alt Hacker NewsBubbles aren't caused by betting on the technology. They're caused by betting on the wrong companies. Say you have railway, and there's 5000 railway companies. At this point no one has any idea what good looks like, and it changes every 6 months. Investors bet on all 5000, and once all the drama is over, there are 3 companies still capable of competing in the railway business. The investors in the other 4997 get screwed, but since the investors also bet on the winning companies, theres a good chance the actual successful companies themselves get screwed because their investors are broke. There is then intense consolidation, and one of the 3 to nail the technology is still left standing while somehow there are now 3-4 other companies that won by taking talent and inventions from bankrupt companies or just by peaking after the bubble burst. About 20% of the bubble companies have also survived by finding niches.
That's a bubble. It happens every time because it has to happen every time. If you stay out of the game, the people who stay in the game win and your holdings in redundant technology are worthless.
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Nah.
Every single railroad company failed. That repeated several times.
The ones that existed on the end were created by assembling the capital brought on the bankruptcy of the original ones. Most of those failed too.
That's how a bubble is. No original investor got out ahead.
Bubbles are caused by reckless stock purchases leading to insane, unjustifiable valuations, regardless of the company's prospects.
Hysteria + widespread financially illiteracy means there are lots of people prepared to buy AI stocks at any price. They're adamant to get in (FOMO).
Suppose OpenAI will be a successful company into the long term, and you bought its stock at a $5T valuation. After several reporting seasons and subsiding hype, its true worth turns out to be closer $1T. OpenAI could still be enormously successful, but anyone you bought at much over $1T valuation is going to get hurt.