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Notice how the top stocks suddenly began making insane profit growth after march of 2023? GPT-4, arguably the biggest leap in AI actualization, released on Marc

Notice how the top stocks suddenly began making insane profit growth after march of 2023? GPT-4, arguably the biggest leap in AI actualization, released on March 14th, 2023. I assume that is when these largest companies (Apple, NVIDIA, Microsoft, Amazon, Meta, Google) started gaining crazy investment for data/AI/processing hardware. I see it as an inflation of speculative worth of these companies. The value they are providing can in no way be proportional to the rate of growth of their stock. It is just a circulation of their own money being passed through each of those companies' services, and not anything of worth to the consumer.

nemomarx 1y ago
month old but https://www.wheresyoured.at/the-haters-gui/ https://www.wheresyoured.at/the-haters-gui/ made this argument - that a lot of that profit was just recirculation between these companies
- brokencode 1y ago
  What do you mean recirculation? Isn’t the money flowing mostly in one direction (to Nvidia)?
  - nemomarx 1y ago
    well there's also openai and Microsoft, paying for cloud compute to run things. I think it could have a few round trips around. Nvidia is where it seems to all end up though yes
- nerdponx 1y ago
  I have had this pet theory for a decade+ that this is the case for most of the economy, and the current "recirculative bubble" is just a really strong example of it happening in a tighter loop than usual. Think about the classic economics fairy tale of why income redistribution is bad ("inefficient") and trickle-down economics is good. Billionaire Bill buys his 10th yacht. Workers need to manufacture the yacht and all the different parts of it. He needs to hire staff to keep it clean, to maintain it, to operate it, and to stock the fridge; he needs to pay for satellite internet so he can do business on the yacht; and he needs to buy TVs for the kids. All of that stuff is produced by other businesses with their own employess and sometimes independent contractors. So all of this economic economic activity results in a flow of income to a large number of individuals. Those individuals then themselves all need to buy groceries, clothes, housing, transportation, etc. so all that income then continues to flow outward throughout the economy. The price system orchestrates everything so that the proceeds from Billionaire Bill's yacht are used to provide the goods and services of greatest value to everyone else. That story of course is nonsense, but the question is: why? It seems correct. In fact it is broadly correct in the sense that the things described in the story do in fact happen in real life. So why isn't it a happy ending like in the fairy tale? There are a few things going on here, but the one of importance here is where are those yacht-builder employees buying their goods and services from? One missing aspect of the story is that they're paid a tiny amount compared to the top management of the yacht company and a few other specialists like the naval engineer, the captain, and the lead software developer. So they don't actually have a lot to spend. And what they do spend money on is largely provided by conglomerates controlled largely by Millionaire Mike and Trillionaire Todd, who of course are very close friends of Bill. Mike and Todd know ensure that their prices are as high as possible to capture as much of their customers' income as revenue. Mike and Todd then go buy golfing trips, yachts, mansions, etc. And the cycle continues. The effect is that all the individual employees do in fact get some of Bill's billions of dollars in the form of income, but they only get enough to cover their essentials, and any profit from buying those essentials goes right back into the hands of another person just like Billionaire Bill. The income does in fact flow throughout the economy as in the bedtime story, but you can't understand the welfare of individuals within the economy by just looking at total flows. You don't need to be a Marxist to see that this is how the economy works and has worked since the dawn of capitalism. It's a natural low-energy state that economies naturally tend towards, because humans are humans and there is always a minority that is willing and able to take avantage of others. The only difference here is that the loop is tighter, where Bill Todd and Mike are all just buying each other's services directly.
- const_cast 1y ago
  Ive had this theory about the US economy for a while. There's mover, and makers. The movers just move money around, making nothing productive. The makers are what actually construct the world we live in and the services we use. The US has a lot of movers, not enough makers. Our GDP is essentially propped up by fake jobs that do nothing. Of course we are a service economy, but a lot of this isn't even services, it's just move thing A to thing B then move it back and make money doing that. It would make sense if we're physically moving stuff - but we're not. We're just moving money back and forth.
RobKohr 1y ago
I divested from s&p and completely switched to funds that avoid these companies... Basically non computer tech. When reality comes to the table it isn't going to be pleasant.
- Workaccount2 1y ago
  You might want to consider an equal weight etf $RSP is $SPY, but equal allocation across all 500 companies. So the top tech stocks are ~1.5% of your holding instead of ~20%.
- chistev 1y ago
  Like which one?
  - dragontamer 1y ago
    I'm not completely divested but I'm buying some VFVA as my non-tech fund. Top holdings are CVS, Verizon and FedEx all at 0.8%. Basically normal companies. It's amazing how traditional companies have done in comparison to the top of the S&P500 (or really the top S&P10). So I feel the need to buy the other stuff in case the top S&P10 is a bubble.
- moduspol 1y ago
  I looked into somehow hedging against the Mag 7 in my portfolio (which is otherwise almost entirely in an S&P 500 index fund), but it seemed surprisingly difficult for something that is probably quite widely desired. Though maybe I'm just unsophisticated. And it feels a little hopeless because there's no telling how long the smoke and mirrors will continue working, and whenever it stops, undoubtedly the rest of the economy is going to suffer, too. Bleh.
  - selectodude 1y ago
    It’s not difficult, it’s just expensive.
  - tg180 1y ago
froidpink 1y ago
Meta's profit has increased almost 2x since 2023. Meta makes money from advertisers spending money on Meta. So the profit growth from Meta does very much come from the real economy
- blitzar 1y ago
  Right around the time Meta stopped setting 100's of billions a year of cash on fire in the metaverse and pivoted to Ai.
  - philipallstar 1y ago
    To open-sourcing AI models though, no?
    - blitzar 1y ago
      To pay $100mil to ai devs. I have a theory that Meta execs was so focused on the Metaverse that the Ai team succeeded thanks to the lack of supervision and interference from above - there was probably a board discussion between 2019 and 2022 about firing them all and just focusing up the Metaverse stuff becuase they were dead weight on the core mission of colonizing the Metaverse. Turns out the Ai team was the lifeboat to save the drowning Metaverse.
      - froidpink 1y ago
        Meta has been investing in AI for more than a decade
        gary_0 1y ago
        Longer than that, for sure. They were deploying ML systems at least as far back as 2011.[0] [0] https://en.wikipedia.org/wiki/EdgeRank https://en.wikipedia.org/wiki/EdgeRank
        blitzar 1y ago
        And yet their quaterly and annual reports dont mention it at all till 2022 and the team are now being "helped out" by new $100mil talent. There is an amazing team there that did the work, I am just saying it wasnt the visionaries vision that made that happen - and if it was they certainly wouldnt have let the Ai team publish or opensource their work.
philipallstar 1y ago
> The value they are providing can in no way be proportional to the rate of growth of their stock. Stock price is related to the predicted total value of the company from now until eternity, not the current value it's providing.
lumost 1y ago
The real question is how much further the top tech firms can cut costs, and how much of their expenses they can shift to NVDA. They aren’t growing particularly fast at this point.
mgh2 1y ago
Apple is still behind the AI game/story, its stock barely grew from 3T market cap height in 2022. It is treated as a safe investment- i.e. when the bubble pops. The rest of the pack is feeding on the AI hype train, each supplying their services to pump up the story (analogy): Nvidia on chips (shovels), Microsoft and Amazon on cloud (gold storage), Meta and Google on ads (marketing).

nemomarx 1y ago

month old but https://www.wheresyoured.at/the-haters-gui/ https://www.wheresyoured.at/the-haters-gui/ made this argument - that a lot of that profit was just recirculation between these companies

brokencode 1y ago
What do you mean recirculation? Isn’t the money flowing mostly in one direction (to Nvidia)?
- nemomarx 1y ago
  well there's also openai and Microsoft, paying for cloud compute to run things. I think it could have a few round trips around. Nvidia is where it seems to all end up though yes
nerdponx 1y ago
I have had this pet theory for a decade+ that this is the case for most of the economy, and the current "recirculative bubble" is just a really strong example of it happening in a tighter loop than usual. Think about the classic economics fairy tale of why income redistribution is bad ("inefficient") and trickle-down economics is good. Billionaire Bill buys his 10th yacht. Workers need to manufacture the yacht and all the different parts of it. He needs to hire staff to keep it clean, to maintain it, to operate it, and to stock the fridge; he needs to pay for satellite internet so he can do business on the yacht; and he needs to buy TVs for the kids. All of that stuff is produced by other businesses with their own employess and sometimes independent contractors. So all of this economic economic activity results in a flow of income to a large number of individuals. Those individuals then themselves all need to buy groceries, clothes, housing, transportation, etc. so all that income then continues to flow outward throughout the economy. The price system orchestrates everything so that the proceeds from Billionaire Bill's yacht are used to provide the goods and services of greatest value to everyone else. That story of course is nonsense, but the question is: why? It seems correct. In fact it is broadly correct in the sense that the things described in the story do in fact happen in real life. So why isn't it a happy ending like in the fairy tale? There are a few things going on here, but the one of importance here is where are those yacht-builder employees buying their goods and services from? One missing aspect of the story is that they're paid a tiny amount compared to the top management of the yacht company and a few other specialists like the naval engineer, the captain, and the lead software developer. So they don't actually have a lot to spend. And what they do spend money on is largely provided by conglomerates controlled largely by Millionaire Mike and Trillionaire Todd, who of course are very close friends of Bill. Mike and Todd know ensure that their prices are as high as possible to capture as much of their customers' income as revenue. Mike and Todd then go buy golfing trips, yachts, mansions, etc. And the cycle continues. The effect is that all the individual employees do in fact get some of Bill's billions of dollars in the form of income, but they only get enough to cover their essentials, and any profit from buying those essentials goes right back into the hands of another person just like Billionaire Bill. The income does in fact flow throughout the economy as in the bedtime story, but you can't understand the welfare of individuals within the economy by just looking at total flows. You don't need to be a Marxist to see that this is how the economy works and has worked since the dawn of capitalism. It's a natural low-energy state that economies naturally tend towards, because humans are humans and there is always a minority that is willing and able to take avantage of others. The only difference here is that the loop is tighter, where Bill Todd and Mike are all just buying each other's services directly.
const_cast 1y ago
Ive had this theory about the US economy for a while. There's mover, and makers. The movers just move money around, making nothing productive. The makers are what actually construct the world we live in and the services we use. The US has a lot of movers, not enough makers. Our GDP is essentially propped up by fake jobs that do nothing. Of course we are a service economy, but a lot of this isn't even services, it's just move thing A to thing B then move it back and make money doing that. It would make sense if we're physically moving stuff - but we're not. We're just moving money back and forth.

RobKohr 1y ago

I divested from s&p and completely switched to funds that avoid these companies... Basically non computer tech. When reality comes to the table it isn't going to be pleasant.

Workaccount2 1y ago
You might want to consider an equal weight etf $RSP is $SPY, but equal allocation across all 500 companies. So the top tech stocks are ~1.5% of your holding instead of ~20%.
chistev 1y ago
Like which one?
- dragontamer 1y ago
  I'm not completely divested but I'm buying some VFVA as my non-tech fund. Top holdings are CVS, Verizon and FedEx all at 0.8%. Basically normal companies. It's amazing how traditional companies have done in comparison to the top of the S&P500 (or really the top S&P10). So I feel the need to buy the other stuff in case the top S&P10 is a bubble.
moduspol 1y ago
I looked into somehow hedging against the Mag 7 in my portfolio (which is otherwise almost entirely in an S&P 500 index fund), but it seemed surprisingly difficult for something that is probably quite widely desired. Though maybe I'm just unsophisticated. And it feels a little hopeless because there's no telling how long the smoke and mirrors will continue working, and whenever it stops, undoubtedly the rest of the economy is going to suffer, too. Bleh.
- selectodude 1y ago
  It’s not difficult, it’s just expensive.
- tg180 1y ago

froidpink 1y ago

Meta's profit has increased almost 2x since 2023. Meta makes money from advertisers spending money on Meta. So the profit growth from Meta does very much come from the real economy

blitzar 1y ago
Right around the time Meta stopped setting 100's of billions a year of cash on fire in the metaverse and pivoted to Ai.
- philipallstar 1y ago
  To open-sourcing AI models though, no?
  - blitzar 1y ago
    To pay $100mil to ai devs. I have a theory that Meta execs was so focused on the Metaverse that the Ai team succeeded thanks to the lack of supervision and interference from above - there was probably a board discussion between 2019 and 2022 about firing them all and just focusing up the Metaverse stuff becuase they were dead weight on the core mission of colonizing the Metaverse. Turns out the Ai team was the lifeboat to save the drowning Metaverse.
    - froidpink 1y ago
      Meta has been investing in AI for more than a decade
      - gary_0 1y ago
        Longer than that, for sure. They were deploying ML systems at least as far back as 2011.[0] [0] https://en.wikipedia.org/wiki/EdgeRank https://en.wikipedia.org/wiki/EdgeRank
      - blitzar 1y ago
        And yet their quaterly and annual reports dont mention it at all till 2022 and the team are now being "helped out" by new $100mil talent. There is an amazing team there that did the work, I am just saying it wasnt the visionaries vision that made that happen - and if it was they certainly wouldnt have let the Ai team publish or opensource their work.

philipallstar 1y ago

> The value they are providing can in no way be proportional to the rate of growth of their stock. Stock price is related to the predicted total value of the company from now until eternity, not the current value it's providing.

lumost 1y ago

The real question is how much further the top tech firms can cut costs, and how much of their expenses they can shift to NVDA. They aren’t growing particularly fast at this point.

mgh2 1y ago

Apple is still behind the AI game/story, its stock barely grew from 3T market cap height in 2022. It is treated as a safe investment- i.e. when the bubble pops. The rest of the pack is feeding on the AI hype train, each supplying their services to pump up the story (analogy): Nvidia on chips (shovels), Microsoft and Amazon on cloud (gold storage), Meta and Google on ads (marketing).