re: Markets may be turbulent tomorrow due to contraction in the AI sector

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when it becomes necessary to socialize their losses because they're Too Big To Fail.

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Who?

If AI falters, Google will maintain a dominant position. AI has a severe threat to its search sector, which prints, so if it doesn't come to be a game changer, Google is strong in a sea of smaller dying companies.

Facebook, Apple, etc. are just dipping toes into AI.

Microsoft was the most aggressive early, but they still print as a software company.

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Yes, this will be good for the consumers but bad for business. DeepSeek is open source AKA free and it is Chinese owned.

This has the potential to hurt every American AI developer and if the rumors are true that they built this on old hardware it has the potential to hurt Nvidia too.

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This reminds me of the conversion of TDM over to Voip. Nortel Networks tried to protect their Voip business with proprietary H323 gateways and end devices and here comes Cisco Networks with an open protocol we all know as SIP. Nortel Networks proprietary protection strategy resulted in their demise and eventually getting absorbed by Avaya/Lucent.

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Can the U.S. just block it from being used here?

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Yes. But there is nothing stopping the rest of the world from using it. Which basically renders a US only version of AI non sustainable.

In a weird sort of Chinese way, this is incredibly based

Good points. Do you have expertise in this field?

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Who?

If AI falters, Google will maintain a dominant position. AI has a severe threat to its search sector, which prints, so if it doesn't come to be a game changer, Google is strong in a sea of smaller dying companies.

Facebook, Apple, etc. are just dipping toes into AI.

Microsoft was the most aggressive early, but they still print as a software company.

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I think AI is just another domino.

The first dominoes are the maturation of various tech market segments that floated the explosive growth of the 2010s. For example, but not exhaustive, Apple has essentially ran out of people in the world to sell iPhones to without lower their product's premium/luxury image in the process.

I see AI as a continuation of grand promises missed by tech over the last decade or so. Over the 2010s we were promised autonomous vehicles but it hasn't happened despite many technical advances simply because the problem set is much more complicated than the salesmen to the public (consumer and investor alike) let on. I'd say that the promise of broadly available autonomous vehicles died when Apple unceremoniously killed their decade long vehicle project in late 2023/early 2024. A smaller but still a missed promise has been VR/AR. A lot of investment has been made in this domain but the viable products have a narrow reach. Simply put, right now, it is not another smartphone.

My assumption is that generative AI is going to hit a similar plateau for practical applications. The scientists and engineers will have made a lot advances but they will not be any closer to actually making intelligence with generative AI/large language models. My assumption is Google is going to be the entity that pulls back on AI investment first and spooks the market.

Generative AI missing expectations alone is not going to cause the need for market bailout. It is the knock-on effects and reevaluations of the US tech market writ large. Once the promise of AI being the next boom is gone, we are left with companies that are very profitable but tapped out on growth. As I said earlier, Apple has essentially pivoted towards rent-seeking from their customers and developers because they have no real growth opportunities. They've already found every iPhone customer in the world for the product they're willing to make. Google, Facebook, et al. have been making their products worse over the last decade because they have also tapped out on new audiences so finding ways to capture audiences to keep them in their products or inundate them with advertisement is the only way forward.

"The Silicon Valley" is bankrupt on transformative ideas. It has been entirely consumed by the MBA/professional managerial class and the engineers no longer steer the ship. Whatever is next in tech is not coming out of the Bay area in my opinion.

How the need of the bailout happens? Probably something banking related for banks over leveraged in speculative tech investment. Again, likely not directly FAANG but deeply meshed with the broad Valley/West Coast tech system.