AI bubble bursts, analysts explain "how to short it if you really want to"

Macro analyst Campbell shares a practical framework for shorting bubbles, including identifying a "wedge" that can pierce the bubble from the outside (such as rising interest rates), shorting "victims" that coexist with the bubble (such as bank stocks in 2008), and waiting for trend confirmation before going all-in. The core principle is "never fight the market trend." This article is sourced from a research piece published by Campbell on X, compiled and reorganized by PANEWS. (Previous context: Former Meta news executive investigation: Almost all AI models are politically left-leaning; Gemini once cited CCP state media) (Background supplement: eBay officially rejects GameStop's $56 billion acquisition offer: Proposal is neither credible nor attractive) Note: Recently, the US memory chip sector has become the main theme of the tech rally, with stock prices of companies like Micron Technology, SK Hynix, and SanDisk rising continuously. At the same time, the debate over whether AI has entered a bubble phase has heated up again. Market opinions are divided: Dan Niles, a well-known chip analyst during the dot-com bubble, believes that the current development of AI is closer to the mid-stage infrastructure sprint of the internet in 1997, rather than the tail end of the bubble in 1999. He points out that the rise of AI agents is driving a surge in computing power demand, and while chip stock valuations are high in the short term, they still have long-term potential. Hedge fund legend Paul Tudor Jones also expects that the AI bull market is currently about 50% to 60% complete and may continue for another one to two years. In contrast, Michael Burry, the real-life protagonist of the movie "The Big Short," has issued a warning, believing that the current market is highly similar to the eve of the dot-com bubble burst in 2000. Amidst the intertwining of mania and anxiety, and with big names holding conflicting views, if a bubble truly exists, how should we respond? The author of this article combines his own experience to share a hardcore guide on "how to short a bubble." The following is the original text of the article: Honestly, I don't know if we are in a bubble right now, and I'm not even sure if that's a knowable question. I know about as much as you do: the AI revolution is real. Although I gave up my professional investment career to go long, and have been writing about it for the past three years, I still feel like I haven't gone long enough. Like you, I look around and see many people becoming extremely wealthy just by stringing Tokens together to build AI applications (or going all-in on infrastructure projects that provide the compute to generate those Tokens), which sends shivers down my spine and makes me jealous. This then leads to a feedback loop where I can't tell if my views are being influenced by jealousy, or if jealousy is telling me a fact I already know: "Keep going long." To some extent, I do feel that "the future is here, and we need massive amounts of compute," so you would indeed want to buy these assets. I don't think software stocks are performing that well, and the market is selling off those stocks, so there's not much to gain there. Like you, I have also been watching the ultra-low valuations of Korean stocks and am interested in the opening of their market, which is clearly not unrelated to the recent stock market rise. I am also surprised by the official quiet easing of the supplementary leverage ratio (eSLR), where banks and funds are allowed to hold less regulatory capital to buy US Treasuries, which is simply a classic "big shine" in sheep's clothing. - I can imagine a day when interest rates rise enough to take away this "liquidity feast," but it's not time yet. - I can also imagine war ending this feast, where the extreme volatility there shakes me out of the uptrend, so who knows what the future holds. - I can also imagine that Canadian bank stocks with a price-to-book ratio as high as 3x and very low volatility are an excellent short opportunity, but due to the lack of trading channels and sufficiently long-term options, I can't write a good article to provide you with any solid takeaways. Frankly, there are many things I cannot say here. While this won't change my fundamental view on the trend, it does severely limit what I can talk about here. If you understand Andreesen's "stop the internal friction" theory, you will know that my cautious personality is destined to never make me a billionaire. However, there is one thing I know how to do. This is also a bit of Alpha I can give you. We are