I completely agree. In fact, many asset classes have become increasingly crypto-like in recent years. Silver, for example, can drop 45% in two days. Even in U.S. tech stocks, the underlying microstructure of trading has become entirely driven by narratives.
When a new narrative emerges, pod shop funds pile in with leverage, pushing prices up. As the candlesticks rise, social media spreads the story, creating a positive feedback loop. When the narrative’s marginal impact starts to fade and the crowded trade unwinds, smart money rushes for the exits first, leaving leveraged investors to trample one another. This game of positioning and liquidity being drained is, especially for small- and mid-cap stocks, fundamentally no different from what happens with altcoins.
I’m optimistic about AI in the long term. If we compare the leading semiconductor companies—with the strongest long-term fundamentals—to BTC, then over a 5- or 10-year horizon, bitcoin:native really did rise from $1,000–$3,000 in early 2017 to a high of $125,000, and it’s still around $77,000 now. But the question is: how many brutal four-year cycles did it go through along the way? How much leverage got wiped out at the bottom of each cycle?
AI and semiconductors will most likely go through cycles of a similar magnitude. The scariest thing isn’t volatility itself. It’s people buying into the story that “AI is humanity’s future, backed by real earnings,” then taking on leverage at the top of the cycle that even altcoin traders wouldn’t dare touch. When the cycle bottom finally arrives and valuations and leverage get crushed, the damage caused by this “fundamentals illusion” may catch a lot of people completely unprepared.
There’s nothing wrong with being a long-term AI bull over a 5–10-year horizon, but you have to manage your position size, avoid leverage, and not go all in on individual small-cap stocks. Don’t leave yourself out of the game.
Of course, I think we should also look at the upside here. If you can time the cycles in AI stocks with reasonable accuracy, the potential returns could be huge.
These are just my personal views and may not be entirely correct. Feel free to criticize.
Quote: https://x.com/i/web/status/2116467676277088570
When a new narrative emerges, pod shop funds pile in with leverage, pushing prices up. As the candlesticks rise, social media spreads the story, creating a positive feedback loop. When the narrative’s marginal impact starts to fade and the crowded trade unwinds, smart money rushes for the exits first, leaving leveraged investors to trample one another. This game of positioning and liquidity being drained is, especially for small- and mid-cap stocks, fundamentally no different from what happens with altcoins.
I’m optimistic about AI in the long term. If we compare the leading semiconductor companies—with the strongest long-term fundamentals—to BTC, then over a 5- or 10-year horizon, bitcoin:native really did rise from $1,000–$3,000 in early 2017 to a high of $125,000, and it’s still around $77,000 now. But the question is: how many brutal four-year cycles did it go through along the way? How much leverage got wiped out at the bottom of each cycle?
AI and semiconductors will most likely go through cycles of a similar magnitude. The scariest thing isn’t volatility itself. It’s people buying into the story that “AI is humanity’s future, backed by real earnings,” then taking on leverage at the top of the cycle that even altcoin traders wouldn’t dare touch. When the cycle bottom finally arrives and valuations and leverage get crushed, the damage caused by this “fundamentals illusion” may catch a lot of people completely unprepared.
There’s nothing wrong with being a long-term AI bull over a 5–10-year horizon, but you have to manage your position size, avoid leverage, and not go all in on individual small-cap stocks. Don’t leave yourself out of the game.
Of course, I think we should also look at the upside here. If you can time the cycles in AI stocks with reasonable accuracy, the potential returns could be huge.
These are just my personal views and may not be entirely correct. Feel free to criticize.
Quote: https://x.com/i/web/status/2116467676277088570