Couldn't it be a problem given the concentration of the S&P in these companies?

At this point these companies make up a huge portion of 401k's for a huge chunk of Americans. How would it affect retirees if they dropped 40-50%, likely taking the market with them?

There is ZERO chance the modern oligo-kleptocracy isn't going to socialize the losses onto the little guy

> As long as this debt does not make it into life insurance and pension funds, we are fine.

Already happened: https://finance.yahoo.com/markets/stocks/articles/michael-bu...

> When these fail, it will become everyone's problem.

Debt is senior to equity. For private credit to start taking haircuts, the equity has to have already gone to zero. At that point, this will already have been everyone's problem for some time.

I disagree - high leverage inherently makes systems less stable.

> As long as this debt does not make it into life insurance and pension funds, we are fine.

I think for small to even large numbers you are correct, but given how yuge this debt amount is a broad-based default will probably cause a contagion. I will not predict how far and wide.

You say this as though every company doesn't take on debt, and all debt isn't a risk. I'm sure you have some much riskier debt than ChatGPT already in your portfolio, and interest rates are adjusted by relative as judged by the market. I'm sure some debt will fail, but certainly all of it won't, and while anything could cause a market crash saying "when these fail" holds a lot of incorrect assumptions.

> As long as this debt does not make it into life insurance and pension funds, we are fine. The trouble is that private credit is taking control of some life insurance companies and off-loads this debt to these. When these fail, it will become everyone's problem.

Three things:

1) at least SpaceX is already in pension funds "thanks" to NASDAQ and MSCI relaxing their rules. Everyone who invests in NASDAQ or in MSCI World has SpaceX exposure, and assuming the bonanza lasts for 11 more months, so will everyone who invests into S&P 500. In addition NVIDIA, Google, Microsoft, Oracle and Amazon all have been in pretty much every investor's / pension fund depots. No matter what, everyone is going to get fucked when the party crashes, and it will make 2007 look harmless by comparison.

2) The debt of the AI companies is bad enough, but there's all the downstream credit as well, chiefly construction companies and public utilities that are undertaking absurd amounts of buildout. When the party crashes and the demand stops, there will be a lot of construction companies and possibly even a few large utility companies that will be unable to service their debt (because no datacenter means no income) or have to hike rates even more than they already are.

3) All this debt and speculation unwinding will cause an economic downturn. Most of Europe already is in or near recession territory, and the US would be in a recession if it weren't for the wash trading and circular investments artificially propping up the GDP. But unfortunately, with the exception of infamously austere Germany, everyone else has already fired all the guns during 2007ff and Covid, and all the ZIRP money never got slowly deflated out of the market, which means this time there will be no government help possible, it will be a hard crash. No way out of that one.

bingo - if the firms holding the debt keep holding the debt & the debt doesn't get passed to other entities - the system will be fine.

if say meta owes 720Bn, they wouldn't have trouble paying that back in 10 years.

this doesn't take away the fact that 'a.i' right now is a bubble.