Ultimately it will be when the credit dries up and circular nature of the “investments” breaks down.
A Couple things that come to mind:
data centre operators borrowing money to buy GPUs and then using those GPUs as collateral for loans to buy more GPUs
nVidia investing money into companies contingent on their purchase of GPUs worth an order of magnitude greater than than their investment
Microsoft selling Copilot below cost, provided by OpenAI selling GPT services below cost, in exchange for compute offered below cost
A consensus that the cost of scaling users is not going to be the same as it has been with e-commerce and software (ie one user using Amazon.com vs 1 million users is roughly the same cost to build the software that runs Amazon.com while the cost scales directly with number of users of chatbots)
a consensus that hallucinations are not a solvable problem
One way could be a failure to deliver on a contractual obligation with regards to a payout (eg company X will receive $100 billion when Y is complete) will lead to the failure to make a debt payment (company X has borrowed money based on the money promised by company Y), which will precipitate a scramble as investors try to recoup the money they’ve put in the firms, which will crash them.
For example, and I don’t know what happened here, CoreWeave had a balloon payment to make on a loan in October; if they didn’t make that payment, it could lead to a panic. But it seems that didn’t happen.
Ultimately it will be when the credit dries up and circular nature of the “investments” breaks down.
A Couple things that come to mind:
One way could be a failure to deliver on a contractual obligation with regards to a payout (eg company X will receive $100 billion when Y is complete) will lead to the failure to make a debt payment (company X has borrowed money based on the money promised by company Y), which will precipitate a scramble as investors try to recoup the money they’ve put in the firms, which will crash them.
For example, and I don’t know what happened here, CoreWeave had a balloon payment to make on a loan in October; if they didn’t make that payment, it could lead to a panic. But it seems that didn’t happen.