""So the way I like to think about it is: Is there going to be an AI wobble at some point? Are investors going to be concerned about how those CapEx dollars are being invested? Right now, he continued, alluding to a famous game theory scenario, "there's a little bit of a prisoner's dilemma, let's call it, among the larger firms. You have to invest in it because your peers are investing in it, and so if you're left behind you're not going to have the stronger competitive position to it.""
"The investor continued by comparing today's heavy concentration-where 10 stocks wield 40% of the S&P 500's weight-to historic bubbles like the "Nifty Fifty" of the early 1970s and the dot-com surge at the millennium. He warned that in those eras, investors waited as long as 15 years just to recover losses after valuations cracked."
Circular financing in the AI ecosystem creates a prisoner's dilemma where firms feel compelled to invest to avoid competitive disadvantage, raising concerns about capital allocation and potential returns. Extreme market concentration—around 10 stocks comprising roughly 40% of the S&P 500's weight—echoes past bubbles such as the Nifty Fifty and the dot‑com era, which required up to 15 years for valuation recovery after cracks. A large high‑profile short position against major AI companies intensified market jitters, and bullish earnings from a leading AI‑data firm failed to prevent a sharp, tech‑led selloff, underscoring heightened vulnerability.
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