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| Economy |
| Free Money Is Out. Financial Markets Dragged Down by AI Hysteria |
| 2024-08-06 |
| Direct Translation via Google Translate. [REGNUM] The sudden collapse of the stock exchanges was probably sudden only for the managers of large corporations who live from one financial report to another. The stock exchanges could not help but collapse - it is not normal when the market capitalization of individual Western IT companies exceeded the GDP of individual major economies in the world. AI BUBBLE The most striking example of a stock market bubble is the fate of Nvidia Corporation. At the end of February 2024, Nvidia's capitalization exceeded $1.97 trillion, which at the time exceeded Russia's GDP, which was then $1.92 trillion. At the same time, if Russia is a nuclear power, occupying 1/7 of the land with colossal reserves of raw materials, developed industry and 146 million inhabitants, then Nvidia is the world's leading manufacturer of graphic accelerators for household and industrial use, the value of whose shares has soared by more than 238% in a year against the backdrop of AI hysteria. Nvidia's fiscal 2023 revenue is $27 billion, net income is $4.4 billion, and operating expenses increased by 50% to $11.1 billion. For comparison: Russian exports in 2023 amounted to $425.1 billion (-28.3% compared to last year). Imports were $285.1 billion (+11% compared to last year). The difference between exports and imports was $140 billion. At the same time, there have been and still are no breakthroughs in artificial intelligence. The average person will certainly be pleased with the "smart" search, and the schoolchild will be pleased with the neural network that can increase the readability of texts, but this is not enough for a breakthrough - such technologies do not bring money to corporations. Money is brought in by business solutions, but with them everything is not so clear: the accounting service QuickBooks, which said that checks are issued in it by advanced AI, in fact used the services of the Filipinos, and driverless cars on the streets are an incredible rarity. However, corporate managers were racing to implement AI technologies and build infrastructure for them, including data processing centers (DPCs). The fundamental non-recoupment of these investments was obvious to everyone: a month ago, the media wrote about the calculations of David Kahn , an analyst at Sequoia Capital, that in order to compensate for the costs of infrastructure and data centers, AI companies will need to earn about $600 billion a year. It is simply impossible to earn that kind of money in this market now. In general, the absurdity of the situation, when the capitalization of a corporation with revenues of 27 billion dollars is greater than the GDP of a country with a positive balance of over 140 billion dollars, was obvious to everyone except gamblers on the stock exchanges. However, to understand this fact, you don’t even need to practice analytics and read financial reports - just look at the Nvidia capitalization chart since 1999. The curve began to soar right after the start of the coronavirus pandemic. "IRON" PROBLEMS There are no breakthroughs in the "iron" shop either. Since the beginning of the year, the capitalization of Intel Corporation, the world's flagship in the production of central processors, has fallen by 59%, although at the local peak in March 2021, the corporation's paper was worth $60 - only $15 less than in 2000, when the dot-com crisis broke out . By the way, at the time of writing this text, Intel shares have fallen to $19.85 per share, and this is clearly not the bottom from which the corporation will bounce off. And Intel was sent to the bottom by its own managers: the company had a monopoly on the processor market for years, and its managers believed that it was forever. "Forever" ended in 2016, when a competitor in the person of AMD released processors on the Zen architecture, which turned out to be better than chips from Intel in every way. AMD then released chiplets - in processors, the company combined cores and microcircuits manufactured using different technological processes, and Taiwanese TSMC produced silicon for it. *Snip* IT GETS WORSE FROM HERE The conclusions from this stock market crash are simple. Firstly, it was predictable and inevitable — corporations had accumulated a lot of problems. Their managers became slaves to financial reports, whose task is to please shareholders with beautiful figures and pay generous dividends. And to do this, you need to avoid scandals and listen to marketers, not the eternally grumbling engineers. The second problem is that the endless and free money that the US Federal Reserve has been pumping into the American economy since the start of the coronavirus has run out. Secondly, the stock exchanges will continue to fall, and growth will begin only after reaching the bottom or starting the printing press again. Speculative capital must burn out. Thirdly, the West has probably nothing left in its economic flagships except IT; other countries have learned to do everything else. This process will have virtually no effect on Russia - after the start of the SVO, it was maximally disconnected from the global economy. But following the IT bubble, the real sector of the economy may also falter, which will lead to a decrease in demand for energy resources. In this case, Russia will get it too. |
| Posted by:Grom the Reflective |
| #3 market rallied today gained back about 50-70% of yesterday's losses |
| Posted by: Lord Garth 2024-08-06 16:13 |
| #2 How the world's richest companies lost $1 trillion on Monday |
| Posted by: Grom the Reflective 2024-08-06 14:06 |
| #1 "When it comes to the money the government is siphoning off you through income taxes, most of it is literally going up in smoke. The most recent Treasury data showed that as the federal government surpasses a record $35 trillion national debt, $1.1 trillion will be spent on interest payments alone this fiscal year. According to reports: “Interest payments on the federal debt now account for 76% of all personal income taxes collected. This means that for every dollar Americans pay in income tax, about 76 cents go towards paying interest on the national debt.“ https://wokespy.com/76-of-your-income-taxes-are-now-going-towards-interest-on-the-national-debt/ |
| Posted by: NoMoreBS 2024-08-06 13:58 |