$500 billion Stargate AI infrastructure project struggles to get off the drawing board The $500 billion Stargate project that aims to build a network of AI datacenters around the globe is off to a slow start, but its main backer – Japan’s SoftBank – isn’t worried. CFO Yoshimitsu Goto mentioned delays during SoftBank’s Thursday announcement of its Q1 earnings, when he offered his personal view that the project is …
Ed Zitron had a few things to say about "Stargate" recently...
Chief among which is that he thinks a lot of the reporting around the project is nonsense and based on what appear to be lies by some of the entities involved. I tried to pull a few quotes but it should be read in its entirety (the public part of the post is only ~1200 words).
The AI bubble will have burst, and they'll have saved a lot of money.
Not saying AI isn't useful or that it will go away, but the level of investment in it is reaching dotcom levels of mania. We keep hearing all the same bs about "its a new paradigm" and "this time its different". Been there, heard that!
We're due for a BIG correction/bear market, so it is just a matter of time before something like bad economic news caused by tariffs gives traders a reason to start selling, and once that happens the bottom falls out because margin calls and other leverage will make the selling self-reinforcing. It'll take down the crypto market too since those guys thought they were smart getting stuff like Bitcoin ETFs, but people being able to buy those on margin (and from the numbers I've seen that seems to be pretty common) will mean a lot of forced selling there too.
That big correction will almost certainly be due in part to the AI bubble bursting. Nobody in that industry has yet figured out how not to simply shovel money into an incinerator, and the big companies involved (Nvidia and its major customers; Alphabet, Amazon, Apple, Meta, Microsoft and Tesla) make up more than a third of the value of the US stock market.
AI can't lead to a big correction because only a tiny number of companies have been benefiting from it valuation wise. The 95% of the S&P 500 that hasn't seen their market caps go up up and up like Nvidia and Microsoft won't see their market caps fall much specifically because of AI. Stocks like automakers haven't got an AI related boost, so they won't take a fall if the AI bubble bursted but nothing else was happening (i.e. if we had a sane president who wasn't waging a trade war against the entire world)
If, hypothetically, the S&P 500 loses 10%* of its value in a day because of an AI bubble collapse causing a major correction to the third+ of that index tied to AI, will it not cause widespread panic? To an extent, the value of all shares is based on the overall confidence of investors.
* Number pulled out of my arse
Even with the recent growth in share prices the value of heavy hitters in AI is about 10% of the S&P 500. For it to fall 10% would require companies like Nvidia and Microsoft to go to zero. We both know that's not happening, so I'd guess the potential impact of a major AI bubble burst at 6-7% of the value. And it wouldn't all happen in a day, just like the dotcom bubble didn't burst in a day.
There's a much bigger risk from bad economic news since reductions in consumer spending hit almost almost every stock, and the whole S&P 500 is at never before seen valuations. It would have to fall 40% just to reach average valuation, and 60% to reach the nadir of the post dotcom and housing bubble markets. Probably why Trump is preparing to cook the books on the numbers, trying to hide the damage as long as he can. Unfortunately for him most of it will be because of his tariffs raising prices, and you can have lackeys falsely claim 1% inflation all you want, if the evidence is in front of everyone's faces they will pull back spending just the same and he can't stop the S&P 500 from reporting bad quarterly numbers that reflected those spending pullbacks.
Thanks, this is outside my area of expertise, although I note that right now, Nvidia is almost 8% of the S&P 500 on its own, while the eight AI-aligned companies in the top ten sum to 34%.
