Situational Awareness is a "hedge" fund that did the opposite of hedging - they made a bunch of leveraged bets that were all linked to each other in typical market movements. It was headed by Leopold Aschenbrenner, a guy just a couple years out of college, whose employment career had been very brief stints at the FTX crypto exchange firm (until it collapsed) and at OpenAI (until he was fired a year later over an alleged information leak). No financial management experience whatsoever. But he was into Effective Altruism, writing AI whitepapers, all that sort of stuff that Silicon Valley tech bros like, and so when he started a hedge fund, $45B was quickly pumped into it.
Nah, this isn't a sort of bubble-popping event. It's a tangential player in the stock market, not some key participant in operations or loans in the AI ecosystem. My main concern: inference IS profitable. Very. But the heavy leverage of the industry is also very real, and can very much still spread like a contagion. And a likely trigger for that is inflation, triggered by trade wars and the ongoing Hormuz and Ukraine conflicts (or worse, new ones added to the list!). One, inflation directly increases their costs, but two, it causes central banks to raise rates. This starves companies of capital (both loans and equity), incl. to refinance existing liabilities, while also hindering income (e.g. new orders get put off or cancelled). It can easily flip a leveraged company into insolvency, and then that can ripple if there's nothing to stop it.
An investment opportunity can be brilliant, a massive world-changing field with huge margins, but still be a terrible investment. One, because the companies you invest in need to survive continuously and not get blipped out by an adverse market event until they have more ability to withstand them. And two, also, because there's a problem where investors don't merely value the whole market as if it has high odds of success, but value the specific player they're invested in with high confidence as if it will dominate said market. Which, obviously, all players combined cannot do.