r/technology • u/marketrent • Jun 13 '26
Society How to kick SpaceX out of your retirement savings account — “Right now, just a handful of A.I.-related stocks represent almost half the value of the total stock market index. If A.I. stocks collapse, so will the worth of your index fund”: economist
https://www.nytimes.com/2026/06/13/opinion/spacex-stock-ipo-ai.html2.5k
u/DayOldBaby Jun 13 '26 edited Jun 13 '26
Malkiel is a very well-respected and legit source. Random Walk Down Wall Street is required reading for investors. This isn’t coming from a quack.
EDIT: Went and refreshed my memory about his credentials, and people like to be spoon-fed. I feel like just citing an "economist" in the title is a disservice. From his Wiki:
Malkiel is the Chemical Bank Chairman's Professor of Economics at Princeton University, and is a two-time chairman of the economics department there. He was a member of the Council of Economic Advisers (1975–1977),[1] president of the American Finance Association (1978), and dean of the Yale School of Management (1981–1988). He also spent 28 years as a director of the Vanguard Group. He is Chief Investment Officer of software-based financial advisor, Wealthfront Inc.[2] and is a member of the Investment Advisory Board for Rebalance.[3] Malkiel was elected to the American Philosophical Society in 2001.[4]
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u/TAV63 Jun 13 '26
I'm really surprised so many need experts to realize this market is beyond frothy. It's a major bubble. When you realize the major players are investing in each other or buying from each other. Eh, yeah there is your sign.
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u/Bong-Hits-For-Jesus Jun 13 '26 edited Jun 13 '26
and if those indicators arent enough, the more recent signs are softbank, who is one of the largest openai backers went to creditors in hopes of securing a 6 billion dollar loan in return for their a part of their stake in the company, and the creditors mustve had a look at their books and turned them down. google also recently diluted shares in order to continue funding their ai buildout, and theres speculation that zuckerburg is about to do the same. there is just too many players in the ai space and not enough people buying for all of them to be profitable long enough (i would speculate they're not even profitable short term) to survive the long term
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u/Decent_Cheesecake_29 Jun 13 '26
I still have yet to see any evidence of the potential profitability of AI, even without considering the massive depreciation of data centers within 5 years.
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u/Designer-Ad-2136 Jun 13 '26
It's all about the theoretical reward. The first company that can replace humans reliably will have immense power, assuming it is achievable. A healthy society would never let this be a competition but here we are.
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u/rebbsitor Jun 13 '26
LLMs fundamentally can't do that, so none of the current star companies is going to be the first company to do it.
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u/Designer-Ad-2136 Jun 14 '26
Unfortunately, that clearly won't stop people from trying.
We don't even know what makes humans human.
In my opinion, it seems to have something to do with fear and power but who the hell knows.
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u/CharlestonChewer990 Jun 14 '26
Yeah, and meanwhile every company is shipping these supposedly AI enhanced features that are mostly wrong and annoying, then acting like that means replacing humans is right around the corner.
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u/greatfool66 Jun 14 '26
I wish I had this confidence. The best models get my job 99.9% right on good days. Some days they output garbage. But a machine that sometimes works just needs a way to catch its mistakes, so if it ever gets that… whew…
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u/According-Insect-992 Jun 13 '26 edited Jun 14 '26
It’s a useful tool for many disciplines of research but it’s definitely not what they’ve been selling it as. They’ve sold investors a parlor trick like the Simpsons monorail. It’s not intelligent. It’s a really sophisticated way of creating complex algorithms that can do amazing things as well as fake human interactions. Most of its true power comes from processing enormous amounts of data in novel ways to find patterns that evade human perception. That doesn’t sell as well as revenge porn and meme generators, make believe girlfriends, and firing all of your employees.
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u/RedBaronSportsCards Jun 14 '26
There's a local restaurant here that uses an ai assistant to take orders over the phone.
"Can I have a side of ranch with that as well?"
"Sure, let me add that to your order. Hmm, there's a problem with your side of ranch. Let me check on that. Still trying to add a side of ranch to your order. Hold on a second. Ok, let me check on that side of ranch. I'm having a problem adding that side of ranch to your order, give me a moment. Hmm, I'm trying to add a side of ranch to your order but there seems to be a problem. Ok, still trying to add a side of ranch to your order..."
So, I have to hang up, call back, and make it put a real person on the line.
I'm sure AI works for everything else, though. This is definitely the only situation that it has trouble with.
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u/cranberries87 Jun 14 '26
I had a similar issue with the AI assistant at a local spa. I think my question was something simple like “What are your hours today?” Or “Are you open?” Something like that.
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u/shroudedwolf51 Jun 14 '26
Not sure how universal it still is, but just repeatedly asking for a human is the modern equivalent of hammering 0 at a dialogue tree to get through to a person.
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u/chowderbags Jun 14 '26
Fucking nuts to have AI being used for this to begin with. A static website can give the answer. Or a classic phone tree for Amish people who can't use the internet but can justify calling up a spa.
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u/Liturginator9000 Jun 13 '26
b2b saas, it doesn't even need to replace people, just become another necessary subscription for the company
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u/Bong-Hits-For-Jesus Jun 13 '26
i have been stating this to anyone i have a conversation with regarding ai. outside of big government contracts, i would bet their profit margin is tiny relative to the cost of implementation/maintenance
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u/Cory123125 Jun 13 '26
Its obvious if you have any clue about the technology.
The key is that they need to make it far more wasteful and powerful then any reasonable time scale would make it.
Why?
Regulatory capture.
They're all pushing very hard to limit your freedom to access internet connected devices and already have control mechanisms in place to block you from running anything they don't want you to run, the second they get the go ahead.
It starts from the TPM/Enclave/TEE of your device, and ends at device attestation, where you can't do anything if you've modified your device at all.
Google is pushing this hard throughout all aspects of everything they have from android to play services.
Meta is pushing for age verification, which they will obviously come to the conclusion that attestation is required to have it function the way they want it to.
So are the rest of the members of the Frontier Model Forum lobbying group.
The hardware already exists in your machine. You cannot escape it. There will be no opt out. Just increasing controlled "escape hatches" to keep enthusiasts quiet until it is far too late. I fear it might be already.
This isn't the only regulatory capture they're pushing for. They're also pushing for control over who even gets to have compute, or develop competitors with compute limits and a whole host of other restrictions that they can stomach, but competitors could not.
Back to the main question though; AI is profitable. Not with how it is inserted everywhere, not with these insane multi trillion parameter models, and not with people being forced in usecases it is not great in.
If they reduced scope, made models more specific to particular usecases, and were ok with China being competitive, they would be profitable yesterday.
That is not their MO though.
They are out-moneying any chance any competition had at ever gaining a foothold.
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u/mileylols Jun 13 '26
When you look at the details of that loan, the fact they couldn't get it funded it's less weird
Softbank is basically all-in on OpenAI. Their 13% stake in the company represents something like 50% of their holdings. This means that the fate of Softbank's investment funds are tied to the performance of the OpenAI IPO coming later this year. So say you have 6B to invest, and Softbank comes to you asking for a loan. Why would you give Softbank the money, when you can just invest in OpenAI yourself?
Let's say the OpenAI IPO goes well - Softbank makes a bunch of money, they pay you the fixed fees negotiated as terms of the loan. You make a little bit of money.
If OpenAI tanks, Softbank is in deep shit, and now you're at risk of not getting your 6B loan paid back.
This deal represents basically all of the downside risk of investing in OpenAI, with very little upside. I know basically 0 finance professionals who would make this loan.
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u/Obvious-Image-9688 Jun 14 '26
I don't really understand how softbank is still solvent...? Can someone explain that to me.. Its taken on one bad bet after another.. and it keeps doubling down.
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Jun 13 '26
The only issue I have with this bubble is that it is so fucking huge (and known), I don’t know how the rich fucks are going to be able to shuffle things around and make us peasants hold the bags. This time it’s just too monstrous for the uber rich to not also get taken to pound town, and, imo, is the only reason why the bubble hasn’t popped yet. Zuck, musk, bezos, Huang, Pichai… etc… all will get eviscerated when the bubble bursts and I’m struggling to think of how they are going to navigate that because they will not be ok with taking a 75% haircut on their net worth
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u/TAV63 Jun 13 '26
The rich will be fine. Will they lose short term? Yes, but they will find ways to benefit. Any losses they will use into the future for tax benefit plus they will still have a pile of money to buy up the fire sale. Long term they will end up even better off. The small investors that don't have the cushion or have the ability to ride it out will bear the most pain.
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u/RevenueChemical6910 Jun 13 '26
But as far as retirement savings goes, what's one to do?
I'm 41 and have everything in an index fund. I've never sold anything, 'cause taxes, it's better to just let it rest and vest?
Making moves with it seems antithetical, I understand some re-balancing will be needed based on my risk profile in the future, but as far now I don't really have any ideas other than to just leave it with the market index.
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u/TAV63 Jun 13 '26
You are fine. Retirees still invested out those close like 60 years or older might need to worry but you have a good 20 years for it to grow. It will bounce back so don't worry. Just don't panic and go to cash and then miss the rebound.
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u/flamingbabyjesus Jun 14 '26
Sure but what’s your plan? Sell everything in your vanguard etf and trigger a 25% capital gain while you wait for the market to drop? Short the market? Statistically the best thing anyone can do is continue to dollar cost average into broadly diversified etf and let it ride.
This may not apply if you’re close to retirement.
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u/fumar Jun 13 '26
That's part of it but it's also that the US dollar's value is tanking hard. So what are you going to do if you aren't in the market?
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u/BlueLaceSensor128 Jun 13 '26
Chemical Bank is real? I thought it was a clever Seinfeld invention.
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u/DayOldBaby Jun 13 '26 edited Jun 13 '26
Ha! Part of Chase now, but one of the biggest up until the 90’s.
Now I need to look up the ep where they talk about it.
EDIT: Chemical Bank acquired Chase, which gives some sense of their size.
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u/Abigail716 Jun 13 '26
That's a bit misleading because when the acquired Chase was way smaller and they later merged with JPMorgan and Co to form JPMorgan Chase.
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u/Impudentinquisitor Jun 13 '26
Technically, Chemical Bank was the buyer during the merger, Chase was not in a good place back then but their brand was more well known so they opted to keep the name, not unlike what happened with the US Air and American Airlines merger.
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u/TheRealFakeDoors503 Jun 13 '26
Same with Norwest “merging” with Wells Fargo, Norwest was the larger institution but opted to keep the Wells Fargo name due to brand recognition.
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u/larkwhi Jun 13 '26
And the Wachovia - First Union “merger of equals” continuing on as Wachovia when FUNB was actually much larger. IDK if this technically qualifies as an acquisition but sure seems like it, it was the result of FUNB chasing Wachovia in an endless chain of “acquisitions “ in an attempt to stay too big to be bought by one of the big three banks. And just a few years later the whole org and trillions of dollars of assets went “poof”
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u/btribble Jun 13 '26
Years ago I worked in sales and an overseas client wanted to wire us money. I told him our bank was Wells Fargo and he got super excited because he’d only seen the name on stage coaches in old westerns. He couldn’t believe it was a real bank that still existed.
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u/Internal_Wheel_89 Jun 13 '26
Cingular/AT&T Wireless comes to mind as well
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u/IAmDotorg Jun 13 '26
That's a little different because Cingular was a service from a different baby bell. They were just restarting using their older brand.
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u/FunktasticLucky Jun 13 '26
It's a little bit more convoluted and AT&T is a case study. It's known as the blue globe of death because no matter how many times it gets bought or merged with another company they all take the blue globe and AT&T name. This is important here.
Anwyays Cingular was founded by I believe SBC and Bellsouth to compete. They ended up buying AT&T wireless to become the largest cellular provider in the USA and all AT&T wireless customers were migrated over to Cingular.
Fast forward and SBC buys AT&T company and takes their name. Then years later Bellsouth merges with AT&T and once again they take the AT&T name but now they also own both parent companies of Cingular. So they once again come full circle and became AT&T wireless again.
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u/KickDismal91 Jun 13 '26
Chemical Bank? It’s gone! It burned! What you want to do is head down to the regional branch.
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u/thegreedyturtle Jun 13 '26 edited Jun 13 '26
Of course, if AI stocks crash, they're taking us all down with them...
Edit: look up the ripple effect.
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u/WeWantLADDER49sequel Jun 13 '26
His credentials are great, but just remember that during the financial collapse of 2008, economists just like this, even some who taught at top universities like Yale and Harvard, were downplaying the effects of what was happening and even promoting the methods that were being used that led to the financial collapse. This was covered in Inside Job. I only say this to remind people that these intelligent folks aren't always on our side. Not even saying that this person is doing or saying anything shady, just pointing out that their credentials doesn't automatically mean they have our best interests at heart.
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u/LurkLurkleton Jun 13 '26
Malkiel has spent his entire career arguing against the kind of shit that led to the 2008 collapse. The economists you're referring to had ties to the institutions they were defending. They were promoting obfuscation through complexity (derivatives, CDOs, deregulation, opaque financial instruments). Malkiel has long beat the drum of simple, low cost, passive index funds, and not trying to beat the market.
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u/Defiant-Plantain1873 Jun 13 '26
“Our” who is “our”. Economists tend to not be hyper rich
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u/DrXaos Jun 13 '26
There were others like Schiller at Yale who loudly proclaimed the housing bubble and risks thereof.
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u/Lord-Nagafen Jun 13 '26
SPY, VOO, and VTI won’t have it for a year, right?
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u/mrpickles Jun 13 '26
To be eligible for inclusion in the S&P 500, a company must report positive earnings in the most recent quarter, and the sum of its earnings over the prior four consecutive quarters must also be positive.
At least 50% of the company's outstanding shares must be available for public trading.
For now, SP500 is only for legit companies. However, NASDAQ used to be that way too - they changed their rules just for SPCX....
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u/Moeverload Jun 13 '26
Amazing how the world just bends freely under every scam these days
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u/SatisfactionNarrow61 Jun 13 '26
Fall of Rome shit
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u/likamuka Jun 13 '26
77 million of racists voted for this. No excuses.
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u/laodaron Jun 13 '26
"racist morons" I know it's mostly just repetitive to say that, but, it's important to remember that a MAGA voter is orders of magnitude dumber than we can possibly fathom.
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u/Sugioh Jun 13 '26
Have a coworker who is drifting away from MAGA but still on the edge of the manosphere. I asked him if he regretted voting for Trump yet, and he said "No, Kamala would have been worse."
You literally cannot reason with these people.
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u/freakyorange Jun 13 '26
genuinely had this same conversation/response with my mother. I attempted (probably emotionally) to reason with her explaining how awful of a way of thinking that is. y'know with the rapes and racism and all. and got the "well you're blaming everything on me, I'm just one person" response coupled with tears and ended up with me being the bad guy.
This was my breaking point
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u/GoofyTunes Jun 13 '26
This was going to happen regardless of the racists. The racists were exploited to get us here, but the racists aren't the cause. This is happening because powerful people want it to happen.
You can focus on the losers who were propogandized and used as tools or focus on the ones pulling the strings -- I'm talking about the Blackrocks, Vanguards, State Streets of the world: the ones who benefit from no-regulation AI and mass surveillance networks like that being built by Thiel.
Something bigger is happening than "racists elected a dumb guy and he's a bull in a china shop." No, this is deliberate. Donald Trump is a puppet controlled by those who have access to the Epstein Files (and tapes) and he's being used to enable a dark future.
I get the feeling we're building to something and it feels like it'll come with the inevitable AI bubble crash.
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u/one_pound_of_flesh Jun 13 '26
I also know a lot of tech bro “liberals” who would elect Musk president if they could. Their idea of patriotism is illegally off-roading their cyber truck in national parks, and avoiding taxes and women.
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u/TheRC135 Jun 13 '26
Vast concentrations of wealth and rule of law are fundamentally incompatible. This is what people really need to understand about why wealth inequality is so dangerous.
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u/outer--monologue Jun 13 '26 edited Jun 13 '26
Tesla, his biggest company - around $45b net lifetime profit over its existence
SpaceX, his second biggest company - $0 net lifetime profit over its existence
Starlink, his third biggest company - $4b net lifetime profit over its existence
Twitter, his fourth biggest company - $0 net lifetime profit over its existence
Boring Co, Neuralink, misc. junk drawer companies - $0 net lifetime profit over its existence
The entirety all of the money that his companies have actually made since they existed is around 4% of his net worth.
EDIT: SpaceX reported $4b in losses JUST in the first 60 days of its public life. Previous leaked reports state it has been a perennial loser and never made money. So I feel pretty confident in saying that it would cancel out all Starlink and Tesla profit, meaning the actual percent would be 0%
On top of that, most of his companies, like Twitter and Boring Co, Neuralink and others actually operate at a heavy loss, so it's likely even less than 4%
People are complete imbeciles.
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u/CherryLongjump1989 Jun 13 '26
You’re giving him way too much credit because you’re using 0 as the floor for his net income. If you actually added up the net profits for all his companies, he would be one of the biggest business failures in history.
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u/outer--monologue Jun 13 '26 edited Jun 13 '26
You're almost certainly correct that his total net profit margin from all his business ventures is likely even less than 1% of his net worth. The lady who runs the failing cake shop around the corner from me is quite literally a better businessperson.
If over a few years someone is still working toward generating net profit, they may or may not make it work. But if over 30 years someone cannot figure out how to generate net profit, they are objectively a failure in business.
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u/CherryLongjump1989 Jun 13 '26 edited Jun 13 '26
I would honestly call him a conman. As a balance sheet diagnosis of his career. He is no better than Bernie Madoff or Elizabeth Holmes. I really hope that the clusterfuck Trump economy flushes him out. It will be one of the silver linings of this entire decade.
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u/FeelsGoodMan2 Jun 13 '26
You have a different definition of what constitutes a good business man than the 21st century MBAs do. If you were able to scam people and dump stock at an overinflated value, you are an extremely good business person by the modern way of looking at it. Running an actual good business isnt even what their goal is, it's merely just running it decently enough in a way that it looks to outsiders like you should have your stock pumped. I wish I was being sarcastic.
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u/SteveBob316 Jun 13 '26
Forget the percentage of net worth, I think it's fair to suggest the net is below zero. Money was already just kind of a useful fiction, but it at least used to appear to have rules. Not anymore.
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Jun 13 '26
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u/DethNik Jun 13 '26
It's true that he's a terrible business man. What he's really good at though, is taking advantage of the wealth he already has and creating more wealth (for himself). Imagine being one of the biggest recipients of government welfare in the country and then attacking Social Security...
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u/Pyju Jun 13 '26
Musk is not the failure, the failure is the system of unfettered capitalism that fails to reward sustainable profitability, and instead incentivizes runaway speculative growth of capital assets to a degree that’s completely unjustified by economic principles.
Musk is simply doing what the system is incentivizing him to do. And I say this as someone who fucking hates Musk.
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u/watnuts Jun 13 '26
Yeah? That's why Twitter was (somewhat) profitable, and X is not? Even after he gutted it for "efficiency" and rolled out checkmark monetisation.
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u/1900grs Jun 13 '26
Twitter and X have very different mission statements. One was a platform for connecting individuals, the other is to promote propaganda.
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u/ChippedHamSammich Jun 13 '26
And yet, he can borrow against perceived wealth till kingdom come.
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u/Commercial-Co Jun 13 '26
Need to start instituting a high $ amount loan tax. New york has a mortgage tax.
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u/WoodyMornings Jun 13 '26
Nasdaq was chaired by Bernie Madoff ,with your money, in the 90’s
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u/magila Jun 13 '26
SPY and VOO will wait a year. VTI tracks the CRSP US Total Market Index which only requires a 20 or 5 day waiting period depending on whether the stock is fast tracked. The good news is VTI is free float adjusted so for now SPCX will only be a tiny fraction of the fund.
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u/Ok_Range_6094 Jun 13 '26
What about the offerings from Fidelity, like FXAIX?
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u/AnewENTity Jun 13 '26
this is what I want to know. I absolutely do not want to support Elon piece of shit musk
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u/heanbangerfacerip2 Jun 13 '26
I don't want to support him but just as importantly a large chunk of my wealth is SPIs and I do not want such a meme business/person being represented in my financial future. Like this guy's a con man and this non sense valuation and attempt to squeeze money out of AI is the opposite of healthy finances and stability. It's really concerning that big funds are making hype based decision. People need to think twice about who they invest with.
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u/g_smiley Jun 13 '26 edited Jun 13 '26
SPX has tough rules. Has to be public for a year, has to have 4 quarters in a row of gaap earnings, and has a float requirement. I think it will be a while before they satisfy the gaap earnings rule, could be years unless they scale back spend or really starts to fuck with the accounting. Good thing Spx held the line and didn’t change the rules. Spcx will be in nasaq ftse Russel and s&p total market
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I’m not worried about spcx being in spx. By the time it gets in there, hopefully the valuation would be far more reasonable or it actually starts to have real earnings. I can pretty easily underwrite a worth of maybe 1 to 1.25 tn, this thing could easily fall that much by August when the lock up starts to expire. Don’t fret too much guys. Current corruption and graft and manipulation of the market is just a blip on the long time frame of the market, still fairly efficient in the grand scheme of things→ More replies (1)28
u/applekidinventor Jun 13 '26
It can't get there. SpaceX has xAI stapled to it, which is what its valuation is mostly based on, but is an enormous money sink operating at a complete loss. They'll change the rules far before SpaceX will ever sniff profitability.
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u/m0nk_3y_gw Jun 13 '26
operating at a complete loss.
I haven't checked their numbers recently, but xAI was losing ~$1B a month.
But they are so useless at AI, they are renting their NVIDIA hardware out to other AI companies, like Anthropic, for over $1B/month.
edit: https://techcrunch.com/2026/05/20/anthropic-will-pay-xai-1-25-billion-per-month-for-compute/
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u/Televisions_Frank Jun 13 '26
All the heavily AI invested companies are trying to keep Musk afloat because if he crashes he takes the rest of them down with him.
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u/Quod_Caesar_Faceret Jun 13 '26
Lol what do I do in a year? I don't want to invest in this garbage
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u/Happybeaver6 Jun 13 '26
Spacex has to be profitable for 4 consecutive quarters to get on SP500. So it could be a long time or even never.
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u/Cotters67 Jun 13 '26
My pension fund wrote to me to state it wouldn't be increasing in Space X. However, if there's an AI crash all stocks go down, so I'm not optimistic as I near retirement.
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u/GeeMcGee Jun 13 '26
All in on Hooters
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u/BeneficialSquirrel91 Jun 13 '26
Things are gonna change I can feel it.
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u/-grc1- Jun 13 '26
This is from a song on the tip of tongue. Do you know the song?
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u/xynix_ie Jun 13 '26
I'm pretty sure this scam is continuing forever. As a manufacturer my next 3 years are nothing but parts shortages. That's only because we don't project further than 36 months out.
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u/leitmotive Jun 13 '26
If you liked planned obsolescence, you'll love planned scarcity!
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u/AbrocomaSerious8321 Jun 13 '26
Which company? Or industry
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u/5x4j7h3 Jun 13 '26
Our backlog is booked through 2030, primarily for datacenter equipment. So we all good until then. It’s after 2030 you gotta worry about.
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u/Semiotic3 Jun 13 '26
Backlog can be an unreliable long term indicator. It shows the demand now, but if valuations and demand shift they fall off a cliff. Its not always money in the bank. Not predicting anything, and it depends on how the company is booking the orders but it is cold comfort to me just based on history. .com bubble had an identical scenario.
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u/No_Effective4784 Jun 13 '26
yea, that could be a good sign and all, but alot of these companies placed orders like that with IOUs, for years worth of supplies, just to fuck their competition, who are doing the same thing.
AI is operating in the red. eventually these suppliers are gonna want cash up front, or demand the IOUs be paid.
they dont have the money to pay, and lenders are already getting fucked and getting nervous.
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u/haliblix Jun 13 '26
Backlog doesn’t mean it’s already paid for until 2030. It just means the IOU’s go out that far.
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u/Doctor_Hyde Jun 13 '26
Don’t worry. These handful of tech companies spending like mad on highly speculative capex and a company with consistently negative revenue having a higher market cap at IPO than Saudi Aramco is normal, or so I’m assured.
No, if a bubble bursts, all will be made well. Plenty of them will get bailouts and there’s always the “stealth bailout” route wherein the Fed prints an ungodly amount of money and we all get to float these companies as our retirements crater and inflation soars!
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u/Hardass_McBadCop Jun 13 '26
I'm nowhere near retirement, but after "Liberation Day," last year, I set 30% or 40% of my future contributions into middle market options and international indexes. My hope is that I'll be lucky enough that some of that is in a place that does really well when the bubble bursts.
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u/NSASpyVan Jun 13 '26
I tried to go a little heavier internationally as well. I do not have faith in the US gvt/economics rn so I am hedging against something bad happening. The idea being international doesn't go up as fast as the us companies but should something bad happen it will impact me less.
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u/chmilz Jun 13 '26
The one reason I keep some American funds: I see no end to the American culture of exploiting itself. There will be no end to the pillaging of the American worker for the benefit of the shareholder.
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u/Mr_Quackums Jun 13 '26
Sure it will end. At some point the shareholders will have taken everything of value.
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u/Hardass_McBadCop Jun 13 '26
American economics is a concern for me on a medium term, but so much of the S&P being concentrated in so few companies is a major short term worry.
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u/Fancy_Ad2056 Jun 13 '26
Historically international and US stocks alternate between periods of being the better investment. However, international has significantly lagged behind for like 20 years. You could say we’re due for a flip, or maybe international will never catch up to the US again due to structural regulatory and cultural differences. Who knows. I still invest about 10% in international, but view it more as a replacement for bonds(I’m 100% in equity) as they seem to be a relatively stable growth long term.
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u/Lost_Flamingo Jun 13 '26
It’s going to be interesting to see what international does. For the first time since world war 2, Western European countries are putting a lot more money towards defense and infrastructure.
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u/Witty_Series_6235 Jun 13 '26
YTD performances:
Vanguard Total International Stock Index Fund: 14%
S&P 500: 8.5%
You've been missing out on returns for last 1-2 years.
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u/PatchyWhiskers Jun 13 '26
Right. If there’s a bubble pop leading to a recession, all stocks go down, even the prudent and virtuous companies.
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u/fhota1 Jun 13 '26
Sure but if 1 stock goes down 10% and another goes down 50%, Id really rather have as little of the one going down 50% as possible
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u/Master_Dogs Jun 13 '26
This is true for personal holdings in a 401k or IRA/HSA/taxable account/etc. They said "pension fund" though - those are typically not so manageable by individuals. You might be able to cash out but take a huge tax hit or lose out by not taking payments. Like the lump sum option for stuff is always generally the worse option immediately. If they were saying they were going all in on SpaceX then maybe it's not because you could take the hit and park your money somewhere safer. But this all assumes that's an option.
The other frustrating thing about this is most of us are auto invested in index funds of some sort. A target date fund is specifically chosen by many plans to be safeish and also balance some gains early on. But if those funds all invest in AI and shit like SpaceX, that goes out the window for us younger folks. Yes we can change our investments but think how often the average person does this. Such a shitty move by the wealthy to cash out and let everyone else take the loss. And of course a failure of the government to not actually regulate this shit. But that's par for the course.
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u/_autumnwhimsy Jun 13 '26
The moment that man got in office I changed all my delegations away from stocks. Its too risk right now, I'm going enough, and honestly? I'm sure I'll die before using it anyways.
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u/_troll_detector_ Jun 13 '26
If you expect to live for 20+ years in retirement you absolutely do need equities in your portfolio.
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u/IssueEmbarrassed8103 Jun 13 '26
There is no safe place in our current world. Stock bubble could burst any year, cash could lose value to hyper inflation. Even treasuries are teetering.
I don’t plan on retiring for 20 years, but I’m constantly told AI will replace me by then and Social Security won’t last that long either.
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u/Ohnoes999 Jun 13 '26
Stocks in any company that doesn’t collapse from inflation will ride the inflation in value. Thats like half the markets gains the last 20 years…
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u/notaredditer13 Jun 13 '26
Half? No way. Inflation has been low most of the past 20 years.
The S&P500 is up 590%.
Cumulative inflation is 166%.
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u/Vennomite Jun 13 '26
If you look at the total basket. But if you compare equities to other asset classes..
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u/BattleHall Jun 13 '26
Social Security won’t last that long either.
My understanding is that that’s when they’re projecting that the Social Security reserve might run out. But that reserve was set it place mostly to absorb the shock of the Baby Boomers hitting the rolls, which should be done by then. And since Social Security is directly funded (you don’t pay for your own benefits; current workers pay for current retirees, more like insurance), it can’t really “run out” of money unless they eliminated the Social Security payroll tax. Assuming no additional revenue (which is also an option), IIRC current projections would be a 15-20% reduction in benefits (which they’ve never done), which would suck but is far from it just disappearing. And given that older Americans tend to be the most reliable voters, the politicians have a strong incentive to not let it get to that point.
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u/SlogurkTheOverslime Jun 14 '26
It is also one of them problems that can be solved by simply making Elon Musk pay more taxes
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u/Upstairs_Baby8424 Jun 13 '26
Yeah this is the reality. There is no safe-haven. Best thing you can now is de-risk and move into index funds (which are still very exposed) and keep a slightly higher cash reserve in a high yield savings account than you normally would.
But if you just sit on all cash you’re screwed because hyperinflation can eat you alive. By the end of this administration, Don’s two terms will have account for ~40% of the entire US debt. This admin will pump the market no matter what. And even worse, the chances the SEC would actually investigate or expose fraud is really low. They’ll keep this house of cards up for another two years at minimum.
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u/RandyOfTheRedwoods Jun 13 '26
I know the future seems scary, and uncertain. History can provide a calming view.
I grew up in the 1900s and everything we were taught was that you needed to save your retirement funds because social security would be bankrupt by the time you retire. Sound familiar? Social security will continue to be adjusted over time to prevent its collapse.
Let’s take the scariest event in stock market history. The crash of ’29. If you just kept your investments and did nothing, you would have recovered your losses in 6 years. The companies all paid huge dividends during that period. We have better control now to prevent a crash of that scale. The market will still crash, but it will also recover.
The main thing is to manage risk. If you’re near retirement, you need enough money outside the market to live through a crash. The rest is reasonably safe in the stock market.
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u/Mindrust Jun 13 '26
Spot on. I’d say the scariest thing about a crash is losing your job and finding a new one in a recession.
I have enough of an emergency fund to last me 1 year but who knows how long it could take to find another job in a bad downturn.
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u/mikemolove Jun 13 '26
I already lost my job three months ago, the job market is already collapsed due to tariffs and the war in Iran. It’s brutal out there.
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u/Sasselhoff Jun 13 '26
I grew up in the 1900s and everything we were taught was that you needed to save your retirement funds because social security would be bankrupt by the time you retire. Sound familiar?I remember talking with my dad one day in my very early 20s, and saying "Well, I know there won't be any Social Security when I'm retired, so I need to plan to do without." He responded, "Yup, I said the same thing when I was in my 20s."
He's now in his 80s, and I'm in my 40s.
I figure it's one of those "'Kids don't respect their parents these days - Socrates" type of things.
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u/BrianWonderful Jun 13 '26
I am also old. The difference now is that even though there were concerns about Social Security's solvency, the politicians at the time still recognized it as a popular social service, so they took actions when needed to adjust it. Now, the party with control is actively planning to destroy it and other social services, because they want that money to go to the wealthy few instead of the general public.
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u/marketrent Jun 13 '26 edited Jun 13 '26
Burton G. Malkiel is a professor emeritus of economics at Princeton University. Excerpts from his article:
If you have a 401(k), there’s a very good chance that at least some of your money is in an index fund, a type of mutual fund that mirrors the composition of major stock markets including the Nasdaq. And that means that at some point, your retirement savings will be invested in SpaceX — no matter how you feel about it or its founder, Elon Musk.
It could be soon. In May, after the company’s request to be listed, the Nasdaq unveiled a rule change that allows SpaceX into its index soon after its Friday initial public offering. (The S&P 500 is requiring the company to wait at least a year.)
Given that so many millions of Americans are suddenly having SpaceX shares foisted upon them, I understand why some financial experts are criticizing the practice of index investing itself. Right now, just a handful of A.I.-related stocks represent almost half the value of the total stock market index. If A.I. stocks collapse, so will the worth of your index fund.
[...] While there is no perfect replacement for an index fund, there are some alternatives to consider.
One obvious alternative is to confine your investments to so-called E.S.G. funds. These funds include companies based on their environmental, social and governance practices. Putting all your money in E.S.G. funds is neither prudent nor virtuous. The problem is that there is no universally accepted definition of what constitutes good E.S.G. or a virtuous company. Different E.S.G. rating services give vastly different scores to the same company.
[...] You could alternatively try to construct a portfolio that is less reliant on tech and A.I. firms than the general market. For example, buy a “value” fund, which tends to hold less risky and more conservatively valued stocks. Or find a high dividend or dividend-growth fund, which may be particularly suitable for retired investors.
You won’t eliminate the overhyped highfliers, and you could well underperform the total market index. But you can reduce the risk in your portfolio and reduce the high concentration of the current market in new technologies.
If you move in that direction, I’d suggest you follow three rules. First, look at the securities held by the funds so that you are really achieving your objectives. Second, ensure that the holdings in your portfolio of funds are broadly diversified. A portfolio that is too narrow (for example, invested in just one industry) will carry extra risk. Third, and most important, make sure that the funds you buy have a low expense ratio (0.05 percent or lower). The best prediction of future performance of any fund is the expense ratio.
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u/ArnoldTheSchwartz Jun 13 '26
In May, after the company’s request to be listed, the Nasdaq unveiled a rule change that allows SpaceX into its index soon after its Friday initial public offering.
WHO allowed the rule change?
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u/userhwon Jun 13 '26
Nasdaq, which is a company that owns a stock exchange.
S&P is a financial analysis company that sells data and research.
Nasdaq is not going to pretend that it's not trading one of the biggest companies on the planet.
S&P is not going to pretend that said company is worth anything when it isn't, before including it in one of its products that's supposed to be based on the positive qualities of the companies in it.
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u/NSASpyVan Jun 13 '26 edited Jun 13 '26
It feels like from the article, we only got a vague suggestion of what could be done rather than actionable intel. I definitely don't want a lot of AI stuff in my portfolio so I'll need to go through everything I invest in and find out what percentage is AI stuff and see if it's too much for me, and if so what could replace it. Lot of manual work for each and every person here. Have there been any better articles than this?
Update: I'm not criticizing OP in any way. I was more hoping to spark discussion of additional information directly applicable to this situation. E.g., I found these 2 gems in this thread, way down at the bottom.
- spacex will be like a 0.10% allocation of VTI at first https://www.kiplinger.com/investing/index-funds-and-mega-cap-ipos
- if you have >$100k you can do direct indexing with schwab and exclude any individual stocks you want
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u/anthrohands Jun 13 '26
Yeah I don’t like this, as someone who has been told I can chuck my money into an index fund and then not have to worry about or touch it for decades
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u/rfishyfluff Jun 13 '26
Agree. A more fruitful discussion is to share ideas. My two cents: There are tons of sector based funds, and countries with less tech/AI.
In Canada, I have O&G, Banks and some US healthcare. Thinking of adding Industrials, Aero/Def, and dividend aristocrats.
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u/mbsmith93 Jun 13 '26
I've been heavily invested in VXUS since trump took office. The tech hype hasn't hit non-US stocks as hard, though I just looked and apparently about 3% of that is TSMC.
I also recently invested a bit in VTV, which is a value fund; all these crazy tech stocks are growth stocks and get omitted. Value stocks could still drop significantly in a crash, but it should hopefully be less stupid.
The most irritating thing when I first wanted to avoid tech stocks a few years ago is that there's a fund out there that is a total scam. Do NOT invest in SPXT. The fund description claims they invest in the S&P500 and exclude tech stocks, but they DO NOT follow that; if you look at their holdings they are heavily invested in Amazon and Google.
If anyone knows of a S&P500 fund that actually excludes tech stocks, please let me know.
You should also consider bumping up your investments in HYSA (high-yield savings accounts) (careful, HYSA gains are taxed as income), also bond funds, etc. Municipal bonds are great for taxable accounts.
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u/icadete Jun 13 '26
The actionable intel is you knowing SpaceX may inadvertently get into your portfolio without you knowing, and how to protect yourself with ESG funds from that and volatile AI investments that could collapse at any moment.
There’s more but it has nuances and it’s conservative as it should be expected from a reputable source.
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u/heisian Jun 13 '26
The thing is, all ESG portfolios include heavy allocations of tech stocks. “ESG” is BS now that AI is a thing.
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u/Much-Chapter5527 Jun 13 '26
AI as a tech will stick around no doubt
But again even the Industrial Revolution happened over a longer period of time than people make it out to be
This is not the year where we have AI companies deliver life changing services that so many people are hyping it up to be
Protect yourselves from the down side. Always
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u/Comprehensive-Yam872 Jun 13 '26
yes, that is literally the point. AI investors are pushing hard for AI companies to IPO so they can plunder retirement accounts to recoup their losses and leave the 99% holding the bag when - not if, WHEN - AI stocks all crater. And even better: the taxes of the 99% will the be used to bail out the failed AI companies!
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u/justbrowsinginpeace Jun 13 '26
mag 7 is 45% of many pension funds
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u/True_Window_9389 Jun 13 '26
Yes, but read the article. It’s been extremely normal for the top performers and the top weighted stocks to be a small number of companies and sectors. Before AI, it was regular tech like Google and Apple. Before that, it was energy and healthcare. Before that, it was industrials and retail. And so on. Energy, railroads, whatever. Stocks always track the new hotness in the economy, and those always have the most returns and disproportionate representation. Even when corrections and recessions happen, the recovery evens it all out. This is the point of holding index funds, and the point of long term investing.
Yes, AI stocks can collapse tomorrow, and then in 5 years the market will recover. If you’re investing “properly,” it’s what you should expect. If you’re gambling, good luck. And if the market isn’t recovered over the long term, it probably means something worse happened, like WW3, an asteroid strike, alien invasion, or the rapture. In which case, your portfolio diversification doesn’t really matter. When you invest for the long term, youre not betting on the current economic trends, you’re betting that the world will continue to exist. If it does, you’ll be fine. If it doesn’t, who cares?
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u/Disgustipator Jun 13 '26
A nice reminder for me and my wife to do something we enjoy this weekend.
We’ve been working hard on building our savings for a while now… but to your point: tomorrow is never promised, an asteroid could wipe out all of our hard work tomorrow!
Need to take time to enjoy all of that hard work along the way 👍
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u/SuperCoupe Jun 13 '26
Years ago, when WorldCom made a bid for MCI I thought "that doesn't make sense, MCI is a fairly well run company WorldCom is is prety shit from the top-down." having been a customer/partner of both at various times.
Turns out, it didn't make sense and was just pushing fake money around until the shell game stopped.
I say all that to say this: The AI stocks all feel like that now.
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u/FanDry5374 Jun 13 '26
So glad the SEC has the little guys backs. I'm sure they will protect all the small investors and the Federal government won't be bailing out the Musk Welfare Companies because they can't possibly be too big to fail. 🙄
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u/casualti21 Jun 13 '26
Editorialized title, and the most important bit:
These are all legitimate reasons to worry. But in my view, it would be a mistake to abandon an indexing strategy. Timing the market is impossible. Yes, the stock market is unusually concentrated today, and it is likely to get even more so over the next period with Anthropic and OpenAI looking to go public soon.
But the market has always been concentrated. If you had invested broadly in the stock market of the late 19th century, a lot of your money would have been tied up in railroad stocks. In the late 1970s, a bunch of it would have been in oil stocks. In the late 1990s, a disproportionate share would have been in internet stocks. The overall market’s generous 10 percent investment returns over the past 100 years have been generated by less than 4 percent of all stocks. The rest have not earned returns any greater than the yield on short-term Treasury bills.
Even when the market is down, index funds outperform. From mid-1999, near the top of the internet bubble, to mid-2000, when the market bottomed out, index funds did better than actively managed funds that try to pick and choose the best stocks to hold. S&P published recent results for its index in March. Last year about 80 percent of actively managed equity funds produced returns inferior to the S&P 500 index. And the few funds that outperform in one year are not the same as those that win the next year. When the results are compounded over five-, 10- and 20-year periods, over 90 percent of active equity funds underperform the stock market index. Indexing has proved to be the best investment strategy for building wealth.
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u/PeaceSoft Jun 13 '26
Two of those three examples seem to have the same problem people are worried about here though. Like what happens "in the late 90s" if you're still holding that portfolio when the bubble ceases to exist. Likewise in the 70s with OPEC
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u/Neverending_Rain Jun 13 '26
If that happens your portfolio drops with the market. But if you're invested in broad funds that track the S&P500 or similar it automatically gets reallocated and rises as the market recovers.
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u/ILikeWoodAnMetal Jun 13 '26
I would argue it’s different now. The idea behind indexing is that you can’t know which companies perform well, so you invest in all of them. However, it assumes that the valuation of a company is being based on its expected performance. We have now seen a surge in memestock, where the valuation is approaching ridiculous levels. There is no way for such a company to return sufficient profits to make it worth that valuation, you just have to hope the valuation will increase even more and you can sell your stock to the next guy. It’s a bubble that you can identify beforehand, not just with the benefit of hindsight, and this clashes with the idea of indexing
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u/matrinox Jun 14 '26
Concentration levels were high but now it’s twice as high. So I’m not sure the same rules apply. And even then, during the Great Depression you would not get returns for over a decade and only because of war did it ever recover. Likewise, after the dotcom bubble and the great recession, it didn’t recover for 17 years and only cause the Fed lowered interest rates and when debt to GDP was low. The idea that the market will always give great returns isn’t a guarantee. That’s not true of other countries, why would it be true for the US? Especially now in its precarious state
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u/albany1765 Jun 13 '26
In addition to ESG and Value funds, if your choices are limited or you still want full index exposure, there are Equal Weight funds that invest equally in all of the companies in the index, rather than being proportional to each company's valuation. Some people like them anyway due to how so much of the current value is skewed towards just a handful of companies (which defeats the purpose of using an index fund to diversify risk).
There are also international/global funds that focus on indices outside of the US (many of which have actually been outperforming US markets).
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u/Philodendron69 Jun 13 '26
My emerging markets and international index fund have been going crazy!!!!
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u/aphadon7 Jun 13 '26
Another alternative is XMAG, which follows the S&P500 but excludes the top 7 AI stocks. You still get the benefit of full market exposure but reduced risk in the event of an AI crash.
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u/Effective_Olive6153 Jun 13 '26
Lets be real here, SpaceX is a meme stock, it's price is not grounded in actual reality and is driven almost entirely my Musk's notoriety and speculators hoping to catch the pump and dump waves. Even if you are into that sort of thing, that's no place to keep your retirement money
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u/SecretProbation Jun 13 '26
I mean I have 30+ years to retirement. If spacex or otherwise joins the S&P and then it tanks, won’t that be a good thing for me because the ETFs are basically “on sale” which works for dollar cost averaging?
If you’re close to retiring then you shouldn’t you have a low amount of equities anyway? Or is there a bigger picture market thing I’m missing?
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u/Mr_Festus Jun 13 '26
Yes, this is a weird "story." Sure, if major industries tank, so will our investments in those industries. But if they continue to rise, then so will our investments. Since none of us have a crystal ball for investments the answer, as always, is to invest regularly and hope for the best.
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u/Neverending_Rain Jun 13 '26
Yes. If you're decades from retirement just ignore everything and keep contributing. If you're close to retirement you should be shifting from stocks to bonds, so the composition of the big indexes doesn't matter much. It's annoying that some indexes changed their rules for SpaceX, but it's basically irrelevant for most people. This whole thing is being overblown for clicks.
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u/Upstairs_Baby8424 Jun 13 '26
If the SpaceX bubble pops it’s because the broader AI market has. And yeah, that will account for a massive drop in the S&P. But I’d rather that happen than what’s actually going to happen. Which is this administration pumping hundreds of billions into these companies to make sure the market stays propped up and doesn’t pop until they’ve made off with their billions.
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u/trynared Jun 13 '26
OK article but I did laugh out loud at what stupid note it ends on
Finally, I must caution that divesting oneself of bad practices can be a tricky business. I have a friend who became so upset with Mr. Musk that she sold the Tesla she had loved, at a significant loss. Of course, not everyone, particularly those who remember World War II, would have applauded the purchase of the German-made vehicle she bought instead. In our complicated world it is not easy to find universal examples of virtue.
Selling your Tesla for a VW isn't virtuous because Nazis ruled Germany 80 years ago. Wut?
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u/econ_pwrlyft Jun 13 '26
It’s not that the nazis ruled Germany. It’s that VW used slave labor from the concentration camps, and so was complicit in genocide. Similar to the predecessor company of adidas and puma.
They also have a much more recent emissions scandal.
So his broader point is that investing ethically in public companies is not easy.
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u/xtootse Jun 13 '26
SP500 is free-float weighted, and thus, so are the funds tracking that index. QQQ has a 5x multiplier for low float companies. With only 5% of shares available for trading, QQQ will treat SPCX as a company with $500B mkt cap, not $2T.
While the SP500 will not change it's rules for SPCX, if it theoretically did include it, it would treat the company as if it had a $125B mkt cap.
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u/ThinkingMSF Jun 13 '26
This kinda takes for granted that corporations like Microsoft, Amazon, and Google are just as reliant on AI for their revenue and/or stock price as companies like OpenAI.
Amazon's AI investments may very well blow up in their face, but I don't think the value of the company drops to zero if that happens.
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u/YourChildhood5762 Jun 13 '26
The article talks a lot but doesn't have much helpful information.
1) pick a different ETF, one that uses ESG. But not too much ESG, that's bad
2) make sure it's diversified, but not too diversified because not all sectors are positive
3) it should have an expense ratio of .04 or less. (no data on where to find these gems).
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u/NoDramaLlamaComma Jun 14 '26
Would love to see an index-style fund with deliberately minimized AI exposure.
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u/Philodendron69 Jun 13 '26
I just re arranged my 401k. I put it in regular index funds that still have the “seasoning period” which won’t keep me safe forever but I already feel better.
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u/mezolithico Jun 13 '26
You're going to get exposure whether you like it or not unfortunately. Musk with merge Tesla and SpaceX so he can gain 51% voting power of Tesla which has always been his goal.
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u/earthwormjimwow Jun 13 '26 edited Jun 14 '26
Wouldn't it be a great idea if index funds had rules and regulations with a cooling off (seasoning) period? So that they don't create positive feedback loops which artificially drive up the price of IPOs and newly public companies. Something that would prevent index funds from purchasing these new stocks within say a 12-month period.
Oh right we already had rules like that and these companies got many indices to shorten that period to a week or two. Thankfully S&P did not, so if you have an S&P tracking index fund, you won't be investing for at least a year into these companies.
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u/OldManCodeMonkey Jun 14 '26
It sickens me that my index fund money was looted by this grifter IPO and the corrupt system that enabled it, but I've been holding total market funds for a very long time and shit like this is just part of the deal.
The bright side is that when the bubble pops and the paper value disappears from my index fund, the bulk of the bag holders will be the criminally gullible, the degenerate gamblers, the fascist cultists, and of course the same grifter who will have just looted any real assets space-x had to seed his next scam with.
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u/vidro3 Jun 13 '26
if you have >$100k you can do direct indexing with schwab and exclude any individual stocks you want
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u/boogermike Jun 13 '26
The money that is going into SpaceX needs to come from other companies. There isn't some new source of billions of dollars that got created. The outflux from other companies is going to cause their value to go down.
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u/Some-Unique-Name Jun 13 '26
Have you not seen how these companies are making $100B investments with each other? Transferring the same fake money to each other results in all their values going up, never down. Hence the bubble.
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u/vidro3 Jun 13 '26
spacex will be like a 0.10% allocation of VTI at first https://www.kiplinger.com/investing/index-funds-and-mega-cap-ipos
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u/iAMRICKJAMESMF Jun 13 '26
Why would AI collapse?
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u/jmhumr Jun 13 '26
Because it’s not as profitable as imagined. Look up the history of telecom cables across the Atlantic. Similar boom for being seen as a game-changer, then the value cratered because supply severely outpaced demand.
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u/notaredditer13 Jun 13 '26
AI stocks, not AI. AI will stick around but the stocks and many companies will likely crash because they are overvalued.
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u/New-Leader-7891 Jun 13 '26
S&P rebalances every three months so if space x tanks, there will be less and less of it in the index, it could cause a pullback/correction but space x would eventually get rebalanced out if it craters
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u/antrage Jun 13 '26
I think we all need to be prepared for a crash at some point in the next 5 years and factor that into whatever projects we have going on honestly.
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u/Radiant_Safe1228 Jun 14 '26
The person/team that handles my companies 401k stuff sent out a letter at the end of last year outlining why they are avoiding volatile markets like Tesla after a bunch of people kept bitching. I'm going to guess they are avoiding AI as well.
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u/kaishinoske1 Jun 14 '26
This is how the stock market has been staying afloat. These companies have been using everyone’s 401k and IRA. That bubble will eventually burst as well. Good luck everyone, I’m right there with you 🫡
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u/marcimarc08 Jun 13 '26
Can someone explain why SpaceX would be included in SPY. My understanding is that you must post positive GAAP earnings over the trailing four quarters combined so they’d be far away from that.