longshot prediction: the AI bubble gets popped this month by the SpaceX IPO, so get out NOW

[paulkienitz]

When SpaceX asks for $1.75 trillion and doesn't get it, that might be the moment that the AI stock market bubble stops inflating and starts tipping into a crash. I'm leaving this here just on the off chance that I get to say "called it" later.

But seriously, it's time get out of the stock market. Especially index funds and anything large-cap. My hunch is that this danger has gone from looming to urgent. Start the process of getting out TODAY, if you haven't acted yet.

[multigraincracker]

1. Sold my last 3 stocks. Moved money to a

Money market account based on gov bonds to protect against inflation. If market crashes, cash will be king. Impossible to pick highs and lows, but there are some things you can do to be ready.

[edhopper]

2. You may be right

But Wall Street has shown itself to be fools when it comes to AI.

[yardwork]

4. If the Democrats win back Congress this fall I predict a stock market correction.

They call it a correction. I call it deliberately crashing the market when they can blame Democrats.

[edhopper]

22. Trump will still be President

And get the blame

[GreatGazoo]

3. There are no crashes anymore. Market is rigged and irrational

Looks like only the QQQ will have to buy the SpaceX IPO with a time constraint but even then only in proportion to the float which is low. Morningstar thinks SpaceX will make up less than 1% of the SPY so even if SpaceX became worthless in August the "crash" for those holding passive indexed funds would be less than -1%.

It is a ponzi scheme but so is the whole economy. That's why we have $39 trillion debt. The crypto bubble got Ponzi'd into the AI bubble, eg lots of crypto mining infrastructure got rebranded as "data centers". Crypto is crashing right now but the market isn't.

Losing the Iran war and struggling in Ukraine is driving investment in new weapons systems. "Space" mostly means military systems like satellites, hypersonic missiles and directed energy weapons (DEW). Airplanes and tanks are getting replaced. No expense will be spared.

My prediction: SpaceX is not profitable as is so it will use some of the IPO money to buy related companies that are closer to profit or already in the black: RDW, RKLB, LUNR, RCAT, etc. Many of these have doubled in the last month.

I would not sell SPY and would hold off on buying more QQQ until the dust settles a bit but crashes are now impossible. The stock market is socialism (ironic) for Boomers and the investor class. Investors and banks are the only ones that get bailed out in a downturn (see 2008 and March 2020). They will print enough $$$ to backstop the markets no matter what. I like GLD or GLDM right now. Easy call -- it will continue to rise as oil reroutes and output increases. Shiny rocks.

GLDM will be over $120 by year end, up 30% from right now. Has good support at $85-87 so danged little risk now.

https://www.marketwatch.com/investing/fund/gldm

[paulkienitz]

11. That kind of rigging can't hold forever

in the face of continued overinvestment in stuff that won't pay for itself.

[GreatGazoo]

15. and yet here we are

Lost a war with Iran = market goes up 20%

[Happy Hoosier]

43. Something I think a lot of folks are missing are structural changes in the market.

In 2000 passive trading (trading in index funds) was less than 10% of the market. In 2012, it was about 25%. In 2026, it's over 50%. in 2012, about 30% of the total market was help in passive investments. That is now about 60%.

Mechanical investing (where investors make purchases regardless of market conditions) is now the dominant trade. That includes me, and pretty much anyone with a 401K in equities. Twice a month, about 14% of my salary goes towards purchasing index funds.... whther the markets are up, down, or sideways. Realistically, it's the only way I can build actual financial independence. I'll has SS, and a small pension, but that's "keep the lights on" money, not the kind of retirement I've been working for (at least in my head).

With mechanical investing making up so much of the market, there is a strong impetus to follow trends, which tends to increase volatility, but these same automatic investing algorithms also have a strong "buy the dip" element, which tends to feed the strong V-shaped recoveries we've seen and then the trend algoritms take over again.

Does that mean markets cannot crash? Nope. The weakness of the this means that the market is more vulnerable to unemployment and inflation. If mechanical investors are laid off, they stop contributing to their 401K's, and the built in demand decreases. If they are forced to withdraw 401K money due to job loss and inflation, the fund MUST sell, regardless of market conditions. That could be a disastrous cycle, if it's big enough.

So my thinking is no crash in the immediate future. Keep an eye on unemployment and inflation numbers. That's where the risk is. I still think we'll see an AI correction, but not at dot.com bubble levels. But what do I know... I'm just a guy on the internet trying to make enough return to retire!

[GreatGazoo]

44. Have had similar thoughts

What happens with population collapse, fewer pension funds, people getting squeezed out of their savings and investments, etc. ?

My thinking changed in March of 2020 when the Fed printed trillions of $$ and just started backstopping the market at Noon one day. They bailed out the rich before the rich felt a thing. They will do it again. It creates inflation but you are less affected by that inflation if you are invested in the market that they are pumping.

I like that index funds diversify and rotate in and out of stocks as they rise or fall. (And they can rise or fall BECAUSE they are indexed). It is a big crazy game that seems like a house of cards yet it continues.

I like your strategy of buying at regular intervals. Takes emotion and guessing out of the equation.

[Happy Hoosier]

45. Yeah, lots of folks specualte about that kind of stuff...

Some folks are convinced that as the Boomers retire (And Gen Xers begin to retire) and start to draw draw down savings instead of investing, that this will actually cause selling pressures instead of buying pressures. That's not showing up in the data, though. Interestingly, millenials and even Gen Zer's tend to invest at higher rates, but there are fewer of them. I have no idea what this looks like 30 years form now, should I live that long.

[Melon]

5. The issue is how many times have we been told to leave the market?

My portfolio is up 20% this year. Slightly more last year. It’s literally changing my retirement horizon.
The message was to leave last year on trump election. The message was to get out end of 2025. I absolutely know individuals who did and are now really far behind.
I used to get in and out for these reasons, and at the end of the day never came out ahead.
Market timing is a bad bet usually. Take some profits sure, but on a multi year crime horizon no. I would even say it’s at your own risk of returns to not be invested in AI and yes…space X. There are bubbles but the US through 401k accounts has a continuous influx of investment cash going into the market. AI is the foreseeable future and the most successful entrepreneur in the world is Musk. It’s just as risky to bet against those things.

[ITAL]

8. Yeah, that's where I am

Maybe if I were older I'd take everything out...but even if there's a big crash on the order of '08, the market recovered within a few short years.

[edhopper]

23. It took six years to recover

And ONLY because Obama and the Dems were in power in 09.
This time you have Trump.

[ITAL]

24. Six years isn't that long for me

I'm in my late 40s. I'll probably see at least one more crash before retirement.

[edhopper]

28. Or get out now and

Buy in after the crash, You won't recover in 6 to 10 years, you will quadruple your investment.

[Melon]

32. Preferably you are cost averaging.

In December, everyone who cashed out due to doom are down 20% to the markets in only 6 months. That’s multi years of returns for the average investor. They can’t buy in now because of more doom.
The market would have to lose 20% if you’ve taken no gains just to get you back to that time.
It’s crazy to try and time and a huge losing strategy.
You are better off cost averaging with your purchases or just investing more conservatively.

Cashing out also means your down another 3% to inflation. Crazy.

[edhopper]

33. There are other investments

Besides equities

[edhopper]

40. If you took your money out in 2007

When the Housing Bubble was as obvious as this AI bubble, you would have missed a 20% run up. Which would be followed by a 60% drop off.
That 20% went poof. As this one will.

[Melon]

48. Right. And if you bought a house in Florida in 2018

When everyone was selling it would have tripled in value today. Investing is easy when you look in the past.

And if you would have not sold and left your money in the market since 2000 it’s up 740%.
When you try and time the market, statistically with real world investors you lose. I’ve made the mistake and most serious investors have. Look at the posts on DU when Trump took office of those going to cash. Same in December 2025.
Don’t panick and staying the course, diversify, and cost average by contributing regularly.

[edhopper]

49. In general yes

But the housing bubble was obvious and was going to burst.
So is this AI bubble.

[paulkienitz]

52. Exactly. You can't ignore warnings this big and loud.

I wasn't aware of the housing bubble in 2007, but by then-future girlfriend was, and told us it was going to come to a bad end. She saw that coming, I see this. I warned about some of the ways that AI would cause problems as far back as 2013, and my track record on those guesses is working out fairly well so far.

Here are some general facts about AI that I know to be true: large language models cannot progress to the point of genuine intelligence about the real world, generative models cannot replace skilled workers, and if a future better form of AI ever does replace human levels of skill, the result will be a major crisis for people's livelihoods that could easily escalate to bloodshed.

And what I know about the current boom in AI advancements and buildouts is: they are putting no effort whatever into moving beyond large language models and plagiarism-laundering content generators as an approach, their recent escalation of prices is still nowhere near paying their incredible costs, and in most honest businesses they have yet to demonstrate a really worthwhile boost to productivity even at their previously low ultra-subsidized pricing. In short, the chance of these trillion-dollar bets making their money back is zero.

Combine that with the fact that automated index funds are massively bought into the bubble prices of the tech companies doing all this, and there is nothing that can save the stock market from a big crash.

[edhopper]

54. The amount of investment

So outweighs the potential return.

[paulkienitz]

9. No it's not "just as risky".

The only "risk" of being out is that you might miss a share of an ill-gotten ponzi windfall.

[Melon]

21. Ill gotten ponzy...huh? You mean investment returns.

I’m sure people have said that for 100 years.
You would be yelling at cars from your wagon in 1908. Yelling at the clouds today.

You can invest in others success and get a return on it or become that success and start your own business. Then sell shares but I guess then you are the head of the ponzi scheme.

You are losing money sitting in cash. You can invest and at some point make more in interest than you need to live. Then you retire.

Or work until you’re dead. Whatever.

[paulkienitz]

25. "others success"? There is no success to profit from in AI.

AI is popular only because it's been massively subsidized by suckers. The data centers they're building will never pay for themselves. That's the key difference between true investment and a ponzi bubble.

[Melon]

31. Go read what Sam Altman is saying. Uber and

Others. Companies are burning through massive AI budgets in months. The layoffs and 401k cuts posted here due to AI because AI is taking their budgets.

That’s where you’re wrong. I see it at my company. We are now allocating huge budgets to stay ahead in AI. They are building massive data centers because massive amounts of money are being spent on AI. It’s all not speculation. This is where spending is going. The stocks are through the roof because they are taking spending today’s times projected growth multiplied by exactly that…time.

[paulkienitz]

34. That math doesn't math -- companies will not pay enough.

The part Sam Altman doesn't mention are that this is not a case of companies eager to spend that much because of how much they love the product, it's a case of companies reacting in horror to an unplanned price shock. They are finding that what they thought might be reasonable expenditures are suddenly far more costly than they realized, because the almost-free subsidized rates they'd been paying got them hooked into extravagantly wasteful usage habits, which they are suddenly realizing need to either change dramatically, or provide solid proof of the financial return for that expenditure... and such proof is, in most cases, nowhere to be found. Most companies suddenly spending this much are not getting value out of it.

But that's not the only part Sam isn't telling you. The awful secret behind that is that even these much higher prices still lose money!

[Metaphorical]

51. Data Centers are not getting built

at the rate that the hyperscalars need them to be. Banks are refusing to underwrite more loans for them, because they're already sitting on a lot of existing data center debt that they are now believing may not be recoverable. Local opposition is also rising, and states are placing strong restrictions on where and how they can be built, especially as environmental and economic impacts can start being assessed, and this in turn is also scaling down the size of these centers.

I expect the Anthropic IPO to do well, especially if they are first out of the gate. I think SpaceX and OpenAI will be duds - there will be a flurry of interest initially, but a lot of people are going to hold a lot of worthless stock, and it's then that things get interesting.

Right now, what's happening with the market is that about a dozen stocks are keeping the rest of the market afloat. A lot of the accounting is dodgy - circular financing, special purpose vehicles (SPVs). SpaceX in particular holds most of Musk's failed projects - including X, Xai, and I believe his robotics company (that one may have been folded into Tesla). This means that there's going to be a massive continued drain on the company; profitability may eventually come (perhaps around 2100), but I wouldn't count on it.

As to the market itself, I keep hearing about how the exchanges have protected themselves against big collapses. The problem with that is that this also distorts the real purpose of the markets, which is to ascertain the value of stocks and (by extension) their associated companies. It also means that you end up having to provide back-end government capital to keep the markets from functioning the way that they should. Given this market, I expect it will be an opportunity for Trump and his cronies to enrich himself while letting the market collapse.That's why I'm not so sure that the market won't go through a collapse - it's a way for the uber-wealthy to buy up everything at fire sale prices.

[paulkienitz]

53. Those backstops trying to hold up the market are going to have their work cut out for them.

That policy of backstopping the market and not letting it fall may just have set them up for a crash too big for them to catch. The size of the bad bets in this case is beyond any precedent.

[GreatGazoo]

16. WSJ and Gallup did a story looking at how Democrat voters are losing money

because they are more inclined than others to predict, or even want, financial collapse.

https://www.wsj.com/finance/investing/investment-portfolios-politics-6d186f91

[ColoringFool]

17. "Democratic." The adjective form is "Democratic."

[GreatGazoo]

20. I could have put a hyphen in there but noun

one who votes for Democrats.

I identify as a Democrat, not a "Democratic". In theory, all voting is democratic (adj)

[Johnny2X2X]

6. No

Market is going to do well, it's completely divorced from the economy now. Do not let politics affect your money. Stay in, but of course hedged in your mix.

[paulkienitz]

10. I've heard that song before.

Every bubble, just before it pops, gets heralded as a new era where economic fundamentals are no longer a relevant limit.

This bubble is going to collapse as soon as it sinks in that all the new AI models and datacenters are unable to recoup their costs from paying users.

[Johnny2X2X]

12. We've been waiting decades for a bubble

Been like 18 years now. Kept going up under Obama, under Trump, under Biden, and now under Trump again. At each stage there were people who sold for political reasons and missed out on record gains. If you sold under Trump's first term, your portfolio missed out on fantastic gains. If you sold because things looked dire during Covid, you missed out on incredible gains. If you sold when Trump took back over you missed out on very broad and significant gains.

Some people have been predicting a crash for decades now, there are more signs that we are about to see incredible growth than a significant pull back, and that's even if an AI bubble falters.

[paulkienitz]

14. Index funds are like 50% AI bubble now.

[Polybius]

36. 9 years ago when I joined DU, people were saying that Bitcoin would burst and go to near zero

While it goes up and down, it's still over $60k.

[paulkienitz]

37. Bitcoin will either sputter on for decades, or go almost instantaneously to zero at any time -- it's not predictable.

Either way, it produces no value for anyone, and participating in its market is straight gambling.

[Johonny]

7. People are predicting the market is holding on

To pop one more time for the SpaceX IPO.

In reality, the 1970s oil embargo saw a recession stock market crash that took 6 to 9 months to realize. The market is likely to see a significant oil endured pull back by late summer...

[CanonRay]

13. I turned some investments into a newer and larger house

in a location impossible to duplicate. Those funds are now pretty crash proof, although not very liquid.

[ColoringFool]

18. I'll just keep my NVIDIA,TYVM.

[paulkienitz]

19. Jensen Huang is pulling sooo many circular-financing fast ones...

[Ziggy Beans]

26. Heard the same shit from Thom Hartmann a few years back

The stock market doesn't crash anymore

[paulkienitz]

29. That same lie was told before the last two crashes.

[bucolic_frolic]

27. imho Fat gains should be pruned. Rotation is underway.

The overall market is weaker than is apparent. Time to hoard cash and prepare for the next opportunity. That's been the gist of many professionals interviewed on financial YouTube channels. A lot of people who worked professionally in Big Bank trading operations are now retired with nothing to do but become analysts. Some of them know a lot, and most are not political. But as always, do your own due diligence.

[multigraincracker]

30. Simple....

Buy low, sell high..

Most do the opposite.

[paulkienitz]

38. More apropos to the current situation, index funds do the opposite.

[Polybius]

35. I think that's a terrible prediction

But what do I know. We'll see by the end of the month.

[paulkienitz]

39. "doesnt crash anymore"

[BannonsLiver]

41. Lol imagine taking investment advive from a panicked, anonymous internet poster.

So 1999 lol.

[paulkienitz]

47. I am hardly alone in pointing out how remarkably huge and smelly an elephant is currently in the room.

Nor am I anonymous. That's my real name.

[Happy Hoosier]

42. Or not

I do think a correction is coming. But when? I don't think anyone knows.

There is a cautionary tale from the dot.com bubble. A well known investment banker saw the Bubble. He called it. He got out of the market. in 1999. The market went up another 25% before it popped. He didn't get back in the market into well into the recovery, because he wasn't confident in the bottom. He came out worse than if he'd just let it ride.

So, yeah, if you think you can call the top and the bottom, go for it. But most who attempt that will fail.

[paulkienitz]

46. I have no intention of trying to call tops and bottoms. I just want to avoid big crashes.

I am already at retirement age, and have no desire at all to do any kind of fin-maxxxing gamesmanship with market speculation. All I want is to ensure that my retirement is not under threat from pyramid-building asshole liars.

[Happy Hoosier]

55. If you depend upon the money...

… the calculus changes. If I did, I’d stick 2 years of expenses in SGOV (or equivalent) for safety. But no one can call a crash. Maybe it started Friday. Maybe the market rebounds. Who can tell? If you can’t weather a crash, then something like SGOV makes sense for you until you feel more secure. You’ll probably leave money on the table, but that may be fine in your situation.

[edhopper]

50. His mistake was not when he got out

It was waiting to not get back in.

[Happy Hoosier]

56. But hindsight is 20/20.

He was convinced the market hadn’t found the bottom. Getting those calls right is hard.

[edhopper]

57. At that point, after a massive crash

Price cost averaging makes sense.
As it did in 2008, as it will when this bubble bursts.
Not hindsight, what I did.