The AI Bubble Will Pop from Equity Supply Says This $80 Billion Asset Manager | Ben Inker | GMO

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Ben Inker, Co-Head of Asset Allocation at GMO, joins Other People’s Money to discuss why the IPOs and subsequent shareholder unlocks of SpaceX, Anthropic, and OpenAI will bring an unprecedented amount of equity issuance and pop the AI bobble. Inker explains how this mechanism was responsible for popping tech bubbles in 2000 and 2021 and the mathematical relationship between below average equity returns and equity supply. He also outlines how this equity supply in conjunction with a slowdown in the AI buildout from realizations of an AI overbuild could send the stock market down as much as 50% with even greater pain for the most AI linked companies.

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Timestamps:

00:00 Intro

01:10 AI Bubble Setup

06:12 Equity Supply Matters More

10:44 IPO Wave Math

15:32 Sarmaya LENS ETF

16:59 Dotcom Fiber Parallel

20:32 Finding Non-AI Bets

24:06 Passive Flows and Liquidity

29:40 Credit Risks and Spillovers

37:51 Can Government Backstop AI?

41:48 Credit Stress Check

45:36 Energy Portfolio Benefits

48:13 Value Versus Growth Spreads

50:10 Ex-US AI Winners

54:34 Big Tech Commoditizes Compute

57:00 What If Mega Caps Go Sideways?

01:01:53 Memory: Cyclical Peak Earnings Trap

01:05:09 The Major Crash Scenario

01:10:44 Conclusion