I’ve moved my S&P 500 investments to the Equal Weight index to reduce my exposure to AI. Quite aside from SpaceX, I think the large-cap tech companies are making some uncomfortably large bets on AI and any major upset could cause a domino effect.
But as so many ETFs have a significant stake in large-cap US tech stocks (the top 10 holdings of the iShares MSCI World ETF is entirely comprised US Big Tech, making up 20% of the value of the ETF), I found S&P 500 Equal Weight to be pretty attractive.
As for SpaceX itself? I feel the numbers involved all sound a bit unbelievable to me. I fear that there will be a rug-pull sometime post-IPO, and retail investors (and taxpayers, if the US Government ends up taking a stake, as they have recently indicated they might do for OpenAI) will inevitably be left holding the bag.
> I found S&P 500 Equal Weight to be pretty attractive.
The rebalancing required to maintain equal weights means constantly selling your winners and buying more of your losers. That creates volatility drag. Stock returns are highly skewed: only about 4% of stocks outperform the market, and are responsible for most of its gains. By keeping your allocation to those stocks small through constant rebalancing, you are missing out on a large part of their gains. The vast majority of stocks underperform.
Maintaining the equal weighting also requires constant trading, which generally means higher fees. A market weighted fund, in contrast, naturally maintains its desired balance in response to price movements, without any trading.
Also, the equal weighting ignores the amount of outstanding float for each company. If the fact that NASDAQ has not (historically) been float-adjusted (a common anti-SpaceX talking point) gave you concern, this is even worse, due to the multiple orders of magnitude difference between the largest and smallest companies in the S&P. If enough money enters the equal-weight index, this can spark large amounts of buying in (relatively) small companies that is divorced from their economic performance.
The equal-weight index has outperformed the market-weighted index in some periods (not in recent memory), but with higher volatility (so worse risk-adjusted returns). That outperformance can mostly be explained by factor tilts implicit in the equal weighting (e.g., a higher allocation to mid-cap value stocks).
You would probably be better off with a mix of market-weighted funds explicitly designed to give you the factor tilts and risk exposure you want.
This isn't financial advice, but if they dropped 40-50%, things like consumer staples would go up. In fact, they did this Friday, when everything else melted.
The best defensive stock for those situations is WMT, but you can think of other similar names as you reason through the why. That's where I'd go. There are many ETFs such as VDC (Vanguard Consumer Staples).
If you don't want to be so defensive, you could go VTV which is basically "large cap value stocks" so it still includes some Tech like Intel but it's way more diversified into other industries.
Gold is more inflation-related, so I wouldn't go there, at least not for the 40-50% draw down scenario you're describing.
I think a tricky thing is names like WMT, COST, TJX already have high p/e ratios.
You could usually try utilities or energy but those are also high due to AI buildout & Iran.
I think gold could make a come back since it's beating down a bit this year. Treasuries or just a reasonable hedge with puts against your holdings may be the best bet.
Of course none of this is financial advice & is just open discussion looking for thoughts.
Yeah, that all makes sense, great points. I agree utilities and energy are already high. As usual, the answer is probably that diversifying a bit to get exposure to all of the above is likely the right move, but that depends on one's appetite for risk and personal views on when the downdraft risk materializes
Small cap value did well in the 2000 tech crash and SP600 (small cap) doesn’t have many direct datacenter or AI exposed names compared to large and mid cap indexes. But given the scale of capex across the US they aren’t immune from secondary effects.
I think there are no safe harbor investments at this time. Even gold is unpredictable.
Personally I went 80% world excl US and 20% equal weight S&P500 to hedge against what I think is an AI bubble. But if the market decides to adjust Nvidia's valuation 20% downward next week, I expect there to be ripple effects throughout the economy.
(Like the .com bubble, I think the tech is genuinely transformative and here to stay, but the valuations are just ridiculous.)
I think you're missing the feature of equal-weight index that your parent comment is attracted to—which is a sense that the market generally is out of balance toward AI investment at the moment and that there's a correction coming, which the equal-weight index will have less exposure to.
Your concerns sound valid provided things continue on as they have (I'm not a financial advisor and this is not financial advice) but the commenters above you are specifically worried that it's not going to do that. In which case, the disadvantages you point out of the equal-weight index will be handily outweighed. If an AI bubble popping causes the market-weighted funds to suffer, it doesn't matter that we've avoided trading fees along the way.
Company performance doesnt follow a uniform distribution where each company is as likely to overperform as any other. Selling companies that are run well because their stock went up is a great way to miss out on a lot of money.
People are doing so because the math is not mathing.
Assuming that all the claims are true, this would lead to a collapse under its own weight, because at that point, supposedly, most people won't be needed in the jobs they currently occupy.
Assuming the claims aren't true, there will be a reckoning where all the glitter thrown will hit the ground and people that invested would like to have their marbles back at whatever the cost.
I'd be betting on the latter rather than the former. BECAUSE all those companies are RUSHING for an IPO because none of them want to be left with the bag.
Just for the sake of comparison and to put things in perspective, just for the spaceX situation, running a datacenter is no easy task and require significant maintenance and supporting infrastructure, now you're going to tell me that you can achieve the same and even more in space where virtually everything is more complicated to achieve? And you're telling me that your entire business, or at least a big majority of it, will be this entirely unproven infrastructure? Seems like a bit of a stretch to me...
Now this being said, somehow some things may lie in the middle, but people seem to be a bit either too fond of the claims or too aggressive towards some part of the tech stack.
Have they even talked about how they’re going to handle the heat?
I’m willing to believe the construction is plausible (maybe not cost-effective, but possible), and robotic operation of it is a stretch but with some optimism I could be convinced.
I don’t see how they can get rid of the heat, at least in a realistic way that isn’t “a square kilometer of black body radiation surfaces” or something equally “works on paper, so uneconomical it will never actually happen”.
Heat is where the math breaks down. If you examine the heat the ISS is able to deal with (about 70 KW) vs say a H200 SXM5 (700W), you can stick a grand total of 100 units there, or about 12 nodes. This isn't even accounting for supporting infrastructure, compute, etc., nor are we taking a power source into account.
Either there's a revolutionary heat dissipation system in the works they're keeping a secret, or my ass is getting a smoke rash.
> The greatest tech revolution by far and people on this site are trying to movie their money away from it. I hope y'all will do an honest retrospective in a year or so.
I see this sentiment often, and think it is short-sighted:
1. The tech fails at the goal - profitability is what we see for any tech that augments humans, which isn't anywhere close to satisfying the trillions in debt, busting the market and bleeding trillions from the economy.
OR
2. The tech succeeds at the goal - humans are mostly not needed anymore other than for menial low-paid work. Economy slows, then almost completely stops.
What is the outcome you see that keeps you optimistic? How do you intend to avoid the soup kitchen if this all works out? Because, you see, if this all works out you will have nothing of value to contribute too.
I think the tech will work well for some tasks where a formal feedback loop exists (such as coding). In other areas it will take many years to adapt business processes and roles to make the best use of this technology. The total productivity boost could be around 1% p.a similar to the industrial revolution of the 19th century.
Stock prices could be at risk not from lack of demand but because the data center buildout is bound to slow dramatically as we come up against some serious bottlenecks like energy, grid, fab capacity, permissions, etc. Not much will have to be written off, but the delays could cause big problems for debt funded projects and companies.
This slowdown will allow the economy and the workforce to evolve away from execution and towards planning, strategy, research and development, idea generation, experimentation, oversight as well as manually handling a million exceptions and gaps left by current AI models.
I don't think there has ever been a tech boom without a tech bust. But that's not the same thing as the tech not working or causing economic collapse. Maybe this time is different. Who knows.
> The tech succeeds at the goal - humans are mostly not needed anymore other than for menial low-paid work. Economy slows, then almost completely stops.
Economy slows or stops when AI robots are producing goods and services for much lower cost than human workers? Perhaps, but I think the obvious next development would be massive deflation: even on welfare or UBI, you would be able to afford the same quantity of goods/services than with normal wage today, because the stuff produced by robots would be significantly cheaper. Just like stuff produced in factories is much cheaper than hand-made stuff we had before factories were invented.
Who is going to have the income to pay taxes to support that enormous welfare state that covers the needs of 99% of the population? The AI company owners? Why would they allow that? Presumably, if they own all the robots in the world, that includes the military drones.
My general prediction is that we'll see an immense amount of wealth creation and this will naturally trickle everywhere. This is both a continuation and speeding up of the trend we're seeing right now. I think the unusual outcome would be for us to stray from this path.
>you will have nothing of value to contribute too
So perhaps I can finally rest and solely focus on the stuff that I like. For this to be a problem, we need to imagine a dystopian scenario where our systems (and those who run 'em?) are effectively all-powerful and also cartoonishly selfish for no good reason at all.
I think there's a very small needle to thread, where the federal government can buy out the compute/data centers when the economics start to come apart, and the USA becomes for compute like China is for manufacturing. I expect anti-AI sentiment and adoption will trend better when the people feel like they're getting the lion's share of the benefit (which will happen naturally as models commoditize).
In the long term there will be a lot of work that AI _can_ do as well as (or better than) humans, where the human is still nominally doing the work, because of liability and verification requirements (e.g. medicine). Beyond that, I expect influencer/independent media to become the new it job.
Which is unlikely considering their obligations. I'm a bit more optimistic about SpaceX (and anthropic to a lower degree), but if free models keep improving at the same rate as frontier models, their won't be any profit from AI.
What’s the time horizon do you think for free models matching today’s SOTA on average consumer hardware? I see people building 6k+ machines to run the best of them at the moment, which are behind SOTA by maybe 6 - 12 months or so right now.
Open models lag the frontier ~3-6 months, though they're likely smaller than frontier models as well so that lag might not be fully real. Qwen 3.6 27B is very usable for average coding, and Gemma4 31b is very usable for day to day tasks.
The problem there isn't the models, it's consumer hardware. Even 16GB cards aren't the norm, and even with massive improvements in per-parameter performance we probably still need 48GB memory to get models that feel smart enough to trust.
“Average” is also doing terrible things there. The “average GPU” is probably the integrated graphics on the CPU of a laptop.
If you scoped it to “average gaming desktop”, double digit VRAM is pretty normal at this point. If costs came down, I imagine the higher end GPUs would start including enough VRAM for 30B-ish models.
> I see people building 6k+ machines to run the best of them at the moment, which are behind SOTA by maybe 6 - 12 months or so right now
SOTA in open source (frontier Kimi MOE) requires terabytes of RAM. At DDR5 prices, that's $40k alone. For HBM, higher. We're years away from consumer hardware matching the power and latency of e.g. Claude.
I don't think free/open model necessarily means local. I use open code Go for $10/mo for pet projects and deepseek v4 pro is largely comparable to my workflow at work using Claude code. Obviously this wouldn't work for someone wanting to do more than just per projects (I hit my weekly quota 5 days in, on basic usage) but I'm just saying that local doesn't have to be part of the equation
> These three companies can do great while their valuations go nowhere.
How? They're building out on debt. The investors need to offload at a profit otherwise the company can't sell more shares to acquire the cash needed (share price too low).
Sure, it's possible that a recent IPO does poorly but the company soldiers on regardless, but it's not likely.
That doesn't necessarily make it the best investment at this point in time. Especially on a short time horizon such as "a year or so" AI stocks could easily correct 50% or so. And if you think that sounds impossible then you probably don't have much experience with the stock market.
By what metric would you consider the AI market undervalued?
How do you value the AI market? Sometimes inventions change the world and companies struggle to make money. Airlines and the entire aerospace struggle to make money but no one can doubt airplanes are one of the biggest changes an inventions in human history.
The Internet brought obvious benefits to everyone. New ways to communicate, associate and do business. It was a tool of collective empowerment. It promised a more equal, dynamic society. The promises of AI are much less constructive. I can see the power being immediately funneled to the top of the pyramid while everyone else sucks it up. It's not a future I want invest in or take part of.
> The greatest tech revolution by far and people on this site are trying to movie their money away from it. I hope y'all will do an honest retrospective in a year or so.
It does not necessarily follow that it being a technological revolution also means that it is a good investment—at least, perhaps, at this point in time. Railroads were a tech revolution, but a lot of them—and their investors—went bankrupt once the hype subsided and the overbuilding stopped. Once consolidation happened after their crash then railroads became a stable investment.
There are numerous examples of this in history, starting with (at least) canals; see Perez:
Large swaths of population will be left unemployed, lives ruined, with no replacement work in sight if it all pans out. So far, every company is working with massive debt, burning through money in hope that financials will start making sense sometime in the future. Adoption rate will be next to nothing if one has to pay say 3-5k a month for a normal unthrottled access. Very few will get much richer. I know I know, rich couldn't give smaller nano-fraction of a fuck about others, and in US its kind of built in the system, but most of mankind has different values.
If all that works out. Most people including me so far don't see the promised revolution, productivity gains are meager since not all of us work in code sweatshops churning simple crud or similar apps out like there is no tomorrow, llm models are extremely unreliable, confidently hallucinating shit out of blue, their quality highly varies over time as compute is present or not.
If thats your revolution, well fuck that revolution we can do better as mankind. Its probably a change, but bearing hallmarks of the worst in mankind we could muster together and seems to bring the worst traits out of humans, ie greed.
I've been doing research on this subject for an article I'm writing, and the only way things end well if the government gets involved is if we pass legislation deprivatizing AI data centers. Like the dark fiber laid during the dotcom, the compute is the valuable thing here that will remain after the speculative bubble has burst. The deal isn't bad for the AI companies, they can depreciate on a short schedule while still getting a payout for the capex, and being able to offer tech companies compute subsidies puts the people in a stronger position than if we're subsidizing them directly.
How about because they used tax payer money to help fund them? Why should my money make AI executives & shareholders richer? And let them own the products of my tax?
The administration is funding the data centers are they not? Maybe I got bamboozled into believing fake news, let me check that real quick.
Ok couldn't find that tax payer money went specifically to it, so taking that back.
On the other hand, incentives, of other forms, and rates and agreements with the data centers that mean I pay more myself for my own electricity (happening in VA where I live) is an indirection form of taxation or I'll say still means my own need to work greater (to pay for the higher electricity) is whats supporting that data center. Or said in another way, their presence has led to a greater burden on me and others, and they haven't contributed locally in the way that satisfies me or others locally. If ascribe that to a leech/parasite: if a local leech or parasite is in my community, step one to removing it is seizing it. edit: Maybe seizing it can show that removing it isn't needed, as seizing gives a greater level of control over said parasitic entity.
Hope that answered your question better. If not, I can try again in another way.
If you work through the scenarios, we're going to end up enacting heavy protectionism and stimulus on US AI companies to keep the economy from imploding. We could do this with stock in AI companies (like Bernie is pushing), but if the government pays for that stock it becomes a dump target paying out to oligarchs and the AI companies become "too big to fail." If the government owns the data centers, the people profit even if AI underperforms.
First off, there's a fiscal hole that has to come from somewhere. If it doesn't come from AI oligarchs, it's going to come from the rich at large, or the working class. Real talk, if it comes from the working class, we're 100% going to have a revolution, life is getting unsustainable for a large swathe of normal Americans already. If working class folks feel they're getting bent over for oligarchs now, they'll steal and destroy to make the cost up.
Second, these companies have looted America by hiding income in Panama/Ireland/etc when they've earned it on the back of American protection, American consumers, etc. It would be generous of the US government to offer corporate wealth repatriation and a token payment as part of deprivatization.
> there's a fiscal hole that has to come from somewhere.
Why? If new technology is invented that enables us to do new things with fewer resources doesn’t that create wealth? It didn’t take it, it made a new thing.
You should do the math on how much AI would have to create in order to fill the hole. Spoiler: we'd need nearly the best case scenarios for AI driven global GDP growth predicted by the most bullish firms, we'd need to regress to pre-Reagan corporate tax rates AND the AI companies would need to suddenly grow a conscious and stop their tax avoiding ways.
But as so many ETFs have a significant stake in large-cap US tech stocks (the top 10 holdings of the iShares MSCI World ETF is entirely comprised US Big Tech, making up 20% of the value of the ETF), I found S&P 500 Equal Weight to be pretty attractive.
As for SpaceX itself? I feel the numbers involved all sound a bit unbelievable to me. I fear that there will be a rug-pull sometime post-IPO, and retail investors (and taxpayers, if the US Government ends up taking a stake, as they have recently indicated they might do for OpenAI) will inevitably be left holding the bag.