Package your portfolio as a reverse index fund.
Buy it both long and short, then it’ll just hold steady !
> If I buy the SpaceX stock it's 100% certain to go down. If I don't buy it it will rocket to the moon.
The answer is clearly to buy stocks and then short it.
(/s!!)
Net buying of corporate equities by American households, trusts, funds and non-profits has averaged $660bn per year for the last few years [1]. $200bn is not fundamentally a stretch for the American equity markets, let alone capital markets more broadly.
[1] https://www.federalreserve.gov/releases/z1/20260319/html/f22... line 16, 2023 to 2025
A 30% increase in one year, across only 3 companies, seems like a of a stretch. Especially given current economic/etc climates.
> 30% increase in one year
30% above the average. Households bought $1.6 trillion in Q3 of 2025, for example. (Foreigners bought a further $650 and $700 billion in Q3 and Q4, respectively.)
American capital markets are ridiculously deep.
> capital markets are ridiculously deep.
American market valuation is more than twice the entire US GDP. So ridiculous is a good description of what's going on.
> American market valuation is more than twice the entire US GDP
Stock versus flow.
Everyone knows one is stock and the other is flow. It doesn't mean that we can't measuring the ratio between them. Actually, measuring ratios between "stock" and "flow" values is one of the favorite things analysts and economists do! (e.g., rent vs house price, P/E, fixed cost vs marginal cost...)
There is even a name for marketcap/GDP, Buffett Indicator. And historically the current value is very high.
[0]: https://en.wikipedia.org/wiki/Buffett_indicator
A third of all spending is not fundamentally a stretch?
> A third of all spending is not fundamentally a stretch?
Where did you get spending? That's net buying of stocks by non-financial Americans. It's the new money that has, on average, gone into the U.S. stock market from that section of investors every year. A third of it going into these new issuances doesn't need to break anything.
Dumb question here, but would it necessarily mean the other stocks they might've bought (i.e. the rest of the market) will not get the cash infusion and will thus likely drop in valuation?
> would it necessarily mean the other stocks they might've bought (i.e. the rest of the market) will not get the cash infusion and will thus likely drop in valuation?
¯\_(ツ)_/¯.
Almost certainly, to some degree. But that doesn’t mean anything has to drop. Just not rise, or not rise as much as it would have. Or potentially some other company that would have gone public or sold shares doesn’t do it now.
> A third of it going into these new issuances doesn't need to break anything.
Other than it not going somewhere more productive. Are you willing to just bury 1/3 of your income in the back yard?
> Firms in the broad Russell 3000 share index have a total market value of $79trn
I sometimes try to get people to worry about the catastrophic state of American public finances by pointing out that the net national debt, including unfunded liabilities, is estimated to be $175T [0]. The government could appropriate all the equity from the top 3000 largest companies, and also the entire real estate market, and it still would not be able to pay its debt (RE market is $55T).
[0] https://balajis.com/p/americas-175-trillion-problem
The $175T number is unfair because it treats Social Security and Medicare/aid as a liability instead of the service that they are. You might as well say the US is in infinite debt, because we'll always be paying something for our military every year, so infinity years * any dollars = infinite debt.
Also: All of those numbers you use to scare people are way, way off.
> it treats Social Security and Medicare/aid as a liability instead of the service that they are
It's a liability because the U.S. has promised to pay it. We haven't committed to a level of military spending backed by our full faith and credit.
EDIT: Never mind! Apparently we can just cut social security payments.
The NATO treaty says that we have to maintain our ability to resist armed attack, so there is some minimum. And we’ve made public commitments to spend at least 2% of GDP (though that isn’t part of the treaty).
Surely NATO has enough competent people to know that the biggest and only threat remains the USA and pretty much any othed conflict is a direct result of provocation or invasion by the US, right? Or do we all watch Jarhead 2-5 on repeat until all we can say is OORAH
Germany is in the middle of a massive military build up because the primary threat they’re concerned with is Russia and they’re worried that the US won’t back them up anymore.
Neither of those are full faith and credit guarantees. Congress can nullify them in a way it Constitutionally cannot actual debts.
SS and Medicare aren’t debts either in that sense. Congress can reduce benefits if they please.
In Flemming v. Nestor SCOTUS ruled that SS benefits are not guaranteed contractual rights but are instead statutory entitlements that Congress may modify or revoke.
Including all of the Social Security obligations for the current population is nonsense. For one it is money that will be paid from now for another ~60 years, and for 2 it's something that probably will just get cut as the trust fund starts getting into dire straits. It's not really an obligation if it's one act of congress away from being fixed (and without doing something like a debt jubilee that would destroy the dollar).
The rest of your article is complete bogus and the economic equivalent of climate change denial.
This misunderstands the power of monetization, or mistakes "dollars" having some kind of fixed "value." They do not. Whether one agrees with that or not, thinking of this as a "debt" problem where a hypothetical move is to appropriate equity- setting aside the fact that equity ALSO is not in a fixed unit of measure- anyway, thinking of appropriating equity to solve a public debt problem is a category error. That is how accounting works for business structures that exist within a monetary system but NOT for government and currency printers that define the monetary system. The MMT people are right about this. Public debt is a measure of private sector wealth. That is how the machine works.
39T is just the outstanding value of all the Treasury instruments (T-bills, etc). The entitlement programs (SSA and Medicare) have made commitments to certain levels of service and payments that are far in excess of the revenues they bring in, that's what is meant by "unfunded liabilities".
The thing is that at these levels of debt, repayment is never the goal.
How can you use a word like “never” when this debt is literally unprecedented in the history of the world
It can never be repaid. Presumably the people in charge of generating it are not oblivious to this fact.
"If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem."
It goes beyond that. $175 trillion includes all future entitlement spending not debt, it’s crazy to call all future entitlement spending for every living person debt. By that metric there’s essentially no such thing as a solvent government anywhere in the world and there never has been in modern history.
Well, will be interesting to see how this play out. The US federal debt repayments is already above $1trillion a year.
Repayment isn't a goal that anyone in the system should reasonably want. Federal debt is not like credit card debt. Debt is a product that the US Government sells. Me, being a big corporation or human, go to the USG and say "I need somewhere to park my money that is safeish from inflation". The USG sells me debt at X.Y% interest. The money now generates safe interest, which means its safeish from inflation. A world where the USG "repays the debt" is a world where this essential product is no longer available.
High levels of debt only signals high demand for this product.
This is super-counterintuitive, but the debt has little to do with the deficit. We could run a surplus and still be in the same level of debt (in fact, this would be a tremendous place to be). We could run a deficit and have no debt (just print money, duh). The decisions that go into column A generally do not impact the decisions our leaders have to make in column B, though there are of course convenient relationships between the two.
> Repayment isn't a goal that anyone in the system should reasonably want.
Repayment to $0 isn't a reasonable goal but there are a lot of problems with your argument.
The biggest question is about sustainability. Is the debt-to-GDP ratio stable/manageable and is the interest rate on the debt below the economy's growth rate? If the answer is no, you have a problem.
> High levels of debt only signals high demand for this product.
This is backwards. The amount of debt is set mostly by government supply, which is driven by deficits. The demand signal is the price, which in this case is the yield. If the demand was high, yields would drop as the amount of debt grew. Instead, we have rising debt and rising yields, which means supply outstrips demand.
The US no longer has a AAA sovereign credit rating for a reason. When Moody's (the last agency to downgrade the US) stripped the US of its AAA rating, it cited "rising debt and interest costs 'that are significantly higher than similarly rated sovereigns.'"
The biggest issue at this point isn't the principal, it's the interest. Interest is the fastest-growing line item in the federal budget. It's almost at $1 trillion/year now and expected to nearly double by 2035. You either have to cut from other spending or borrow more to pay the interest.
Your comment implies that this doesn't have a real cost, which is silly.
So the more people want US$ debt the more tbe US government must spend?
Government debt isn't like personal debt or business debt. The treasury can choose to not honur it, and there's nothing anybody can do about it. Of course they're not going to find a market to sell more debt to after that, but wouldn't you say they already have enough?
No sympathy for people and institutions who make deals with the devil and expect the government to forever enslave taxpayers to honour those deals and pay back with interest.
As mentioned defaults do shockingly little to change future funding. Its been years since i looked but its something like a few years of “cool down” on issuance and a few points of coupon premium. The economist has done some great, very accessible, articles on this over the years.
Second, its critical that treasury bonds are denominated in USD. The us gov controls the monetary policy and can choose to inflate away the debt over time. This is in contrast to EM debt where they get trapped with foreign denominated bonds. See also the tensions around EU debt, greece, etc.
> Of course they're not going to find a market to sell more debt to after that
Argentina is doing fine. The real constraint would be that defaulting on the debt would cause a credit crisis and bank collapses.
Pretty sure this is why the bankruptcy guy from NY was sent in
Not true
The powerful people holding the debt will seek to change the government to one that obeys them
The way I understand my money market settlement account at vanguard, is that it's all, or nearly all, treasuries. Treasury not honoring government debt would be the worst bank failure in the history of the world.
It would be bad for you, but you also deserve that because you have made a deal with the government to enslave young people to pay taxes on their labour in order to pay interest to you. Loosing all your investments in a bond default would be a very fitting consequence for what you have done so wickedly.
We also don’t have anywhere near $175 trillion in debt. That’s a crazy made up number.
...what does this have to do with these IPOs?
The way I've been thinking about it: there is too much money trying to pour into the market. That's why valuations are so high.
Maybe getting more of these big private companies public will bring valuations down a bit.
(Just my impression. No math or financial studies behind it :)
> there is too much money trying to pour into the market
Keep in mind that inflation ran over 7% annualized in April [1].
[1] https://www.bls.gov/news.release/cpi.nr0.htm
The vast majority of that was fuel.
> vast majority of that was fuel
Everything else is up around 3% YoY. And if energy and transportation are up double digits, and producer prices are up double digits, other consumer prices will follow.
Yea and the cost of fuel has zero downstream effects on the economy.
From that doc, prices went up 0.6% in one month, multiple by 12 get 7.2% annual inflation rate.
Inflation is a measure of the cost of living. It's not got loads to do with large-scale, institutional investments.
> Inflation is a measure of the cost of living
The faster your cash loses value, the stronger your incentive to trade it for something else. That something else can be financial assets.
> It's not got loads to do with large-scale, institutional investments
For investors, particularly retail investors, the consumer price index is most relevant. But for whatever it's worth, producer prices are up over 16% in April (7% excluding "foods, energy, and trade services," which jumped over 50% annualized) [1].
To be clear, I'm floating a hypothesis here. I have seen no evidence linking inflation to demand for these companies' shares. (If anything, it should be the inverse.)
[1] https://www.bls.gov/news.release/ppi.nr0.htm
That depends. Inflation is a measure of the cost of living in terms of currency. It can be high either if goods and services required for living become scarce, or if currency supply increases. Currency supply increasing does affect asset prices.
Yes, but they're not directly correlated. Of course events can affect them both! Going to war would both increase the cost of living and (some) asset prices would go way up. But that doesn't mean they should be measured together like that.
Inflation then is already higher. Cost of living is driven mostly by rent
I'd say your sense is not wrong: https://www.thisamericanlife.org/355/the-giant-pool-of-money
No, the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up
This is one of those "everyone who dies, breaths air" statements.
It's frustrating people who parrot it think they're smart by saying it to others with no basis and finally when it does happen they're like SEE SEE!?
> Until then, history teaches that we'll just keep going up and up
And this is the more important part. As long as you're <40 you SHOULD always buy SPY or VOO, even at the very top.
People have been saying the crash has been coming since 2022. If you believed this and acted on it, you would've missed 3-4 +10%/yr returns.
As Buffet says: You can't time the market; be in it.
It doesn’t seem Berkshire is that much in the market right now.
Just to add some color using real numbers: Berkshire's Q1 cash pile was $397.4 billion, which is nearly 60% of its investable assets.
Right now SPY not be such a great idea with SpaceX launch upcoming since it will be included into it immediately. Retail investors will be bearing that particular flop's cost.
> SPY not be such a great idea with SpaceX launch upcoming since it will be included into it immediately
S&P has not announced a methodology change yet.
They haven't approved a change, but they have released proposals, which are tentatively to go into effect on June 8:
https://www.spglobal.com/spdji/en/documents/indexnews/announ...
I was old enough to remember the 08 crash. Then the market starting recovering in 2011/2012 and the sentiment was that the system would crash again soon like 08. Turns out, it was an amazing time to invest.
Post 08 crash, all sorts of conspiracy websites like Zero Hedge were popular saying how the world economy would keep crashing.
The only reason this happened was due to taxpayers bailing out financial institutions. This only exacerbated an insane amount of moral hazard already present in the market following previous bailouts.
Unfortunately, the US Government continued to run themselves into the ground spending-wise and may have a difficult time with another bailout, unless everyone pretty much agrees that we cannot have a USG failure, so they all pretend like nothing happened.
Eventually the merry-go-round stops, I'm just not sure what the catalyst will be, and it might be 100 years from now.
I am old enough to have had multiple career changes since starting on a major firm’s rates floor in 2008. These IPOs are tiny compared to the overall stock market and the stock market is absolutely tiny compared to debt markets. People consistently underestimate the size of the world economy or even their local economy. The world may look small from an orion capsule near the moon but almost every aspect of human society is bigger than most people can reason about. It is possible these IPOs have an outsized impact on sentiment for weird reasons. But it won’t be an actual outsized impact on capital markets.
Edit: I should add the AI bubble can absolutely burst but there is no reason to believe these IPOs are the end of the ride. If I knew I would be…
The thing is that the IPOs necessitate a full release of their actual costs for inference and training. This by itself should be enough to pop the bubble, if the occasional bits of it we get are anything to go by.
There is a reason anthropic is still hiding those details:
> key details typically included in that form about a company’s operations — like potential risks to its business, executive compensation, and other financials — won’t become public until later on in the process
Source: https://www.theverge.com/ai-artificial-intelligence/941016/a...
We'll see, maybe they trigger some new rule change to be allowed to keep it hidden. Wouldn't be surprised about that at all.
Without massive government intervention it probably would have
It would crash if not for massive public debt that went mostly into capital markets and huge inflation.
One of my favorite phrases is “the market can stay irrational longer than you can stay solvent.”
Even if all signs point to impending doom, at the end of the day if people are still buying, stocks will hold their value.
>And this is the more important part. As long as you're <40 you SHOULD always buy SPY or VOO, even at the very top.
But why? The US population is set to dramatically shrink in the next 30 years. Where does all the money come from?
no one is going to get wealthy buying SPY/VOO. you might get rich, but not wealthy. things have changed now in a sense that handful of companies are large percentage of the stock market to the point where one has to question why invest in “s&p 500” vs “s&p 25-ish”
while going with the tried&true makes some sense, I think we have to open our eyes to a different reality of our stock market… and this market concentration into few companies is going to get a lot worse…
> things have changed now in a sense that handful of companies are large percentage of the stock market to the point where one has to question why invest in “s&p 500” vs “s&p 25-ish”
A small number of companies have always driven most stock-market gains. Betting on size isn't fundamentally a bad bet. But it is a bet against value and the historical tendency for small companies to be higher risk and higher reward.
you may be technically correct but today’s concentration in say top 10-15 companies is historic and by significant margin. I have been self-employed for a long time and somewhat “forced” into being “an investor” and starting in 2021-2022-ish I took my money out of all the “funds” … while I do not disagree that it is “a bet” - it is a calculated bet. things are different now even if historically you are right, no question
I very much disagree that it's coming. I think we need to completely reset our expectations of how the market works. There's been nearly an entire generation working in this "new" bull market, where things like EPS mean absolutely nothing and speculation no longer requires actual returns.
>I think we need to completely reset our expectations of how the market works.
Is this not just "It's different this time" thinking? I remember it being used all the time during the dotcom boom
> There's been nearly an entire generation working in this "new" bull market
You mean 0DTE babies?
> the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up
Stock prices don't have to crash. They can just stagnate while profits catch up and multiples compress.
Debt binges, on the other hand, tend to go bust with a bang. But after the recent private-credit scare, the AI build-out has been predominantly financed with stock. (I think.)
Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I follow this stuff somewhat closely and it feels intentionally confusing, so I've likely lost track.
> Hasn't there been a _lot_ of debt to buy up Nvidia GPUs?
I believe that's been concentrated at the hyperscaler layer, and subsided when the aforementioned private-credit scare reared its head. (I haven't heard a big datacenter debt deal announced in a while. Though of course that doesn't mean they aren't being done.)
And we're still extremely compute constrained. We need more Nvidia GPUs, RAM, power.
> Equity bubbles don't have to crash. Prices can just stagnate while profits catch up and multiples compress.
Is there is historical evidence for that? As someone who used to follow Jeremy Grantham a lot (he considered himself a "bubble historian"), IIRC every bubble he studied always mean reverted, and it usually (maybe always, can't remember) overshot on the downside during the correction.
> IIRC every bubble he studied always mean reverted
This really depends on how we're defining these things. Let's call a stock-market bubble a period of elevated multiples. That can mean revert by prices decreasing while earnings stay constant or by prices staying constant and earnings rising. (Alternatively, both earnings and multiples can rise and fall.)
Yes, for equity prices in particular he talks about P/E ratios (among some other metrics like corporate profit margins), and so you're right, it would be possible for this to mean revert by prices holding stagnant and earnings catching up. However, as far as I can remember (primarily because a big emphasis of his was how unchecked bubbles can cause a lot of damage on the downside) all the historical bubbles he studied (something like 50) always crashed with a big price drop. Not 100% sure though, which is why I was curious if you had any contrary examples.
Corporations across the board are experiencing record profitability. That's the reason behind the high valuations.
This isn't true of AI companies...yet. But these are companies entering the market with pre-IPO userbase (including lots of B2B) numbers that Meta and YouTube would have dreamed of before their acquisition/IPO.
I think this whole situation is very sleazy and corrupt, but ultimately my prediction is that nothing serious will come of it. Even the exposure of index and passive investing is overstated.
There is nowhere else for that money to go
From Matt Levine’s column today:
> The index demand is not 100% of the stock available in the IPO, or 110%, or even 50%. But it’s plausibly more than 25%. It’s not a short squeeze, but it’s a lot. Add a reported 30% allocation to retail, and arguably a majority of the IPO is being sold to price-insensitive investors. That is one way to get a high IPO price.
Do the indexes have some capacity to defer / waive buying into new stocks if they judge it in the interests of investors?
two thoughts, the top three s&P 500 etf's have $2.7t in aum (and there are a lot of other etfs, mutual funds, and direct indexers on top of that) - so the dollars don't seem to be the problem.
I think its a little insane to have the seasoning rule for an index be inside the lockup period
Mercedes would have a market cap of $2 trillion according to the ARR valuations. Instead, it has $150 billion revenue, $5 billion profit and a $50 billion market cap.
Like Mercedes, Anthropic is not a growth stock because it has already been foisted on everyone.
Everything will be fine. You may see a little bit of dump here and there, but it'll come back roaring.
I'm not sure if it was intentional, but roaring is an interesting word to use here:
https://en.wikipedia.org/wiki/Roaring_Twenties
None of these companies have any MOAT.
LLMs are getting better at a rapid pace and in a year or two, Chinese LLMs should easily catch up with the best of the models. Models have kind of reached a saturation point and that’s why OpenAI and Anthropic are doing an IPO now. Because a year down the line when their lead diminishes even more, they would be worth lesser money.
SpaceX has clients to put payloads into space, but those clients have always looked for good low cost alternatives. It is going to have competition in the future and will lose customers.
SpaceX would tell you to look at how profitable is Starlink. Two things about that: you have to replace the infrastructure every five years while terrestrial infrastructure electronics lasts at least twice as long, and inert stuff like towers and fiber lasts for decades. And you can drive a truck to where it's located if there is a problem.
Secondly, terrestrial infrastructure keeps expanding into the rural areas that Starlink counts on for most of their TAM. Except for ships at sea and extremely remote places, the Starlink TAM is chronically shrinking.
Several issues:
1) The short lifespan is intentional. There is no reason to keep satellites beyond a few years because older satellites are quickly becoming obsolete. The first generation Starlink sats are now 4 generations old, and are practically ancient at this point. SpaceX wants the satellites to fall, so they can be replaced by updated ones.
2) SpaceX could easily increase the lifespan of Starlink satellites to 10-15+ years, but they don't want to, because of (1), and because they are waiting for Starship to launch larger satellites at 10x lower cost.
3) Despite continually replacing satellites every ~5 years, Starlink is operating at a very profitable 40%+ profit margin.
4) Starlink is expanding to direct-to-cell 5G at speeds up to 150Mbps, which vastly expands the TAM from just broadband usage to all cellular data usage. Rural areas may never get a terrestrial cellular buildout, since it will be cheaper for companies to partner with SpaceX for coverage than to build their own towers. A cellular tower can cost upwards of >$250k.
> [SpaceX] is going to have competition in the future and will lose customers [to good low cost alternatives].
Okay, well who will offer a lower cost-to-orbit than SpaceX?
I mean sure, for LLMs, but:
> It is going to have competition in the future and will lose customers.
Is that not true for everything.
Back in 2008, we'd perfected the art of combining high-grade and dogshit Mortgages into one Security which could be sold on to, of course, Pension Funds.
Took almost 20 years for someone to find a way to scale up the basic Scam Mechanics and try again.
If you like SpaceX's launch business (the Grade A mortgage that you personally hold and pay), know that you can't get it without xAI (The dogshit that's already delinquent)
Maybe we changed the rules so that our capital markets can protect our champions from large Chinese buy pressure at lower post-IPO valuations. Plus, these companies have probably had to demonstrate earnings stability (yes, unaudited) in order for the rules to be waived.
Is the text of the waiver and its reasoning anywhere? I guess I'll read tfa.
Index funds had a remarkable run. They avoided Goodhart's law for decades
Do we prefer the market will spit or swallow in this case?
I believe we've settled on AI bros gargling all the stocks.
Of course the market can and this is a silly question. These issues are tiny amount of money for the global capital markets to swallow. Masa Son has endangered ostrich eggs for breakfast worth more on the daily. I kid, but seriously this is a very small amount of money to the global markets. It is more of a worry on the psychology than the size.
Remember they arent selling the entire floats of these companies. I cant read the article because Im not willing to pay for the Economist, but 400-500b in equity issuance is not a big deal to the global financial markets even though it sounds big.
Is there an index fund that intentionally only focuses on actually profitable companies? It would actually be nice to hedge some funds into non speculative assets.
Sure. The problem is that it is impossible to predict which companies will continue to be profitable.
No doubt these companies are woefully overvalued. But this won’t stop me from putting in orders for several thousand dollars of shares with at market open. There will undoubtedly be plenty of buyers and I expect them to gain rapid entry into the indexes which will unlock a flood of additional capital from 401ks and pensions
So timing the market?
Why? You think an obvious scam is easy money for you? You think you're smarter than the next retail investor? Why?
Don't give your money to Elon Musk, he doesn't need more.
Is SpaceX going to eat Tesla? As in, are a bunch of Tesla investors going to be migrating across to SpaceX since that seems to be getting more of Elon's attention these days, especially with xAI barnacled onto the side of it?
The money to participate in the IPO has to come from somewhere...
Yes. Elon has a massive controlling share in SpaceX, complete control over the board. SpaceX will be double the size of Tesla after a successful IPO, then they can swallow it and then he has the control over Tesla he’s constantly fighting for.
86 X
I don't think the market will swallow the stock offerings until we see early signs of GDP growth attributable to these entities. But until then, I think the cost is higher than the benefit, which "The dead economy theory" essay covered it well [0]
[0]: https://www.owenmcgrann.com/p/the-dead-economy-theory
> don't think the market will swallow the stock offerings until we see early signs of GDP growth attributable to these entities
Investors in these companies are going to be looking for revenue and pathway to profitability. I'm not sure anyone needs to see an impact on GDP to invest.
[flagged]
Several guidelines make it clear that this kind of comment is unwelcome here. Corruption and conspiracies are easy to insinuate, but we need more than insinuations to have intellectually gratifying discussions. https://news.ycombinator.com/newsguidelines.html
We detached this subthread from https://news.ycombinator.com/item?id=48364986 and marked it off topic.
It’s often telling what sort of thing is deserving of moderation. The timing is well documented as being extremely favorable to Musk and Altman and indeed directly benefits them. Suspicion is not only warranted it should be demanded.
If you have evidence of corruption, present it. Otherwise it's just generic cynicism leading to a thought terminating cliche.
At this point in US regulatory oversight I would have a harder time finding evidence of no corruption.
Then present your evidence, so we can have a substantive debate and draw informed conclusions.
My evidence of no corruption?
I can’t find any because the admin is so horrendously corrupt.
Why else would they change the rule ?
> Why else would they change the rule ?
These indices aim to replicate the market. They’re not trying to pick stocks.
There is a serious argument for saying they fail to replicate the market if they structurally exclude trillions of dollars of it.
It defeats the purpose of the value setting part of the IPO if there are guaranteed buyers. It would be better for the market and for the indices if they only hopped onto new entries of the market after any initial instability has passed.
> defeats the purpose of the value setting part of the IPO if there are guaranteed buyers
The indices don't buy into the IPO, but a few days afterwards. That's obviously easier to bridge than 6 months. But IPO buyers are still taking a risk.
They also exclude many other things that are of economic value, because they could cause structural or social harm in the markets.
> They also exclude many other things that are of economic value, because they could cause structural or social harm in the markets
Which index are you thinking of?
Yes, but a stock market index is just that. It is intended to track stocks, not meth sales or the phase of the moon.
Most of these indicies intend to match the largest companies on the market - going up when they do and going down when they do.
If someone doesnt want that, they can pick a different index or invest in a managed fund. Companies like vanguard also offer custom EFTs where you can exclude certian companies if you want - probably the simplest option.
But then you cant complain if they go up and you miss out.
PS: Yes, there are several cannabis ETFs if you are into that kinda thing. look into MJ, WEED, MSOS, and YOLO.
Because they think that a lot of people will want to get in on the historically massive and well-known companies, which would lead to outflows if the index doesn't pick them up fast enough?
It will lead to outflows either way. And I say that as someone who has been an Index fund evangelist for years, strongly considering selling my index funds to build my own collection of companies that I believe in long term.
So why not just stick to the roles we agreed on when buying in?
I think deep cynicism is the correct mindset to have in the current financial/political climate.
I find it to be genuinely more likely some level of corruption, and while my insinuation may be overly specific or illustrative, I still hold to it as an ironic statement meant to speak the truth.
In this age of AI marketing taking over the minds and imaginations of most of our businesses leaders in the name of greed and fear, I’ll hold to the more likely truth given the circumstances, regardless of this appeal to some invented tale of uncorruptable corporate governance. Have you never seen decisions being made?
I think that better matches the original spirit of this forum. The progenitors have become the people they once disrupted.
At least a new Cybertruck.
You're claiming without evidence that the bureaucracy and regulators are corrupt to the core? No way I refuse to hear another bad word about the government, they are above reproach sir.
I was a lawyer in 2008 representing banks in the financial crisis. Multiple bankers wives set up companies to by mortgage backed securities using government loans and government guarantees on payment upon default. That let the banks get the toxic mortgages off their balance sheet.
These wives were yoga teachers and socialites. And I say that as a man that is a feminist and upmost respect for the amazing women I have worked with that were absolutely world renowned professionals. The bankers wives were not in that category and were shells to eliminate the “conflict of interest”. The CEO of Goldman Sachs did this. You can find the records if you want to be on a government watch list.
We’ve really hit that point, where our institutions are transparently corrupt, and everyone knows it, and both the guilty and the public just say “yep, we’re doing the corrupt thing”.
It’s depressing as hell, and it’s going to go out with the proverbial whimper, but at least we’ve got to be close to rock bottom, right?
From someone who lives in a country that is still more corrupt than America.
You need to vote for the next several years, no matter what, because you still have a chance.
Once corruption becomes the default, then you are REALLY screwed. Because it kills hope and the faith in the future in the most corrosive way possible.
The death of morale is a far worse and insidious fate that will make today look like a high point.
I appreciate the perspective. From where I sit in America, morale is as dead as it gets. The president wrote himself a $2B check, and both his supporters and opponents are resigned to this massive theft. Restrictions on voting are nonsensical, the Supreme Court is transparently ruling based on who will benefit rather than what the laws say, and masked “police” are terrorizing communities.
Of course I’ll vote, and be more active in protests and campaigns, but TBH the general vibe is that it’s already too late. It’s that bad.
To be fair, these are not regulators, just private companies making up rules, so technically this is not corruption just something that looks like it but it's just business™
> To be fair, these are not regulators, just private companies making up rules, so technically this is not corruption just something that looks like it but it's just business™
What I find odd is that the comments are critical of how the police didn't caught thieves, but there is absolute silence towards thieves and the fact they have been engaged in thieving for ever.
Another comparison is people blaming the fire department for not inspecting sprinklers after an arsonist torched the place. It seems to me that the arsonist is the root cause, isn't it?
We expect thieves to thief.
Police are only useful so long as they are effective as policing. It’s insanely difficult to put a price on a cost center which doesn’t add value, but only has a chance to reduce the loss of value if they do their job well.
The problem with the fire department analogy is that there’s a lens through which the fire department IS the arsonist here, or is at least pouring accelerant at the future site of the arson. If you don’t know why I would call the bankers at S&P, Nasdaq the arsonists in this case, you aren’t equipped with the background info about SpaceX’s fast track + goalpost moving to index funds.
I guess we should be thankful there aren’t more Luigi jokes in the comments.
> We expect thieves to thief.
This seems to be the problem. Thieves get a free pass but the very few guardrails that said thieves haven't dismantled yet suffer the blunt of the criticism, to the point people argue they don't need guardrails at all.
Don't you feel you are unwittingly aiding thieves to go unpunished?
Thieving behavior is deterred by the police doing their job.
> Thieving behavior is deterred by the police doing their job.
Wouldn't it be more productive to place the blame on thieving? Police is a mitigation, and your complain boils down to complaining that police is influenced by thieves. Yet, I don't see people complaining about thieves.
These are all private companies's decisions.
> You're claiming without evidence that the bureaucracy and regulators are corrupt to the core?
The "bureaucracy and regulators" are at most engaged in passive corruption.
For passive corruption to exist, you need massive active corruption effort.
Why is everyone focusing on vilifying passive corruption while completely ignoring active corruption? I mean, I'm hearing lots of conspiratorial remarks directed at regulators but... Who stood to benefit? Aren't those responsible?
I mean, why was regulation required to begin with?
Can the stock market remain legitimate after such a brazen example of dumping? Regular everyday people can’t access private shares and participate in upside even if they want to. They don’t have the connections like VCs, and aren’t accredited investors. And companies ban secondary transactions, which should be forced by law to be always allowed.
And then after all that, the public have to deal with their index funds, ETFs, mutual funds, pensions, 401ks, etc buying up these overpriced stocks. You have a space company that also acquired a failing social media platform and failing AI company with little revenue justification for the valuation, and a lot of other obligations that make it financially a disaster (like payments owed for spectrum). And two frontier labs with no real moats, each looking for regulatory capture based on safety or ethics or whatever.
To the everyday person, the stock market after the fast listing rule, these three IPOs, and AI job loss, will feel no more legitimate than prediction markets or crypto.
> then they have to deal with their index funds, ETFs, mutual funds, pensions, 401ks, etc buying up overpriced stocks
Only about a third of American stocks are held by passive capital [1]. Out of that, index funds are about 16%, and most of those in America reference the S&P 500, which has not yet announced whether it is changing its rules.
[1] https://alexchinco.com/double-what-you-think-it-is.pdf
A third is a lot 16% is a lot
Sure, but it's the Americans that can least afford to be stood up as exit liquidity that have the most exposure here relative to their net worth. The ultra wealthy are going to be heavily overrepresented in the active basket. Meanwhile the folks lower down on the income scale are more likely to have their money in passive funds.
> The ultra wealthy are going to be heavily overrepresented in the active basket.
Do you have evidence to substantiate this claim? My brief research has shown the wealthier the investor, the likelier they are to use a passive strategy.
I did have few days ago conversation with AI to research how the economical environment was just before Great Depression and this doesn't look good if true. Definitely feels like someone try to dump their bags to retails investors and main street.
- Trailing P/E: 1929 peak was 32.6 vs. 32.67 today.
- Shiller PE (CAPE): 1929 peak was ~30 vs. 42.66 today (2nd highest in history).
- Buffett Indicator: Market cap was 124% of GNP in 1929 vs. 259.6% of GDP today.
- Margin Debt to GDP: 3.0% in 1929 vs. 4.1% ($1.304T) today.
- Systemic Risk: 1929 margin debt was 10-12% of total market cap vs. 1-2% today. Modern leverage has structurally shifted from retail to sovereign debt and shadow banking.
They're doing an IPO now because the war in Europe with Ukraine is almost over it seems, and after that a big percentage of capital will relocate from the USA to Europe again. They are just cashing out right before the tide turns.
There goes my 401k
There is a reason they IPO now I feel like. Markets at ATH, greed is bigger than fear. Now is the perfect time to IPO. Could very well be a bubble burst after that...
pop the bubble already
I been saying this for a year now and no popping. I dunno maybe they found a way to break the stock market so it never goes down.
That's how the new 1927 starts.
It will be in the history books.
At realistic valuations? Sure. At the current overvaluations? Yes. Are these valuations sustainable? No.
I don’t understand why there is so much pushback and skepticisim about SpaceX. They actually have a functioning product, a market where they sell the product and virtually no competition at their pricepoint.
Because they lobbied for a rule change to get fast tracked to an index forcing passive investors to buy it at IPO price instead of being included after market value corrections.
This is completely wrong. Passive funds don't buy at IPO price. They buy after the inclusion rebalance which happens weeks later, at whatever price the market has already set. Plus the S&P500 rule change hasn't even happened yet, it's unclear if the rules in the current form will go through.
THANK YOU. Everyone complaining about index inclusion in passive funds have clearly forgotten to read their respective prospectuses.
It is the price. SpaceX has reasonable parts. More questionable parts. And then crap parts. Reasonable parts must pay for crap and maybe questionable.
What is reasonable value for all it does? Clearly it is not what it is now projected at.
Would have been interested in SpaceX but I don't like that xAI is being baked in so I will skip this one.
Even if you believe the space hype, Twitter and Grok are garbage.
SpaceX is actually 3 companies, one of which is profitable. The satellite business operates at a loss and xAI is a money burning furnace.
> The satellite business operates at a loss
How come? On the books or they're actually selling internet cheaper than they source it?
> xAI is a money burning furnace
So far in the AI business, it looks like only Anthropic might be profitable in the near future. On the other hand, a lot of nonprofitable companies have IPOd for billions with the hopes that one day they will become profitable.
One crucial thing we've learned for the past few years:
- You can't blindly trust the US, or US businesses. Even less when it comes to critical infrastructure.
- You can't rely on underwater cables to be safe.
Starlink is a proven technology. They were the first major mover. But they will not be the last.
It'll be sort of like Tesla cars. For a long time they completely dominated the EV market, but now others are catching up. Yet Tesla is valued more than all other EV manufacturers combined. Some of this is of course from their vertical integration, but most of it is just hopium.
Same will happen with both Starlink, SpaceX, and other products under the Musk umbrella.
I just had this thought: This is the story of the Great Western Desert eXploration Railway Company. Let's call it WestX for simplicity. They are building a 2000 miles railway line from the east coast into the great western desert. There is nothing there in this desert, but its a great place to set up antennas. The place is called Sunshine Plateau. Unfortunately, there is also absolutely nothing on the entire 2000 miles going there, no water, no coal, no midwest, no great planes, no gold, just empty, barren desert. So every train going out there has to haul all the coal and water it needs for the 2000 miles trip along with it. It needs about 200 wagons of water and coal to pull one wagon of antenna stuff out into the desert, but in the future, they'll build an engine so powerful, it can haul 2000 wagons of coal and water into the desert along with 10 wagons of antennas. Its a big leap forward. In the future, this super steam engine will also be able to roll back to the east coast all on its own, because its all downhill from Sunshine Plateau. The antennas need replacement every couple of years, but there is enough demand for antenna signal to run the train operation at a small profit. Also, the government likes to place some spy stuff there every once in a while, also some science stuff, and every now and then a tourist takes the journey because the view from Sunshine Plateau is really great. But thats not all! In the future, once the super engine works perfectly as promised, they will not roll all of them back down to the east coast, but they will keep an entire train at Sunshine Plateau. Then they will haul a looot of trains with a looot of coal and water into the desert to refill this one single trains 2000 fuel wagons, so it can haul 10 wagons of stuff even further out into the desert. 10 wagons! Sadly, there is no California after the desert, just another desert named Moon Hole and then behind that another desert, named Mars Basin, but thats okay because there may be gold there to exploit. WestX just has to find a way to produce coal and water out in the desert to haul that potential gold back to the east coast. But thats still not all! WestX operates a newspaper where every jerk is allowed to publish racist stuff. It runs at a loss but that doesnt matter, because trains and newspapers go well together. There is also a new hype at the east coast, named thinking machines. They're amazing and are almost always right in their answers. Other companies are at the forefront with those thinking machines, but WestX also has a little sidehustle in this business, even though their thinking machines suck. BUT! They could install those thinking machines up on Sunshine Plateau! Takes only 2000 wagons of coal to put 10 wagons of thinking machines 2000 miles out there into the void, but there is a lot of sunshine up on the plateau. The competitors just install their superior thinking machines back at the east coast, where there is also sunshine, but also cheap coal and lots of other energy resources. Anyhow, thinking machines! The Great Western Desert eXploration Railway Company will soon open up to investors at the good old Wall Street and they value themselves at $15'000'000'000'000 to $20'000'000'000'000. Some grumpy naysayers say thats quite a lot of money for a railway company that doesn't make any profit, but if all their plans work out exactly as promised, you may even not make a loss! The founder, Elon Rockefeller, who is mostly busy publishing racist articles in his newspaper every single day, and also runs a horse carriage business, has a great track record of delivering on promises, and is a well respected man.
Paragraphs are your friend
John Rockenfeller was an active supporter of black rights.
No california. Sounds like Australia
Feels more like: can the bond market handle any potential outflows as money is rotated into these IPOs?
> can the bond market handle any potential outflows as money is rotated into these IPOs?
Yes. Even if this capital is just rotated out of the equity markets, it would be fine. The bond markets are orders of magnitude deeper.
The index fund thing seems to me to be an overhyped nothingburger. The seasoning period would just delay the inevitable when a company is launching with a trillion dollar valuation.
The big story is that that is happening at all. It wasn’t that long ago when Facebook had to get special permission from the government to stay private until they got to $100 billion.
The issue here is that public investors are missing out on so much upside.
I am actually curious in knowing an answer to this: Does anybody think this is a good thing? A benefit to the world?
Not if anyone is cheating or scheming or being a rules lawyer, but is it good?
I expect it to be catastrophic or at least chaotic and we have removed our investments from the american market and untied ourselves from the dollar as best as we can. We are sitting this one out.
Is anything in late stage capitalism good for the world? Any and all benefits are accidental and temporary.
According to SpaceX's own S100 filed to the SEC their future revenue is projected to be 93% AI and there's also where the overwhelming majority of the CAPEX will go.
You guys remember that bit in Project 2025 where the plan was to crash the economy and buy up everything cheaply?
Do we finally see the mechanism?
What a headline
What is the value proposition for Space-X?
As far as I can tell it is in machines they cannot make work, servicing markets that do not exist for a service that will not matter for 20-years.
That and a third rate AI company that no body wants, except to get rid of.
This will probably go swimmingly at the start - but as time goes by and they raise more capital, Musk snorts more K and the glory fades, what then?
I don't really see anything that really matches their valuation. Yes there is some value in launching stuff in space. But it ain't not trillion.
And for starlink. There is some market. But if terrestrial options got their stuff together it is not that big either. Userbase is marginal. As they operate in areas that are not served by other options. And that market has real limit in size.
i feel like starlink could be huge, why not the default internet connection for everybody. similar to how people abandoned landlines for cell phones.
Customers who have fiber don't replace it even with terrestrial wireless.
It’s not value proposition, it’s profit
The market : As long as you sell for more than you buy, who cares what happens long term
Hence Tesla bubble
Finance bros look to their bonus for the year, not 5 years
So what people seem to be unaware of or are purposely ignoring is that OpenAI and Anthropic have invested trillions in a rapdily depreciating asset. There was a HN post from a day or two ago where someone bought a V100 for 150 pounds and connected it to their computer. Well that was a $10k GPU in 2017. That's the fate of H100/B100 GPUs in 5-10 years (and I suspect closer to 5). What do you do if you've invested $1 trillion that will be worth $100 billion or less in 5 years? I think it'll be worse than that because modern hardware at that time will still probably be the same Wattage but have much higher performance so you'll be getting much higher performance-per-Watt and that's going to really matter.
The only company I'm confident will survive this hardware crunch and still be relatively successful in this space is Google.
OpenAI in particular is a bet that there will be an AI moat and that OpenAI will "win". I don't think there will be a moat and China is a big reason why (eg DeepSeek).
SpaceX is a little different. Yes, launching rockets is a business but it's not a trillion dollar business. 100 Falcon 9 launches doesn't even break $10 billion in revenue. Plus, Starship faces cost overruns, delays and significant headwinds.
But the real kicker is that SpaceX was used to bail out Elon from the Twitter purchase and the xAI investors from the first Twitter bailout. That's a problem because xAI is burning $1 billion a month in a company where that really matters and I don't think Grok will "win" here. Like, at all. SpaceX would be a significantly more attractive company without xAI.
The big potential growth area is Starlink. For that to justify this valuation I think you need handheld Starlink phones. That requires a lot of satellites at a relatively low orbit, which also means they have a relatively short life (because they burn up in the atmosphere). And for that Starship must succeed.
All the AI data center in space stuff is complete bullshit. It makes no sense. It'll never be viable. It's not going to happen.
EDIT: let me clarify because I was careless in my wording. So, Anthropic individually has not spent "trillions". That was more of a general statement on AI spending. Anthropic has raised ~$100B, the last round of which was $65B (at $965B post-money IIRC). This industry as a whole needs to recoup trillions.
Anthropic seems to be in a better position (as a business) than OpeNAI is but I do think the it's a race to cash out before depreciating assets, well, drepreciate and there's the real risk as compute becomes cheaper and the AI craze wears off, Claude just may not have the growth trajectory that is built into the price.
> What do you do if you've invested $1 trillion that will be worth $100 billion or less in 5 years?
I think the aim would be to generate at least $900bn of cash flow from those assets.
As I was reading the start of your argument, I thought you were gonna call the models a depreciating asset! Totally agree about GPUs too, but literally everything they’re spending money on has to be rebuilt to stay competitive. They have to go for the moonshot of training a full new model when better tech comes, they have to upgrade GPUs to keep their data centers efficient.
Technically, the model is a depreciating asset too. Just consider the difference between a model you need a B200 cluster to run vs one you can run on a Raspberry Pi. One's going to have a moat around it that gives it value and the other isn't. It's a hyperbolic argument to be sure but the nature of "enthusiast" hardware is that we're currently running, say, ~27B parameter models on hardware for a few thousand. What's that going to look like in 2 years?
Anthropic/OpenAI really need to train ever-bigger models to keep their moat. But that assumes there isn't a law of diminishing returns and also that a compressed model isn't sufficient for what many people need.
You mihgt say that the training is a barrier. And it is, kind of. Notice how it's Chinese companies coming out with open-source models like DeepSeek and Qwen? That's no accident. As soon as DeepSeek came out I knew what was going on: China is going to make sure no single Western company "owns" AI. It's in their national interest for that not to happen.
I wouldn't be surprised if the rush-to-IPO is motivated, at least in part, by getting ahead of Chinese AI commoditization.
How many failed foundation model training run cycles do you think these companies can tank before the bubble pops and deepseek/etc. catch up to frontier quality?
If Ant, OAI, etc. aren't able to make 20-30% improvements on Opus 4.6 in 2026, does the music stop playing altogether? It seems like they'd lose their ability to charge >10% gross margin on inference in a span of 3-6 months.
"OpenAI and Anthropic have invested trillions in a rapdily depreciating asset". Anthropic raised a bit over 100B and has 47B ARR. Where are you getting trillions from ?
Now that Moores law is dead I think GPUs will depreciate a lot slower. I mean there's already a lot of hardware that has gotten more expensive in the last 5 years.
> I mean there's already a lot of hardware that has gotten more expensive in the last 5 years.
The vast majority of the price rise is mainly due to AI companies sucking all the air out of the room and everyone investing in "AI" regardless.
If China gets their process down to match US/Korea/Taiwan and they decide to flood the market to drown out competitors then hardware is going to be an order of magnitude (or two) cheaper than it is today.
Source on the trillions invested?
Starlink Mobile (i.e. Starlink direct-to-cellphone without modifications) is already happening, and fast. Phones that have the recently announced Qualcomm X105 modem will support Starlink Mobile 5G at speeds up to 150Mbps, direct from satellite. The Qualcomm X105 modem will be in most Android flagship phones coming later this year, and by 2027 most new phones will support Starlink direct-to-cell. The next iPhone that supports the 3GPP Rel-19 standard will too.
The rollout relies on Starlink V3 sats, which can only be launched Starship, but Starship progress is going well and is already able to deploy satellites from orbit. SpaceX is capable of launching Starlink V3 on the current iteration of Starship, but they want more testing. We'll probably see Starlink V3 launching late this year or early next year.
How long have the SpaceX, OpenAI and Anthropic investors been waiting for an IPO (excluding tender offers)? 24 years, 10 years, and 5 years.
You really think they are going to hold off against selling for multi-millions for another year, especially SpaceX?
OpenAI (and especially) Anthropic are at risk from being undercut by the Chinese labs and their open-weight models and may cause their valuations to be questioned.
If that doesn't cause a correction, then SpaceX will do it for them. There is no lock up for the 5% of shares being available.
Spacex is worth buying. The best chance to make a lot of money is buying stock before the economics make sense. By the time SpaceX looks like a good company on paper with strong profits… the price will be so high you have little chance of making anything significant. If it’s a long term hold, consider how far away retirement is for you. Also, moon bases are coming.
The AI companies IMO are fucked. In the next few years computer hardware should advance to the point that local LLMs are good enough for everyday workloads. Not everyone needs top of the line flagship models in a cloud to see productivity gains. Companies will actually save money just buying employees top of the line laptops for AI enabled work than blowing that same amount on tokens every month.
You're assuming the economics will ever make sense. Remember what happened to WeWork?
Warning to readers-- do not take stock advice from random comments on the internet
It’s not a random comment, it’s a comment from Hackernews which is filled with smart people who are tapped deep into these industries.
the AI companies make way way too much revenue to be f*cked, and people are hooked and they have not tested limits of their pricing power yet.
Why wouldn't it? There huge demand for these shares. It's not like $3+ trillion is dumped at once. It's a tiny percentage of it, and the high multiple does the rest of the work.
There was a huge demand for the World Online IPO in The Netherlands in the late 2000 bubble. Retail investors bought it thinking they got a unicorn.
Turns out it was a scam and shares fell on the first day. Soon after the entire bubble burst.
That said, I don't even see "huge demand" for the AI triocorns right now. Unlike in 2000, most people are skeptical.
Meanwhile, Anthropic is adding ~$10-$15b ARR every month.
I personally think there is massive demand. I think Anthropic will easily eclipse $2 trillion marketcap on first day of trading.> Meanwhile, Anthropic is adding ~$10-$15b ARR every month.
I'd like to see how creative their accountants are before thrusting any numbers like that.
So, The Economist's paywall is unbypassable?
Download the Bypass Paywalls Clean browser extension.
https://en.wikipedia.org/wiki/Bypass_Paywalls_Clean
The project has been going on for years, it moved to gitflic after being banned from github and gitlab.
Amazing! Thank you!
What a stupid proposition. The capitalisation has already flowed to theses companies through private means.
So then what is the point of them seeking to do an IPO, if they are already capitalized?
Investors can bank a profit at what they regard as the peak of the hype
One other angle to think of is the midterm elections.
There will be chaos and potential stall for another 2 years following the elections and if the democrats win. There will be natural vested interest in showing economic decline or bad things to win next elections.
Both parties do it.
This is the best time to get to a safe place for all these companies.