"The secret is out about the potential artificial intelligence bubble — and Wall Street’s sharks smell blood in the water.

Wall Street traders have sharply increased how much they’re spending on “credit default swaps,” which, in case you weren’t paying attention during the movie The Big Short, are insurance derivatives that pay out when a company fails (a form of short).

Investors are shorting Big Tech companies, mainly Oracle and Meta, to “protect [themselves] and create a hedge,” one anonymous credit executive said. That means more and more investors are managing their risk by putting their money on the AI market’s eventual crash — just like in The Big Short.

In the lead-up to the 2008 financial crisis, firms like Goldman Sachs “made a fortune” playing both sides of the economic crash by selling mortgage-backed securities that its executives infamously identified as “shitty,” then also selling credit default swaps (shorts) against these investments as it became apparent they’d fail.

According to data reported by the Financial Times this week, the volume of credit default swaps tied to U.S. technology giants has risen 90 percent just since early September after being reportedly “thin to nonexistent” at the start of the year."

https://www.levernews.com/the-big-short-2-ai-boogaloo/

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