7 ms·

Amazon plunge continues $1T wipeout as AI bubble fears ignite sell-off

92 points by truegoric 7mo ago

tucnak 7mo ago
They always say it's about "AI," but it never turns out to be about AI. I wonder what's it about this time?
- mullingitover 7mo ago
  The collapse of the yen carry trade.
  - bhouston 7mo ago
    I have read that numerous places and it seems plausible but it is beyond my investing experience. I think the new nominated Fed Chair is also a hard money advocate and is spooking USD alternatives (gold, silver, BTC, etc.) But hard money can be quite hard on the economy, so that could limit growth.
    - robocat 7mo ago
      We should just blame "the willies". Investment is all about belief. When the root cause is the willies, then we hallucinate reasons together. Crypto and memes have demonstrated us a lot about the drives of individual investors. Unfortunately it seems that professional investors are not that much more rational (from my limited personal experience with a small hedge fund, and from my years of looking at markets). My favourite term has always been "taking profits" which is generated by the technical analysis (I loath that term) of looking at the prices: taking an effect and publishing a cause (trying to sound smart). We are deeply irrational beings; often the more you go up a professional ladder the more rationalisation you see. During unstable periods, we see lots of weird side-effects and there is a lot that doesn't seem to make sense. Edit: a better meme could be "The use of AI by funds is destabilising markets" Disclaimer: I am not a professional investor. I am a cynic.
      - mullingitover 7mo ago
        Speculation involves belief, sure. However, there is hard math involved in markets as well, and the yen carry trade equation exists whether you believe in it or not.
        robocat 7mo ago
        I love your juxtapositioning! Can the yen carry trade equation exist outside of belief? Edit: I just noticed your comment is the one result for your "equation"!! https://duckduckgo.com/?q=%22yen+carry+trade+equation%22 https://duckduckgo.com/?q=%22yen+carry+trade+equation%22
  - AnimalMuppet 7mo ago
    Not saying you're wrong, necessarily, but as I type this the Dow is at 49,700. Would you expect the collapse of the yen carry trade to cause the Dow to collapse as well? Or is the Dow not high-growth enough for people to put yen-carry money into it?
    - mullingitover 7mo ago
      > Would you expect the collapse of the yen carry trade to cause the Dow to collapse as well? USD devalued ~10% last year, so some of the losses are already priced into the DJI. When you account for that and sprinkle in ~3% inflation, it has lost value despite being up ~11% in the last year.
- renegade-otter 7mo ago
  Anecdotally, read somewhere that delivery people are going idle. The Orange One wrecked everything with tariffs, and the ripple of destruction is slowly taking its course. That's before we take into account massive outflows of cheap labor and fired government workers.
- DaedalusII 7mo ago
  wall street analysts are starting to realise that software companies shouldnt trade on a P/E of 300. DocuSign is currently valued at 30 times its annual earnings. Adobe is currently 16. Amazon is 28 -- has been as high as 50 recently. NVDA is 44. Investors are basically starting to realise that enterprise are not going to subscribe to software like DocuSign for 50 years. They'll probably just move to odoo or zohosign or something and save a lot of money. So its probably a better bet to put that capital into something like Nvidia or Tesla or whatever. it also looks like the US Fed isn't going to cut rates, so capital is getting more expensive. Of course, if you are a CEO its great to blame all this on AI and then tell your investors you are increasing AI in your business (see: salesforce whose stock price is down 42% in a year and is now trading at 25x earnings)
  - bhouston 7mo ago
    > software companies shouldnt trade on a P/E of 300 You are playing pretty fast and loose with your definition of a "software company" when you include Amazon and NVIDIA in your list. Amazon is many things but it is not a "software company" and neither is "NVIDIA".
    - ecshafer 7mo ago
      50% of amazon operating profit is from AWS. NVIDIA's GPUs aren't really that much better than AMD if it weren't for CUDA. Software company is a pretty good description for both.
      - dd8601fn 7mo ago
        I’ve heard the same about Nvidia, quite a few times, but have never really understood it. I don’t suppose you know a good “for dummies” explanation of why CUDA is such an insurmountable moat for them? Like, what is it about that software that AMD can’t produce for their own hardware, or for a most important subset, with these $1T market stakes?
        surgical_fire 7mo ago
- softwaredoug 7mo ago
  Every tech company assumed they would be the benefactors, not victims, of AI. And investors now see that without the alleged AI growth, these companies at best look like stable utilities, not high growth stocks. At worse companies look like they make highly replaceable software as software stops being a moat. Moreover they look like large, inefficient organizations with a lot of human veto points that prevent innovation (requiring more human coordination is an anti moat now)
  - symfrog 7mo ago
    Was software ever a moat? Software typically only gave companies a small window of opportunity to turn a fleeting software advantage into a more resilient moat (network effects, switching costs etc.)
    - softwaredoug 7mo ago
      Yes, I would argue good (stable, fast, easy to use) software was somewhat of a moat and much harder before coding agents. Stripe, Square, Shopify, Google, all thrived in some part because their services take a hard problem and make it easier to use. Now more people can take a hard problem and make it easier to use. All you have to do is look around (esp 5+ years ago) and see the many many BAD, unstable, hard to use, slow, etc versions of these companies
    - tonyedgecombe 7mo ago
      Windows was a moat but it looks more like an anchor now.
      - symfrog 7mo ago
        Windows' moat was not the operating system code, but that they were able to get distribution via IBM, and then grow an ecosystem of applications that were targeted at Windows, which created a snowball effect for further applications.
        7mo ago
zlkanter 7mo ago
Amazon missed earnings and promptly doubled down on AI spending: https://finance.yahoo.com/news/amazon-plans-200b-ai-spending-surge-sinking-stock-after-earnings-173054820.html https://finance.yahoo.com/news/amazon-plans-200b-ai-spending... It is encouraging to see that investors are punishing what is the greatest misallocation of capital since the dotcom bubble. Investors have figured out that AI is limited to probabilistic and annoying chatbots that are for entertainment and for looking up trivia questions.
- bpodgursky 7mo ago
  I know it feels comforting to say this, but deep down you have to realize that saying things confidently does not cause them to become true.
  - chucksta 7mo ago
    Was that comforting? At least the commentator came with a source
  - sdf2erf 7mo ago
    Theres a real problem with people who are too tech-induced: youre disconnected from how the average person interacts with stuff.
- symfrog 7mo ago
  If only that is what investors have figured out. Unfortunately, it seems investors now think that all paid software will be replaced by AI generated software, somehow open source projects laundered through generative AI models should finally convince enterprise customers to go with free.
- danielbln 7mo ago
  Why should anyone take your sensible first statement seriously if your second statement is so easily verifiably false? Some of these AI critical posts really are an exercise in Gell Mann Amnesia, man.
  - 7mo ago
blinding-streak 7mo ago
Question: does Amazon's retail business matter for analysts at all? It drives the majority of revenue for the company but a much, much smaller amount of profit. Does Wall Street care about Amazon's core business one iota?
- legitster 7mo ago
  It definitely boosts their overall value as a company. If one share equals a slice of "what the company is worth now" + future growth, steady long-run revenue sets a solid baseline for the stock price.
- mlyle 7mo ago
  Big revenue + small margins in a stable business, IMO, is a massive liability for the bottom line; any downturn in business and that becomes big revenue + big losses. Even if cloud is making money, it can wipe a lot of that out. From the point of view of running an enterprise that lasts, though, diversification is important. Financially diversification is probably, in general, bad for EPS. But if you want to run a lasting empire, it's best to not tie it to just a narrow thing.
  - bluGill 7mo ago
    That depends on the business. People are not going to stop eating so small margins in the grocery business isn't a negative - the revenue is mostly recurring and recession proof (some people might switch from buying meat to rice+beans, but other people are going to stop eating out and so it balances).
    - mlyle 7mo ago
      Just because people need a grocery store doesn't mean that you're guaranteed to make money running one. multiplying huge revenue by a small percentage to get a big positive number to multiplying huge revenue by a small negative percentage to get a big negative number So that's how Kroger managed to lose billions over the last couple of quarters, or how small changes in shoplifting/shrinkage based on store makeup can cause losses to some chains, etc.
mmastrac 7mo ago
This insanity was going to break at some point. Now hopefully these trillions of dollars of losses might finally allow the price of old DDR4 memory I've been trying to acquire to finally recover.
smithcoin 7mo ago
It’s not an AI bubble - it’s an inflated P/E bubble.
- tim333 7mo ago
  Yeah, the stock price is still higher than any price it obtained prior to Oct 2024. I think people are just shocked that stock prices may go up and down rather than up only.
the_absurdist 7mo ago
Hmmm. And I wonder who bought all that NVDA today and what's suddenly so compelling about the price. Certainly couldn't be someone in government trying to pin the NDX100 index.
truegoric 7mo ago
https://youtube.com/watch?v=LZ-bkTG30Ns https://youtube.com/watch?v=LZ-bkTG30Ns

92 points by truegoric 7mo ago

tucnak 7mo ago

They always say it's about "AI," but it never turns out to be about AI. I wonder what's it about this time?

mullingitover 7mo ago
The collapse of the yen carry trade.
- bhouston 7mo ago
  I have read that numerous places and it seems plausible but it is beyond my investing experience. I think the new nominated Fed Chair is also a hard money advocate and is spooking USD alternatives (gold, silver, BTC, etc.) But hard money can be quite hard on the economy, so that could limit growth.
  - robocat 7mo ago
    We should just blame "the willies". Investment is all about belief. When the root cause is the willies, then we hallucinate reasons together. Crypto and memes have demonstrated us a lot about the drives of individual investors. Unfortunately it seems that professional investors are not that much more rational (from my limited personal experience with a small hedge fund, and from my years of looking at markets). My favourite term has always been "taking profits" which is generated by the technical analysis (I loath that term) of looking at the prices: taking an effect and publishing a cause (trying to sound smart). We are deeply irrational beings; often the more you go up a professional ladder the more rationalisation you see. During unstable periods, we see lots of weird side-effects and there is a lot that doesn't seem to make sense. Edit: a better meme could be "The use of AI by funds is destabilising markets" Disclaimer: I am not a professional investor. I am a cynic.
    - mullingitover 7mo ago
      Speculation involves belief, sure. However, there is hard math involved in markets as well, and the yen carry trade equation exists whether you believe in it or not.
      - robocat 7mo ago
        I love your juxtapositioning! Can the yen carry trade equation exist outside of belief? Edit: I just noticed your comment is the one result for your "equation"!! https://duckduckgo.com/?q=%22yen+carry+trade+equation%22 https://duckduckgo.com/?q=%22yen+carry+trade+equation%22
- AnimalMuppet 7mo ago
  Not saying you're wrong, necessarily, but as I type this the Dow is at 49,700. Would you expect the collapse of the yen carry trade to cause the Dow to collapse as well? Or is the Dow not high-growth enough for people to put yen-carry money into it?
  - mullingitover 7mo ago
    > Would you expect the collapse of the yen carry trade to cause the Dow to collapse as well? USD devalued ~10% last year, so some of the losses are already priced into the DJI. When you account for that and sprinkle in ~3% inflation, it has lost value despite being up ~11% in the last year.
renegade-otter 7mo ago
Anecdotally, read somewhere that delivery people are going idle. The Orange One wrecked everything with tariffs, and the ripple of destruction is slowly taking its course. That's before we take into account massive outflows of cheap labor and fired government workers.
DaedalusII 7mo ago
wall street analysts are starting to realise that software companies shouldnt trade on a P/E of 300. DocuSign is currently valued at 30 times its annual earnings. Adobe is currently 16. Amazon is 28 -- has been as high as 50 recently. NVDA is 44. Investors are basically starting to realise that enterprise are not going to subscribe to software like DocuSign for 50 years. They'll probably just move to odoo or zohosign or something and save a lot of money. So its probably a better bet to put that capital into something like Nvidia or Tesla or whatever. it also looks like the US Fed isn't going to cut rates, so capital is getting more expensive. Of course, if you are a CEO its great to blame all this on AI and then tell your investors you are increasing AI in your business (see: salesforce whose stock price is down 42% in a year and is now trading at 25x earnings)
- bhouston 7mo ago
  > software companies shouldnt trade on a P/E of 300 You are playing pretty fast and loose with your definition of a "software company" when you include Amazon and NVIDIA in your list. Amazon is many things but it is not a "software company" and neither is "NVIDIA".
  - ecshafer 7mo ago
    50% of amazon operating profit is from AWS. NVIDIA's GPUs aren't really that much better than AMD if it weren't for CUDA. Software company is a pretty good description for both.
    - dd8601fn 7mo ago
      I’ve heard the same about Nvidia, quite a few times, but have never really understood it. I don’t suppose you know a good “for dummies” explanation of why CUDA is such an insurmountable moat for them? Like, what is it about that software that AMD can’t produce for their own hardware, or for a most important subset, with these $1T market stakes?
      - surgical_fire 7mo ago
softwaredoug 7mo ago
Every tech company assumed they would be the benefactors, not victims, of AI. And investors now see that without the alleged AI growth, these companies at best look like stable utilities, not high growth stocks. At worse companies look like they make highly replaceable software as software stops being a moat. Moreover they look like large, inefficient organizations with a lot of human veto points that prevent innovation (requiring more human coordination is an anti moat now)
- symfrog 7mo ago
  Was software ever a moat? Software typically only gave companies a small window of opportunity to turn a fleeting software advantage into a more resilient moat (network effects, switching costs etc.)
  - softwaredoug 7mo ago
    Yes, I would argue good (stable, fast, easy to use) software was somewhat of a moat and much harder before coding agents. Stripe, Square, Shopify, Google, all thrived in some part because their services take a hard problem and make it easier to use. Now more people can take a hard problem and make it easier to use. All you have to do is look around (esp 5+ years ago) and see the many many BAD, unstable, hard to use, slow, etc versions of these companies
  - tonyedgecombe 7mo ago
    Windows was a moat but it looks more like an anchor now.
    - symfrog 7mo ago
      Windows' moat was not the operating system code, but that they were able to get distribution via IBM, and then grow an ecosystem of applications that were targeted at Windows, which created a snowball effect for further applications.
      - 7mo ago

zlkanter 7mo ago

Amazon missed earnings and promptly doubled down on AI spending: https://finance.yahoo.com/news/amazon-plans-200b-ai-spending-surge-sinking-stock-after-earnings-173054820.html https://finance.yahoo.com/news/amazon-plans-200b-ai-spending... It is encouraging to see that investors are punishing what is the greatest misallocation of capital since the dotcom bubble. Investors have figured out that AI is limited to probabilistic and annoying chatbots that are for entertainment and for looking up trivia questions.

bpodgursky 7mo ago
I know it feels comforting to say this, but deep down you have to realize that saying things confidently does not cause them to become true.
- chucksta 7mo ago
  Was that comforting? At least the commentator came with a source
- sdf2erf 7mo ago
  Theres a real problem with people who are too tech-induced: youre disconnected from how the average person interacts with stuff.
symfrog 7mo ago
If only that is what investors have figured out. Unfortunately, it seems investors now think that all paid software will be replaced by AI generated software, somehow open source projects laundered through generative AI models should finally convince enterprise customers to go with free.
danielbln 7mo ago
Why should anyone take your sensible first statement seriously if your second statement is so easily verifiably false? Some of these AI critical posts really are an exercise in Gell Mann Amnesia, man.
- 7mo ago

blinding-streak 7mo ago

Question: does Amazon's retail business matter for analysts at all? It drives the majority of revenue for the company but a much, much smaller amount of profit. Does Wall Street care about Amazon's core business one iota?

legitster 7mo ago
It definitely boosts their overall value as a company. If one share equals a slice of "what the company is worth now" + future growth, steady long-run revenue sets a solid baseline for the stock price.
mlyle 7mo ago
Big revenue + small margins in a stable business, IMO, is a massive liability for the bottom line; any downturn in business and that becomes big revenue + big losses. Even if cloud is making money, it can wipe a lot of that out. From the point of view of running an enterprise that lasts, though, diversification is important. Financially diversification is probably, in general, bad for EPS. But if you want to run a lasting empire, it's best to not tie it to just a narrow thing.
- bluGill 7mo ago
  That depends on the business. People are not going to stop eating so small margins in the grocery business isn't a negative - the revenue is mostly recurring and recession proof (some people might switch from buying meat to rice+beans, but other people are going to stop eating out and so it balances).
  - mlyle 7mo ago
    Just because people need a grocery store doesn't mean that you're guaranteed to make money running one. multiplying huge revenue by a small percentage to get a big positive number to multiplying huge revenue by a small negative percentage to get a big negative number So that's how Kroger managed to lose billions over the last couple of quarters, or how small changes in shoplifting/shrinkage based on store makeup can cause losses to some chains, etc.

mmastrac 7mo ago

This insanity was going to break at some point. Now hopefully these trillions of dollars of losses might finally allow the price of old DDR4 memory I've been trying to acquire to finally recover.

smithcoin 7mo ago

It’s not an AI bubble - it’s an inflated P/E bubble.

tim333 7mo ago
Yeah, the stock price is still higher than any price it obtained prior to Oct 2024. I think people are just shocked that stock prices may go up and down rather than up only.

the_absurdist 7mo ago

Hmmm. And I wonder who bought all that NVDA today and what's suddenly so compelling about the price. Certainly couldn't be someone in government trying to pin the NDX100 index.

truegoric 7mo ago

https://youtube.com/watch?v=LZ-bkTG30Ns https://youtube.com/watch?v=LZ-bkTG30Ns