TAM - part the ninth

Time to cherry pick some numbers from Coy's report on AI's tenuous hold on reality. Avid readers and some professionals alike see an analog with the Great Recession, fueled by stupid lending to prop up the vast housing market. And, some times mentioned, household goods.

[T]here are rumblings that the artificial intelligence boom could similarly end in tears. How worried should we be?

You may remember the ouroboros from a history class. It's that snake like symbol where it's eating its own tail. It goes back, at least, to King Tut. Been around a while.

Nvidia is a prime mover in this incestuous endeavor. Huang wants all the money.

A.I. doesn't have to fail for high rates to do damage. It just has to succeed more slowly than its lenders and shareholders are counting on — making it one more reason that there might be more peril in U.S. markets than meets the eye.

IOW, in keeping with this series, if TAM doesn't materialize in the volume that the zealots assert, kaboom.

There's lots of ink spilled the last couple of days wrt Anthropic's Godsirra IPO. To be discussed soon. Spoiler: so far, none of the reports (and the NYT alone has a bundle) I read makes any presentation that AI is (or ever will be) a Consumer Good. And that's where the justification is. If AI is just another intermediate good, it's most likely to increase average cost. How many trillions of Bongo Buck of labour are there to eliminate, and if so, what happens to aggregate demand? Nothing good.

In the long run, though, A.I. is likely to displace people from jobs and push down wages, which is "profoundly deflationary," Mr. Kedrosky said. Deflation, if it occurs, would raise the risk of a crisis. Why? Because debts stay fixed while wages fall, leading to defaults on mortgages, car loans and other forms of debt.

IOW, not only is this version of AI modelled on the Housing Crisis/Great Recession, but also on crypto. Remember that? The last Great Inhaler of GPU. The lure of crypto, at least the ones I've seen, is that such "currency" is explicitly deflationary, which is the pure love of Goldfinger and his acolytes. Now, that's not a near term win, and more difficult if bitcoin (or some other) never makes it to dollar's status of Reserve Currency. If you think Vlad and the Oligarchs is just a washed up garage band, you'd best hope that none of the crypto gain reserve status: I'll wager no one can point to a time in the Industrial Period when both deflation and economic growth coincided.