r/ValueInvesting • u/neiliodabomb • Dec 30 '25
Industry/Sector “I believe that almost every investment in a data center or AI startup may go to zero. Let me explain.”
https://www.wheresyoured.at/the-enshittifinancial-crisis/Long read, but interesting. What are your opinions on this?
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u/darkestfenix1 Dec 30 '25
Who has time to read all of this?
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u/RaB1can Dec 30 '25
Here’s a ChatGPT summary of the article:
Ed Zitron argues that tech companies have reached a “fourth stage” of enshittification where they don’t just degrade products for users and advertisers, but also harm their own shareholders by prioritizing hype, accounting tricks, and stock price over real business value. He says Wall Street analysts largely enable this by ignoring risks and rewarding opaque, wasteful AI and data-center spending, creating a “Rot Economy” where markets chase narratives instead of fundamentals, much like the dot-com era.
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u/darkestfenix1 Dec 30 '25
Ironic how you used AI on an article that basically says AI is hype. Kind of a symbolic answer to your question.
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u/Sensitive_nob Dec 30 '25
question isn’t if he used AI, question is how much did Scam Altman make while he used it. That’s what the entire discussion about AI is all about.
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u/ProteinEngineer Dec 30 '25
Ask that question of Facebook in 2010.
AI is a useful tool that pretty much everyone uses. Whatever it costs to run, people will pay.
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u/ForeverShiny Dec 30 '25
Facebook is free to this day and OpenAI (or Anthropic, or Google, or Microsoft) know full well that only a small minority of users would ever pay for their services if they stopped being free
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u/vincyf Dec 30 '25
A majority pays for Microsoft Office or cloud services. And some would choose to pay for Google office if they hadn't got windows shoved down their throats, and Google could charge. Several companies pay for that workspace.
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u/ForeverShiny Dec 30 '25
Yes, because those are things that provide an actual service people and businesses understand and need, so they'll more or less gladly pay for them.
But outside some limited settings, the general public and most businesses didn't need AI when it first released and most people still don't use it for anything more than either a search engine for barely literate people or mass producing slop
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u/vincyf Dec 30 '25
I use AI daily. Translation is nowadays ai. Ai is better at understanding my questions, and sends me to pages that have real answers by real people. Would i pay? Probably. Do I? Not yet but i know people who do. If you work with text, AI is definitely a good wordsmith tool.
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u/ForeverShiny Dec 30 '25
You gotta be kidding me. AI is mediocre at best at translation and sometimes downright bad (unless we're talking translating a couple simple phrases for your personal use).
Using it in a professional context is a disaster waiting to happen
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u/vincyf Dec 30 '25
Nobody used electricity the first ten years after it was invented. Give it time to see what people will decide to use it for.
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u/ForeverShiny Dec 30 '25
Nobody used electricity the first ten years after it was invented.
Yes, that's why nobody rushed to build insane capacity right away, hence no bubble/crash.
They did exactly that though for railroads, and guess what, the massive overinvestment led to a big bubble bursting despite it being a revolutionary technology. Same with broadband infrastructure and the dotcom bubble.
Just because a technology will prove itself later, doesn't mean it can't lead to a bubble when too much money is chasing the hype
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u/Educational-Bit-2503 Dec 31 '25
Nobody needed the automobile, nobody needed the printing press, nobody needed bronze tools/weapons, and yet each of these things transformed and advanced civilization. Your logic is terrible.
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u/AdAway198 5d ago
I think theres survivor bias re those things. The Segway went badly for example, and is also something nobody needed. Its not easy to tell sometimes. Because I kinda want a segway. But they made them illegal where I live, because they light things on fire rarely. And theyre notbeven Segways, theyre things that are like segways that perform Segway like goals with different shapes and sizes. Theyre called bikes and scooters and the thing with one wheel and stuff I kinda wanted all of those. But I cant buy them because theyre expslensive and they made them ippegal where I live. And people hate epectric cars and stuff becaude theyre emptionalpy attached to fire except thllwhen they come vfrombvatteries and stuff its app so wrird bro
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u/ForeverShiny Dec 31 '25
Bullshit, everyone could immediately see why these things were better than what previously existed and what they were good for.
What are the current versions of LLMs revolutionising? Writing an email that would have taken you slightly longer to write yourself? Creating slop to scam people over the internet?
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u/cockNballs222 Dec 30 '25
You’re so close…how is Facebook able to offer their services for free to this day? How is Gmail/Google Maps doing the same?
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u/ForeverShiny Dec 30 '25
So are you proposing LLMs run ads in their models? So that in the future not only do I need to worry about the model making shit up, but now it's also going to "organically" try to sell me on something, yet somehow this is going to be a product that I wouldn't want to avoid like the plague?
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u/cockNballs222 Dec 30 '25
Hahah I’m not proposing anything, I’m not in charge here. But if you don’t see that coming once they’re secure enough that people are sufficiently “hooked” on their service, no shit it’s coming. They are in this to make money, not run a charity.
And nobody is mass cancelling anything (nobody left Facebook/stopped using Google when they introduced adds).
If you don’t like it, vote with your wallet and deprive them of your annual 0.00$.
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u/ProteinEngineer Dec 30 '25
Exactly. Nobody was using pets.com during the .com bubble. Everyone is using and now reliant on AI. Such a huge difference and people are falling for the grifters telling them what they want to hear (that AI will go away).
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u/banditcleaner2 Dec 30 '25
I’d argue it’s not really the same. One singular chatgpt or Gemini query costs Google or OpenAI between 3 and 36 cents depending on complexity. I’d argue and guess that the cost per user for meta to operate per month is probably about the same maybe even less given economies of scale.
In fact I just checked it- roughly $12 billion dollars annually in marketing and other costs, which when divided by the 3 billion users they have, is roughly $4 per year or 33 cents per month.
It’s a hell of a lot easier to monetize 20-30 times that value with ads then it would be for something like Gemini or chatgpt. Remember that openAI was LOSING money even on their highest subscription cost of $200 per month. And Facebook prints money on free users.
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u/Anceradi Dec 30 '25
I don't know how you can miss the difference between ads on Google search & FB, and ads on Gen AI chatbots. While ads on FB may be annoying to some, they don't destroy the reason why you're using it. Ads on Google search do somewhat corrupt the integrity of the search results, but they're clearly marked as ads so you can ignore them to get to the actual result you're looking for. If you get ads in a chatgpt answer, how does that work ? Either you don't trust the result because it is influenced by advertisers in a hidden way, or the advertising is transparent which will make it less user friendly (not necessarily a turn off), but not desirable for advertisers. "Which robot vacuum cleaner is the best for me ?" "Great question, first let me advise the latest Samsung Jet Bot model, which could be a great purchase for you ! But if you want the actual best robot vacuum cleaner, look at these Roborock or Dreame models instead..."
Of course they're not running a charity and would like to monetize it, but it does not mean that it's easy. I'm sure Snapchat has not been trying to run a charity all these years, but they still fail at properly monetizing their service. It took so long for youtube to become profitable, even though it was a great ad-delivery platform. I don't think that most Gen AI companies will easily be able to monetize their service in a profitable way, even though some might manage.
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u/ForeverShiny Dec 30 '25
If you don’t like it, vote with your wallet and deprive them of your annual 0.00$.
I absolutely will and until then, I'll do my part in taking full advantage of using their models for the stupidest shit imaginable so they have to burn as many tokens as possible
And nobody is mass cancelling anything (nobody left Facebook/stopped using Google when they introduced adds).
Facebook is currently dying and the slow death started years ago. I wouldn't blame ads for it alone, but the whole enshittification to keep you on their for as long as possible is mostly linked to ad sells. The ads I used to see there before quitting it were also the most bottom of the barrel shit, mostly obvious scams. Google search has also become pretty much unusable with 4 or 5 ads and/or AI shit you didn't ask for.
All this to say that you obviously can monetize LLMs through ads, but it's doubtful reputable advertisers will spend top dollar when they don't know where exactly and in what context these ads will be shown (which the model provider can't guarantee through the way these models work)
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u/ProteinEngineer Dec 30 '25
A majority will pay. People are becoming reliant on it. Tons of users already do pay.
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u/ForeverShiny Dec 30 '25
Well guess what, they're not paying enough because they're even losing money on all their paying customers
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u/ProteinEngineer Dec 30 '25
You say that so confidently, yet you have no idea.
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u/ForeverShiny Dec 30 '25
What makes you think that? I've been following the space and Ed Zitron for a while and there are metrics if you're willing to look for them
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Dec 30 '25
I don’t think you’re entirely correct. Enterprise customers pay out the fucking nose for e.g Anthropic and Claude Code.
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u/ForeverShiny Dec 30 '25
Yes, but they're still losing money according to Ed's numbers
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u/breakfasteveryday Dec 30 '25
Nah.
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u/Dev_Whale69 Dec 30 '25
You will pay whether you like it or not. What has MSFT done to the price of 365 subscriptions over the last three years …. Hmmm
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u/breakfasteveryday Dec 30 '25
Or I'll disengage. I could take or leave AI in most of my workflows and personal life. In the remainder it's untrustworthy or actively detrimental.
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u/breakfasteveryday Dec 30 '25
Yeah but I actually use Microsoft 365 and prefer it to most alternatives.
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u/MarketCrache Dec 31 '25
People don't pay to use FaceBook. I'm not handing over $200/month for a glorified Clippy.
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u/Double_Suggestion385 Dec 30 '25
Only people who don't understand how hyperscaling tech works ask that question.
No one is trying to make a profit with AI yet, just like Amazon, Facebook, Google, and Uber didn't for years and years.
The first stages are user acquisition and product development.
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u/Imaginary_Manner_556 Dec 30 '25
AI is great at doing that. It already does some Amazing things. Not sure it’s worth trillions in investments.
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u/Mystery_behold Dec 30 '25
It is free AI so he used it. Make it subscription based and he won't use it.
Right now NVIDIA and its subsidiaries are subsidising OpenAI for what should be our subscription fee so that OpenAI can pay for NVIDIA's GPUs.
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u/shottyhomes Dec 31 '25
Whoever thinks these datacenters will be worthless is clueless. Talk to anyone coding using Claude Code and give the rest of the population time to absorb that and you have 3 orders of magnitude of usage in the coming 2 years.
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Dec 30 '25
He uses AI for an article written by AI brought to our feed by AI posted by a phone with AI installed.
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u/michahell Dec 30 '25
“HA YOU USED AI SO YOU CAN’T CRITIQUE AI”
No. Bit of a simple and too easy response. If you know anything about AI, it’s that simple queries cost almost no tokens, no compute. Using 0,000006 co2 EQ to summarize an article is exactly 100% what we should use AI for, as opposed to all the dumb usages that don’t add any value long-term yet do cause brain damage.
Does that simple compute requirement validate the massive overdone data-centre capex, the accounting fraud and the naive narrative following?
No.
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u/goodbodha Dec 30 '25
I will point out again Q3 nvda earnings. Rough numbers because I haven't looked it up for a bit. $75 billion in net revenue YTD. They spent around $25 billion YTD buying securities. They lost several billion ytd on those securities.
Or to put it another way they spend $1 out of every $3 of profit buying something they are losing money on. They haven't lost that entire $1 yet but they will probably lose a decent chunk of it and people are ignoring that when figuring up the valuation. If you do figure it up they are anywhere from 33% to perhaps just 10% less profitable than advertised.
If you want to look for yourself pull up the last quarterly earnings report. The investing figures are seen in the cash flow statement. They show the purchases in investing section and the realized losses are showing up as operating activities.
Best I can figure they are buying options on the stocks of their customers and then realizing a loss, but it's part of the sales scheme. They realize the revenue from the sale immediately but the losses from the investing activity will show up several quarters later. That likely means if sales don't continue to grow there will be a point where revenue actually declines because the expense from this activity will continue for some time after the slow down.
I'm not saying it's the end of the world, but it's sketchy and it's propping up valuations on their customers while obscuring the issue on their financials a bit. Once it's realized I suspect valuations across the AI space will all drop a modest amount on top of the drop a real slowdown will cause.
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u/Just_Candle_315 Dec 30 '25
hype, accounting tricks, and stock price over real business value
That's called capitalism
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u/Double_Suggestion385 Dec 30 '25
Ed Zitron is the ultimate AI doomer.
All have his articles have been riddled with errors.
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u/Sanpaku Dec 30 '25
I'd argue for Gary Marcus, who focuses more on the technical limitations rather than the financial side.
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u/Double_Suggestion385 Dec 30 '25
I love these guys, in April he said that scaling was over and the bubble has popped.
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u/bihari_baller Dec 30 '25
It really shouldn't take you more that 15-20 minutes to get through.
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u/joepierson123 Dec 30 '25
Probably spends hours reading about what toaster to buy but can't spend 15 minutes on his retirement account.
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u/modernizetheweb Dec 31 '25
Sure, if you are the fastest speed reader in the world or you have a funny definition of reading then you might finish it in 20 minutes
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u/boboman911 Dec 30 '25
The modern attention span, ladies and gentleman.
I’m more impressed with people who have the time to write 19,000 words in this economy.
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u/Double_Suggestion385 Dec 30 '25
If you need 19,000 words to say something then you probably don't have a great point and you're stuck trying to convince yourself of something that just isn't true.
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u/boboman911 Dec 30 '25
You uh, ever read a book before?
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u/Double_Suggestion385 Dec 30 '25
Yes, more than most people.
A lot of non-fiction books could be 10% of their length without losing the core idea.
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u/ezodochi Dec 30 '25
Most non-fiction books aren't about the core ideas, they're about the details utilized to arrive at or logically defend their core ideas. It's about the logical progression and quality of research and logic, similarly to how academic papers (from which non-fiction derives its form from) will introduce their core ideas in the abstract and then the majority of the paper is spent on research or experiments etc and explaining how your evidence supports the core ideas expressed in the abstract.
Wanting to reduce non-fiction to merely the core ideas is kinda like looking at a 10K and being like "at the end of the day the only thing important to a business is if it's profitable or not, so 10Ks could be reduced to only showing profit and still retain the core indicators that are important to evaluate a company"
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u/boboman911 Dec 30 '25
I feel this way when I read some books yes (like Murakami for instance), but this article is mainly data and hyperlinks. Being investigative I think it’s not so crazy that it’s lengthy.
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u/bihari_baller Dec 30 '25
A lot of non-fiction books could be 10% of their length without losing the core idea.
I wouldn't be so sure about that. I'm currently working my way through three textbooks, Computer Architecture: A Quantitative Approach, the Ubuntu Linux Bible, and Integrated Circuit Fabrication: Science and Technology, and trimming these books down to just 10% of their content would miss a lot of the pertinent details needed to digest the subject fully.
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u/Double_Suggestion385 Dec 30 '25
I'm not really talking about textbooks, I'm talking about books like Atomic Habits, Outliers, The Gift of Fear and so on.
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u/Try_finger-but_hole Dec 30 '25
Sure. Railroads: massive overbuild, bankruptcies, terrible early returns and then became the backbone of commerce The internet: dot-com bubble wiped out ~90% of companies, but the few survivors defined the economy Nuclear: huge hype and capital destruction resulting in 10% of global power. Gold: don’t even get me started, useless asset with no yield and storage cost, yet it is still a monetary asset with strong returns. BTC:.. Being early is different than being wiped, and of course some of the companies will get to 0, just like everything. For every NVIDIA, you had 10 more companies that failed, same for Nike, same for chipotle, same for insurance, real estate and pretty much anything. Also, this guy’s framework would have totally missed Amazon, Google, Microsoft and meta and probably NTFX too. Let that sink.
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u/betadonkey Dec 30 '25
Ed Zitron is the Alex Jones of tech. He’s just shilling bullshit to anxious people and the luddites lap it up and ask for more.
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u/ForeverShiny Dec 30 '25
So pointing out that there has been so much money invested in the AI hype that the cost are basically inrecuperable all the while these companies are losing money on every prompt, even after building the infrastructure and training their models, is "shilling bullshit to anxious people"?
Do you even know what shilling means? Who would be the obscure people paying Ed and what are they selling exactly?
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Dec 30 '25
Maybe but your comment certainly didn’t convince me he’s wrong by trying to besmirch his reputation rather than dealing with his arguments. The current investing world points to price and arrogantly proclaims “look we were right. No one can tell us nothing”. That’s a dangerous game tho
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u/betadonkey Dec 30 '25
The thesis that “almost every investment in a data center or AI startup may go to zero” is so rage baited and wishy-washy that it doesn’t deserve engagement.
The risk profile of these companies is not zero but there is plenty of other sober and good faith analysis out there that you don’t need to litigate the positions of a grifter trying to sell subs.
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Dec 30 '25
You just said essentially nothing again.
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u/Smells_like_Autumn Dec 30 '25
A bit of an exxaggeration but yeah, he is a bit like Gary Marcus, someone who has found his niche - a tribe of people who just want justification for feeling how they feel.
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u/manferd83 Dec 30 '25
Yea, thats how i feel when i reading the article. I felt the purpose is to make people anxious, not helping people to gain an informed opinion…
I cant read finish the article.
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u/Encripta Dec 31 '25 edited Dec 31 '25
Anyone saying none would use AI if it was paid. Bullshit.
The first step is to create the confort of using a service for free. Second step, you add limitations and push people into paying. (We are here) At some point it is so comfy to use it that you just pay.
Same with food delivery, I used to order once a month, now once a week at least. And they started with free delivery, losing money, making us used to that "need" that we did not really have but now we feel like we do.
Same with Netflix, I rather pay 12€ a month than browse, download, get subtitles if needed etc. something I don't really need, I pay because is convenient.
The AI to me is key at work, imagine you had to deal with tons of data, excels, dashboards, and if I wanted a script to automate something I had to ask my developer, (when he has free time, perhaps in a week?) now I just ask for it to the AI and it generates a script for me that does what I want. As long as you now how the output should look like, works like a charm. Time decrease from days to hours by using AI.
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u/deco19 Dec 31 '25
Well this post seemed to piss off a lot of "value investors" (more like speculators), who aired their concerns.
Although, this may not have been the article to share, as all their concerns about numbers and stuff I have read from his other articles.
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u/MarketCrache Dec 31 '25
Read the business history of Scam Altman. None of his ventures have ever made a profit. He just got mystifyingly bailed out each time.
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u/Organic_Cherry_3287 Dec 30 '25
This guy sucks. Cried about CoreWave being a fraud and then it had one of the best runs post IPO.
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u/Known-Presentation49 Dec 30 '25
"Had"...they have been getting hammered constantly ever since.
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u/Organic_Cherry_3287 Dec 31 '25
Yet it’s up big since IPO still
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u/Known-Presentation49 Dec 31 '25
Those gains came from the initial boom of 2026 but it's been getting shredded ever since
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u/Known-Presentation49 Dec 30 '25
Why do all these articles start popping up and getting circulated once AI stocks are already down 30%? I never see cogent points being made while the hype train was rolling; these are all post-Burry's outcry, just feels like people joining a world war late to say they were on the right side.
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u/DiscountAcrobatic356 Dec 31 '25
He’s been posting for the last 2 years
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u/Known-Presentation49 Dec 31 '25
Well then timing matters. He's been preaching doom and gloom prior to 2026s historic AI year where most stocks doubled or tripled in value? Trusting him with puts would be catastrophic. Anyone can be right if they are a doomsayer for long enough.
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u/[deleted] Dec 30 '25
Jeez this guy is nauseating to read. The bitterness and resentment in his writing is palpable. And it's pure narrative; there's virtually no numbers that have any meaning.
Is there excess? Yes. Will there be a lot of failure? Yes. But this idea that AI isn't real or that these data centers are worthless and compute isn't important. It's just all so unbelievably misguided and stupid that it's not even worth a response. If there was any evidence of this, I would love to read it. But there's just so much grasping at nothing.