“Weighing on the stock market is widespread uncertainty about the impact of AI infrastructure spending on the earnings of the AI data center corporations. Nvidia’s strong report didn’t do much to resolve the known unknowns about AI spending,” Ed Yardeni of Yardeni Research told clients. “Also unnerving investors are recent reports that Softbank and Thiel Macro sold all their Nvidia shares. Michael Burry (the ‘Big Short’) continues to raise doubts about the accounting practices of the major AI companies.”
The icy AI atmosphere was set by a note from ING published November 19, titled, “AI’s habit of making stuff up is a growing concern.” Analyst Julian Geib said the “leading AI systems generate false claims at a rate of up to 40%.” The number of errors committed by AI is increasing, he adds: “While older models refused to answer almost 40% of queries, newer models are designed to answer virtually every request. … this shift from accuracy to fluency poses serious misinformation risks.”
“The latest crypto convulsions would constitute hyperinflation, if crypto were a currency. Annualizing Bitcoin’s recent spending power collapse is equivalent to roughly 800% inflation,” UBS’s Paul Donovan told clients this morning in a note that took an unusually harsh line against crypto.
“When crypto demand collapses, there is no possibility of reducing crypto supply to bring about balance. … Money supply needs to fall when money demand falls—if it cannot, hyperinflation will be a regular risk. Hyperinflation is why crypto cannot be a currency,” he said.
Here’s a snapshot of the markets ahead of the opening bell in New York this morning:
