Down goes the Dow

I am on the other side of that argument, though market direction so far proven me wrong. It seems to me the AI buildout is overfunded, and has yet to prove viable as a standalone entity. I see the market as more of the same, liquidity from debt issuance flows to investments whether viable or not. AI better be real, because there currently is no alternative.

AI says:

The viability of the AI investment thesis is currently a subject of intense debate, characterized by a "GenAI Divide" between massive capital deployment and measurable economic returns. While the long-term potential for productivity breakthroughs remains a cornerstone of the bull case, the short-term reality in 2026 shows significant friction in moving from experimentation to profitability. [1, 2, 3, 4]

The Bear Case: Structural & Economic Friction
Critics argue the current frenzy mirrors past speculative bubbles due to a disconnect between valuation and value. [1, 2]

The ROI Gap: A 2025 MIT study found that 95% of enterprise AI projects failed to deliver a measurable return on investment, often stalling at the pilot stage.

Infrastructure Constraints: Scaling is increasingly hampered by "real-world" bottlenecks, including energy grid capacity, skyrocketing power costs, and supply chain fragility for advanced chips.

Total Cost of Inference (TCI): Many AI-native business models are fundamentally threatened by the high operational costs of running models at scale, which can lead to insolvency if not managed with extreme efficiency. [1, 2, 3, 4, 5]

The Bull Case: Secular Transformation Proponents, including industry leaders like AMD's Lisa Su, view AI as the most important technology of the last 50 years, suggesting we are only in the "early innings". [1]

Healthy Balance Sheets: Unlike the Dotcom era, major AI spenders (the "Magnificent Seven") are heavily cash-flow positive, funding their massive 2026 capex—estimated at $432 billion—primarily through internal capital rather than debt.

Operational Efficiency: While direct revenue from GenAI is slow, 45% of surveyed executives in early 2026 report achieving significant value through internal process improvements and "analytical AI" (e.g., dynamic pricing and targeting).

Maturity Models: Companies that involve the CFO in AI governance and move past individual pilots to "Stage 5" formal reporting see an 85% success rate in achieving high value. [1, 2]

Core Viability Verdict for 2026: The thesis is viable as a long-term secular trend, but it is currently highly "dicey" as a short-term momentum trade. Fundamental viability depends on a shift from "capability-led" spending to "ROI-led" governance, where companies prioritize vertical AI (industry-specific) over broad general-purpose models.[1, 2, 3, 4]

I'd say that your view is most prevalent nowadays, and I think that it has been instrumental and probably beneficial in building in some restraint at this time and going forward.

I think it will take a little longer to roll out and get implemented than many of the early projects would have it, but I think it is going to undeniably significant and transformative.

I don't think it will implode.

CNBC this morning:

“OpenAI recently saw revenue and new users growth that were below its own targets, according to a Wall Street Journal report. The report added that CFO Sarah Friar told leadership she was concerned OpenAI may not be able to pay computing contracts in the future if its top line doesn’t expand fast enough.”

The idea that building huge structures that house computing technology and somehow changes everything in ordinary life seems farfetched. At this point it seems somewhat useful in search and generated memes.

AI on AI debt:

In 2025, tech giants and AI infrastructure providers shifted from using cash reserves to a "debt binge" to fund massive artificial intelligence projects. As of April 2026, over $200 billion in AI-related corporate debt was issued in 2025 alone, with cumulative investment-grade AI debt estimated at roughly $1.5 trillion. [1, 2, 3, 4, 5]

Breakdown of AI Debt Funding (2025–2026)

Funding Type [1, 2, 3, 4, 5, 6]Estimated Amount / Notable DealsKey DetailsInvestment-Grade Bonds $120B+ (2025 record)

Major issuances include Meta ($30B), Oracle ($18B), and Alphabet ($32B).

Private Credit $200B+ (outstanding)
Includes loans to startups and data center projects; expected to reach $600B by 2030.

Off-Balance Sheet
$27.3B - $30B

Meta's "Hyperion" project used a special purpose vehicle (SPV) to keep debt off its main books.

Project Finance $170B (2025 data centers)
Secured by data center assets; includes Oracle’s $38B loan for "Stargate" facilities.

Convertible Bonds $13.6B (Early 2026)
A 556% year-over-year increase as companies leverage equity upside for lower interest rates.

Major Debt-Heavy AI Projects

Oracle's "Stargate": One of the largest single commitments, involving a $300 billion deal with OpenAI for data centers, heavily reliant on bank syndication and asset-backed loans.

OpenAI's Partners: The Financial Times reported that companies supplying "compute" to OpenAI (like SoftBank and CoreWeave) carry approximately $96 billion in debt.
xAI: Elon Musk's AI venture secured a $5 billion loan in mid-2025 to scale its "Colossus" supercomputer. [1, 2, 3, 4, 5, 6]

Future Projections

Wall Street analysts at JPMorgan and Morgan Stanley project that the total debt needed to finance AI and data center infrastructure could reach $1.5 trillion over the next few years, with global AI infrastructure spending potentially hitting $3.5 trillion by 2029. [1, 2, 3]

AI has done wonders for memory. check out micron, Hynix, western digital and the wunderkind Sandisk!!

Thought this one was pretty good and thought-provoking. Been a few days since I listened, but the short of it is that a lot of the world has been running mostly fine since the Iran conflict happened due to having reserves on hand but that everyone is going to start running out of reserves very soon. Also, there is a lag in cause and effect with all this stuff, so we have not yet been hit with the effects of the straight being closed all this time. I have seen many other people now say the same thing, that probably sometime in May or June things could get very ugly economically for the US and the whole world. Even if things got magically fixed today, we would still get hit with the lagged effects from the past two months...

Also, on average (highly variable though), the peak to trough for the stock market in a midterm election year is something like 22%. I think there is a reasonable likelihood we see a drop of 20% or more from all time highs before the end of 2026. We will see, but I'm shifting to a more conservative position right now.

I didn't listen to the video, but commenting on what you have posted here, what I have been hearing is that the real effects of the war won't be fully felt for some time yet, and that they will take quite a while to work themselves out once things return to how they were before the war.

Given that, I would only add that it may be helpful to distinguish the economy from the markets. The economy, and unfortunately, it is the world economy, will follow the timeline described above, but the markets tend to be forward looking, and as such, one would expect them to be tanking now and rebounding much sooner than when the economic impacts come to fruition. So far the markets haven't been tanking. I still hold out hope, though, that the markets are going to snap out of the downturn, once felt in the economy, much faster than the economy can, and I say that again, because it is forward looking.

You are correct, but sentiment is not always right. The market thought things were looking great in early 1999 as well as early 2007. My point was that there is significant reason to believe the markets might be overly optimistic or even blind right now as to what's coming. It also seems that the market is not allowed to fall much or stay down very long since the covid crash in 2020. People have realized dips are opportunities to buy, and corrections and bear markets are not lasting nearly as long as a result.

I am not pulling anything out of the market, but I'm using this time to put my money in other areas like building up my emergency savings a little bit more and taking care of a couple large expenses in the real world I need to do rather than putting that money in the market.

Between AI and Iran/oil, there seems to be a great deal of fragility in the economy and markets right now, but of course getting it all exactly right is impossible. Getting it even mostly right is quite difficult.

This sounds abundantly prudent.

Here's my view of the current US equities market ( the iguana ).

P.S. I know it should be loco not loca.

How appropriate on this, National Investing Day. May 1st.

And to think, I wasted - I mean, spent - 2 hours today watching investor education day webinars at Schwab online, when i could have just watched your informative nature simulation of the markets.

But both were informative, actually.

It's not really how I do things but it's good refresher about the generally accepted practices and recommendations.

Markets sitting pretty, for the time being....

EDIT: and to be fair, the Schwab online webinars were actually very, very good. Highly recommend.

Shiller PE ratio currently at 41, the highest ever outside of the dot-com bubble... For reference, it was 38.5 at its peak in late 2021 before the market corrected by over 20%... I don't really see how this can continue much longer.

Gente,

I had a pet iguana from age 13, until I went off to college, and got married. Papino had to be in our family over 20 years until my parents gave him to a neighbor boy. Spoiled with fresh lettuce and papaya.

CG 3,

You would think the market is awfully toppy here. But seems to ignore everything.

Everyone,

Did Sally finally end his period of transition?

I am normally 100% of the mindset of buy and hold, but this is one of like 2 times in my life I am considering selling off somewhat and increasing my cash position. A significant downturn in the next 6 months seems almost certain. But the markets (people!) can be very irrational.

Came across this Frontline Documentary last night that is rather informative, though probably not news to most here. Even if you are spared the downsides of the 401 K retirement pitfalls through a broker, it is instructive in understanding some very significant market forces at play in no small measures.

A lot of the takeaways sound like the things Sally Vix was spouting off about emphetically for quite a while (i.e.: index funds investing).

Frontline - The Retirement Gamble

Igy, I know at one time you were speculating on a double leveraged shorting vehicle on Strategy, Inc (MSTR for Strategy, SMST for the double leveraged short of Strategy).

Did you catch their earnings announcements today? Interesting developments.

Upon the news, I closed my position of MSTR for a healthy gain.

Their holding strategy for bitcoin is changing and I just don't know how comfortable I am with that going forward, so took my profits.