The Too Big To Fail Moment in AI, The Deglobalization Trend Accelerates and The $VIX spikes to 22 (it remains 4 in Tuscany)...

Good morning from London where I am working this week. I head to Lisbon next week for the Alpaca partner summit which is at the epicenter of all things global degenerate economy, brokerage 2.0 and tokenization. I am doing a fireside chat with my friend Nate Rodland who was employee one (founding COO) at Robinhood.

A few things before I get into the markets…

I spent last week mostly off the grid in Tuscany at the Lindzon home away from home at Casetta just outside Florence. I got some much needed rest and recovery in after a week of Stocktwits and Social Leverage events in New York. My daughter Rachel joined me (and our pal Sheel) and it was a blast to ride with her in the Tuscan hills. She had an e-bike but even still the riding is very technical and she did great.

Rachel, Sheel and I also hatched the first ‘degenerate economy’ product an extra virgin olive oil. This was all hatched during a dinner with just texts between us all and Chat GPT…

Onward…

I can’t not talk about the markets and of course AI.

I like to say in Tuscany the $VIX is always four. In fact, if you ‘google’ it, I get credit for coining it. Thank goodness for the AI bubble…

Last week was no different in Tuscany, but in the real world the $VIX spiked to 22 on Friday. The AI stocks, particularly the debt heavy neocloud stocks were hammered -$CRWV ( ▼ 11.91% )  $NBIS ( ▼ 12.18% ) .

It is easy to see why the $VIX could be 22 right now. We are in the midst of incredible AI disruption, deglobalization, the midterms, higher oil prices, weak and erratic government leadership, rising interest rates, increased warfare, inflation, endless grift, negligence, government debt, a media gone haywire, a leverage addiction and everyone for himself mindsets.

But, just a few weeks ago technology stocks were breaking out and all the issues detailed above that finally caused the selloff were known.

So why now and what happens next?

Obviously, investors and traders finally started to care about AI debt, the IPO status of Anthropic and the way revenue is circling amongst the semiconductor, hardware, storage, neocloud and Mag 7 companies all at once.

I am not sure if that fear accelerates but the ‘haves’ which I was writing about last week started to catch up to the downside with the ‘have nots’ and not the other way around.

At Stocktoberfest a week ago, my final fireside chat was with two of my favorite thinkers on all things AI and narratives - Ben Hunt and Michael Parekh. I was surprised by two things…one is they had never met. The second was they both agreed on what I think is the biggest issue with AI right now and that is it has reached ‘too big to fail’ status.

The hyperscalers can’t and won’t slow down no matter what they tell us. Adding new worry to the pile of cash they already burn is the question of who will insure all the liability that these AI models.

Nobody could be happier about the ‘too big to fail’ status than Sam Altman of Open AI, Masa at Softbank, Jensen at $NVDA ( ▼ 1.43% ) and Dario and his Anthropic investors. They hit ‘too big to fail’ escape velocity which means any and all losses will be socialized.

If you want a taste for what happens if and when the losses get socialized at this point in history, look to France this weekend whose locals (ya right) are burning their country over ‘schools’ (ya right)….

As an investor, I am trying to figure out who wins if AI potential losses get socialized?

So far only $AAPL ( ▲ 0.43% ) stands out. The stock closed at an all-time high in a sea of technology red.

They have the cash, trust and distribution to help the government clean this up if it gets out of hand. They look like geniuses in a ‘too big too fail’ situation because they mostly watched as others spent.

Jensen at Nvidia has also cemented himself into the winner category no matter how this plays out.

The other big trend that gets further accelerated as this panic over AI hits is ‘deglobalization’. This is a trend I started factoring in to how I think about my job and investing in general since early 2025. I went back and listened to the podcasts again.

Deglobalization changes growth patterns and regional winners depending on their policies and resources. Last week it was Brazil breaking out whose country ETF - $EWZ ( ▲ 0.6% ) is loaded with bank and oil companies.

It is likely just too early to tell the ultimate winners if a panic continues and a crisis is at hand re the financing of all this AI spend. I am sticking with my degenerate economy index and made no changes last week. It already has a high cash position and held up very well last week.

This week SpaceX reports and earnings season is in high gear so be prepared for volatility.