So this week… (almost) everything is down, people seem to be freaking out a little. The CNN Fear & Greed Index is not quite as far into “fear” territory as it was in October of last year, but it’s at a new low for 2024, and it’s pretty close to that last panic low. The emotional state of investors seems to be “worried.”
Though of course, we already knew that, because the stock market has been dipping lower in the past few weeks. The Fear & Greed Index and similar indicators are pretty interesting to follow to track the things that indicate the emotional state of market participants, but really the S&P 500 is the ultimate fear & greed index… when people are feeling optimistic, they put in more money and drive the market higher; when they’re feeling more pessimistic, they take out money and push the market a bit lower. Same as it ever was.
The stock market rides an emotional wave that crests and crashes, with some regularity but not much predictability — in April, bad news was good news because it reinforced the idea of a Fed rate cut coming soon… now in August, it seems like bad news is bad news, in part because the spending on AI is not letting up, but the big companies seem effectively to be warning us that although they’re spending on building their AI capacity, they’re not going to be making any money on AI anytime soon.
AI profits are still the domain of just a few companies who supply the hardware everyone’s fighting over, most prominently NVIDIA… that will change someday, probably, but nobody knows when. We need a business case for AI that justifies all this hardware spending and energy consumption, and we don’t seem to have it just yet… which is the way in which this market most resembles the 1999-2000 tech peak: We knew the internet was amazing, we knew it could change the world, but we’re not sure how that turns into profit for the companies involved — there was no real business model for most companies, there was just “build and hope” and try to be first (though in fact, most of the profit went to companies who came along a little later, like Google and Netflix and many others, and really turned the potential into a sustainable profit engine, as the business models ...