I think it's because the private market can't possibly go any higher. OpenAI is already valued at around $1 trillion and just raised $122b.

The only next step is the public market.

Meanwhile Chinese AI companies outputting open weight models nearly as good are valued in the low single digit billions. Go figure.

Current chinese AI company valuations (USD):

Knowledge Atlas Technology (Z.ai): 57B

MiniMax Group: 26B

Deepseek: 45B (rumored)

> Meanwhile Chinese AI companies outputting open weight models nearly as good are valued in the low single digit billions.

That's surprising to me; I thought (or heard) that it was low 3-digit millions.

Wasn't there a Chinese ai startup that got bought recently but the government wouldn't let the founders leave china? I think stuff like that would have an effect on valuation

Yeah, Manus were supposed to be acquired by FB, but the Chinese government nixed it.

long-term a very smart move to block it.

That's the premium for being a Western company in a Western market, yes.

They are dirty communists.

We prefer red blooded American scam artists here, buddy. Hell, Elon probably found some bullshit way to recognize Chinese AI as Twitter revenue, used to buy cyberattacks to sell to SpaceX.

I believe that Elon is in fact selling inference data center time under SpaceX (which does own Twitter), some of which may be used to buy cybertrucks.

>the private market can't possibly go any higher

Can public markets go higher? Shiller P/E is closing in on the peak of the dot-com bubble:

https://www.multpl.com/shiller-pe

This is already close to being the frothiest market in US history.

Consider two competing forecasts for AI: it's a "normal technology", or it will be superintelligent.

If it's a "normal technology", where's the moat? Why won't this turn into a boring commodity business, like telecom after the bubble? Sure, railroads transformed the US, but that didn't prevent investors from losing a bunch of money first: https://news.ycombinator.com/item?id=47900502

If it's superintelligence, we're most likely either all dead (in which case you helped cause human extinction by investing, congratulations) or else we're living on generous UBI: https://www.astralcodexten.com/p/you-have-only-x-years-to-es...

The M2 money supply is ~4x higher now than in 1999. Does that indicate there is a lot more runway now, than then, at least on that metric?

Nasdaq is about 8x higher now than then, so 4x higher M2 is tight. Ofc there is always a chance that this time is different and that the markets are genuinely much more efficient :-)

The P/E ratio references "price" and "earnings". Both "price" and "earnings" are denominated using money. So it's not obvious to me how an increase in the money supply should affect this ratio.

BTW, in Shiller's book which was published right as the dot-com bubble popped, he has a chapter listing out similar late 90s structural factors, many of which could lead to permanently higher stock prices in theory.

P/E is not an indicator of available to deployed capital. Just in the EU alone there is about €12 trillion in bank deposits which could be invested. There is no lack of liquid capital to be invested.

Basel capital rules are supposed to mitigate against the insane idea of banks deploying all their capital in a single high risk stock.

If you think you can get all the _public_ to pull their short term bank deposits into stock .. well, (a) you've not met the Germans, and (b) that is how the economy of Albania collapsed in a pyramid scheme.

> Basel capital rules are supposed to mitigate against the insane idea of banks deploying all their capital in a single high risk stock.

At the same time of these companies IPO'ing, they are also trying to bend the rules of the index funds and their markets (Nasdaq,S&P 500) so that they can get listed into these index funds asap.

And when these happens at such obscene levels, what happens is that a very sizable chunk of the S&P will get into these companies (5-10% is a very large number for a single company especially such companies within these index funds IMO)

and their whole plan is that then banks and other investments sitting on cash would then invest in it. Oh by the way, your retirement funds might also be linked to it all.

The fact is that there is a race with multiple companies (SpaceX,Anthropic,OpenAI) all trying to IPO and get listed on the stock markets as soon as possible.

Should be illegal. There should be a cool off period before new stocks get auto added to indexes.

It’s bad but not as bad as it seems. To get these insane valuations companies are selling very low float. A lot of indexes won’t list them at under 10% float and even if they do only at a float multiplier so spacesx as a 100b component (2 billion x 5% float) See this podcast for a better explanation https://podcasts.apple.com/us/podcast/the-rational-reminder-...

I'm not suggesting the banks invest. But that individuals could withdraw money to invest. All I am saying is there is still lots of 'dry powder' left in the financial system. There is no shortage of liquid cash to invest, only places to put it.

There is the amount of capital which is technically available, and the amount of capital which is available in practice.

If EU depositors want exposure to US AI firms, why didn't they already withdraw their money to invest in Microsoft/Google/etc.? I'm a bit doubtful that an OpenAI IPO is going to trigger major shifts in asset allocation.

> Can public markets go higher? Shiller P/E is closing in on the peak of the dot-com bubble:

Shiller PE is near 44. Japan had an equivalent price to earnings ratio of over 70 during their 1989 bubble.

Hm, wasn't Japan's bubble in part due to easy credit? Are we going to see easy credit in the US given recent memories of inflation?

Quite possible that there will be a Trump effort to drive down rates and abandon inflation control for political reasons.

There already was such an effort but Trump lacks enough federal reserve votes to succeed at present.

The exit strategy is your 401k. SpaceX, OpenAI, and Anthropic are banking on rule changes to indexes that will force retail to buy at elevated premiums. This will likely generate enough artificial demand for insiders to exit before prices correct. At least that’s OpenAI’s plan.

Fortunately for them, the current SEC is highly in favor of short-term market manipulation.

> I think it's because the private market can't possibly go any higher. OpenAI is already valued at around $1 trillion and just raised $122b.

How many public companies even get 122b? They definitely can go higher if they really are that valuable. With public companies come the other factors which might not be based on the actual value and can cause people to throw money.

Don't worry, the Fed can create infinite money!

It's good that there is now a new head of Fed for this.

This is also my understanding of why Twitter (and thus Grok) was acquired by SpaceX (which was already having an IPO). Less to do with GPUs in space, more to do with the first way to invest 'directly in AI companies without a proxy (e.g. nvidia).

> free market concept should move the prices down

Kind of a radical idea. I did read about that in economy books way back when at uni... but I don't think it's really happening actual. At least my walled doesn't seem to get it.

PS: it's a joke, free market works when there is competition. VCs are making damn sure it's just enough monopolies that they get wealthier while consumers themselves get milked. Without antitrust actually being enforced, there is no free market.

Prices do go down for electronics:

https://ourworldindata.org/grapher/price-changes-consumer-go...

That was then and this is now. RAM and storage prices are through the roof, effectively erasing the price drops of the latest 15 years or so.

Seems like a Macbook Neo would be far better than a computer at any price from 15 years ago? What would it have taken to build an equivalent computer?

Since it appears that LLMs can't achieve AGI and lose hallucinations, I presume a new company will appear with a new architecture that can - what happens to the current behemoths and their stock prices? Will they jump architectures?

Splendidly interesting times.

That's not how money works. It's not an asset which is subject to conservation of matter like gold.

Banks make money by giving out loans is a meme, but it's actually true here. You kind of need collateral to do that, but a stock of a company which has revenue is a perfectly cromulent collateral even by strict standards. It's not even some infinite money glitch - it's kinda how the whole system is supposed to work.

The stock market is largely about betting on expectations of future value while money is just a token which is used to settle things. E.g. if you think about simplified mechanics of IPO, say, investor Alice buys OpenAI shares, OpenAI gets the money and Alice has shares. If for simplicity we assume that Alice and OpenAI use same bank and there are no intermediaries, then it literally just updates two cells in a database. And Alice now has shares which is an asset of known value, thus can be borrowed against, etc. Also, say, OpenAI can use that money to repay debt, then perhaps lender would buy SpaceX stocks - it's not like money was withdrawn from the system.

Of course, there can be some interference: multiple companies do IPO around same time it would reduce FOMO, and if they did it literally in one day there might be lack of liquidity.

There are regulations that mostly forbid stock movements from creating new money. The money available for an IPO is pretty much finite and independent of those companies' actions.