Ed explained that the math just isn’t mathing. OpenAI, the company behind ChatGPT, needs something like $900 billion of annual subscription revenue at 25% margins just for a 10% ROI.
Nope, not going to happen.
And certainly not before their first waves of chips wear out and have to be replaced at enormous cost.
So, what happens when this bubble bursts? Ed believes that a serious market crash is in the cards. Of course, this means stocks will drop in price, but the main action is going to be in the credit markets.
Treasuries will continue to advance in price (fall in yield), making them an attractive option to ride out the storm, while other forms of lesser credit will implode, as is already happening across the subprime lender space (TriColor, PrimaLend, First Brands).
When will this happen? According to Ed, it already is.