Brace For Impact, The AI Trade Just Hit A Wall

Submitted by QTR's Fringe Finance

Last month, I did something I almost never do: I tried to put a clock on a market crash. I wrote that I thought the AI bubble, and potentially the broader market bubble that has attached itself to AI like a remora on shark, was likely to burst somewhere between the end of this year and the beginning of 2027.

Normally, trying to time these things is a fool’s errand. You can be completely right about a bubble, completely right about the eventual outcome, and still get your face ripped off for another year while everybody collectively agrees that paying any price for anything with the letters “AI” attached to it constitutes rigorous securities analysis. But the setup now looks so insane, I decided to stick my neck out anyway.

Then, last week, I wrote about the recent Anthropic whistleblower situation and argued that the biggest risk to the AI trade might no longer be competition, valuations or even disappointing revenues. It might be regulation itself. Researchers inside the companies building these systems are publicly warning that the technology was advancing faster than they believed it could safely be controlled.

I wrote days prior that we may only get one chance to stop AI. And suddenly, last week, the idea that governments might intentionally impede AI development, something that would have sounded completely insane to investors a year ago, started looking considerably less insane.

I also wrote last week that I found it fairly sick that 24 year old “hedge fund manager” Leopold Aschenbrenner was being handed another opportunity to speculate on the same AI theme using options after his fund managed to incinerate more than $30 billion during July’s AI stock rout. As a reminder, his fund Situational Awareness had grown to roughly $45 billion before collapsing toward $10 billion, forcing the fund to unload most of its public equity portfolio.

Which brings us to this weekend, because something much more fundamental may actually be changing. And as a result, the market could wind up flying from ludicrous speed to a deadass stop, shooting investors, most of whom are not buckled up, to the front of the ship helmet first.

On Saturday, Anthropic CEO Dario Amodei publicly called for the AI industry to slow the pace at which frontier model capabilities improve. Sam Altman then publicly agreed that the industry needs to “pace the frontier” and said the issue has become a major topic of discussion inside OpenAI. Even more interestingly, Altman suggested that leading AI companies may be getting close to announcing some kind of coordinated arrangement around slowing development and addressing safety risks.