This Just Broke The AI Bubble (And No One Is Talking About It)

If you are an investor, there are three big forces you want to pay attention to right now that can not only impact the stock market, but it can impact the economy and the dollar. They are number one, the chip shortage, which just got worse because of conflict in the Middle East. Number two, cracks on Wall Street because of private credit, which also just got worse. Number three, concerns about what's going to happen with inflation, even if the conflict in the Middle East gets better today. So let me break this down one by one, starting with the chip shortage. Computer chips are used in everything, not just computers. We use them to build iPhones, we use them to build cars. But there was a chip shortage that was going on already because the demand for chips, these computer chips, has been going up so much. Why? Because of AI and data centers. AI has been using so much of the computer chips that are being produced. In fact, in 2026, 70% of all memory chips manufactured are going towards AI and data centers, leaving only 30% for your phone, car, and laptop. But this chip shortage just got worse because of the conflict in the Middle East. Why? Because of helium. One of the places that Iran attacked in the last number of days was Qatar, otherwise known as Qatar, depending on how you say it. Well, Qatar is one of the world's leading producers of helium. And what was attacked? A helium site. Well, helium is used in data centers to help keep these data centers cool. And if there's not enough helium to go around, these data centers may not be able to function at full capacity, which means some of the AI is not going to be able to run at full capacity, which means we could also be facing a bigger chip shortage. And why does that matter? Because the demand for chips keeps going up. In fact, Elon Musk, just a couple of days ago, maybe it's correlated, just went on X and said that he is now going to work to build the biggest chip factory in history as a joint venture between Tesla, SpaceX, and XAI as a way to now be their own supplier of chips because there seems to be a chip shortage coming. Now, the CEO of Nvidia, Jensen Huang, also kind of mentioned this, but said it in a positive light, which is scarcity of chips is good for Nvidia because that's how they profit. Which brings me to the second big force you want to pay attention to. What's going on with Wall Street? Because it feels like things keep getting worse. By the way, we've been covering all of these stories in Market Briefs. Market Briefs is a free financial newsletter for investors where every day my team is working to break down what's happening in things like the economy, housing, stocks, crypto, and global markets into a fun, witty, and easy-to-read newsletter. It's read by hundreds of thousands of investors every single morning. Plus, it's completely free. So if you have not signed up for Market Briefs yet, I have the link for you to join down in the description below. What's going on with private credit is over the last number of years, a number of companies who could not qualify for a traditional loan started borrowing money from hedge funds like Blackstone's hedge fund, Blue Owl's hedge fund, BlackRock's hedge fund, and Morgan Stanley's hedge fund. And these hedge funds were now lending money to these businesses at very high interest rates between 8% to 20%. And investors were then lending money to these hedge funds because these hedge funds kept needing more money to lend out to the businesses. Well, it was good news for the investors because now, instead of saving your money in a bank and getting 0% interest, 1% interest, 3% interest, you could make 8% or 9% or 10% a year in interest by lending your money to these hedge funds. And it sounded great because just like a bank, you could pull your money out kind of whenever you wanted. Well, a couple of things happened. Number one, the companies that these hedge funds were lending their money out to started failing. Two reasons why. Reason number one is 40% of the companies that these hedge funds were lending money to were negative cash flow when they initially got the loan, meaning they were losing money every single day, even when they first got the loan from the hedge fund. Reason number two is these private credit funds were lending money often to software companies. And software companies were known as this safe play because these software companies had predictable revenue. Well, then came AI. And AI got very smart very fast. And certain companies were able to ditch software companies and said, we don't need to pay for your software. We can just build our own software with AI and save this monthly fee. And so a lot of these software companies that were originally great investments for these hedge funds because they were stable revenue started to see declining revenues and stopped paying back their loans. You can start to see why that's a problem. The hedge funds that were making these business loans now started to lose money and they couldn't pay back people when they wanted to pull their money out. Because as an investor, if I got concerned about my hedge fund struggling, I might want to pull my money out. And kind of like a bank, I was able to pull my money out, or at least that's what the pitch was, that I could pull my money out essentially whenever I wanted. Sure, maybe I can't do it every single day, but I have liquidity to pull my money out if I need it. Well, what happened was these hedge funds started struggling. People started pulling their money out. The hedge fund said, you can no longer pull your money out. These funds are no longer liquid. Even though that's what the initial promise was. Because if these hedge funds allowed you to pull out your money out, well, they would be insolvent. They would run out of money. Because not only are they not making money and interest, but people keep trying to pull their money out and they don't have the money to do that. So we first saw funds like Blue Owl freeze your funds. Then we saw Blackstone freeze funds. Then we saw BlackRock, the largest asset manager in the world, freeze funds. Then we saw Morgan Stanley freeze funds. And we just saw it happen again. Aries Management just locked investors out again, saying we cannot give you your money back because if we did, we might collapse. Now, a lot of people are still saying that, hey, you know what? This private credit thing is isolated. It's just a small problem with private credit companies. It's just a small problem with these certain funds. It's not going to spread. The concern is what if it does spread? And that's the thing you want to pay attention to. We've seen things like this happen in the past. Before the 2008 crash happened, we saw a couple of hedge funds at Bear Stearns essentially collapse because of this. There were investments that they weren't able to make due on. Everybody said, oh, it's just an isolated incident with these hedge funds. And then that was the initial domino that then led to the next domino, which led to the next domino, which then led to the 2008 great financial crisis. Now, clearly, we have cracks in our economy. I don't think anybody would go around saying that there's nothing wrong in the economy. We have concerns about the job market. We have concerns about the economy slowing. We just got the recent GDP numbers, which said the economy is slowing. There's concerns about inflation. The question is, is this concern about private credit going to get worse? And if it does get worse, where is it going to stop? Is it going to be contained with these hedge funds and private credit companies or is it going to spread? That's the thing you want to pay attention to because these private credit funds were also funded by banks, which means, yes, some of the big banks out there who were not lending money to these companies that are defaulting or lending money to the private credit hedge funds as a way to get a return on their money, as a way to get a more safe investment because instead of lending money to the company directly, they were just lending money to the hedge funds, which guaranteed these huge interest rates and it was a liquid investment that you could pull your money out at any time, but now you can't. And that's the thing that you want to pay attention to because it feels like every day there's a new fund that is freezing assets. And that's what you want to pay attention to because if it does continue to get worse, that could have a bigger effect on Wall Street, which can impact the stock market, which is something you want to pay attention to, which brings me to the concerns about inflation. Now, we don't know where the war is going to go in the Middle East. If the war drags on longer, oil prices are going to stay higher longer, inflation is going to stay worse longer. If the war ends today and oil prices are able to come down, then inflation should be calming down. But there's a couple things I want you to remember. Number one, before the war started, we were just getting reports that inflation was getting worse, not better. Especially at the business level. PPI is called producer price index, which shows the inflation that businesses are paying. And that has been going up. Why does that matter? Because if the cost of operating a business goes up, what does a business generally do? They have to pass it down to consumers. So when you see high PPI, that generally means that the inflation that regular people feel is going to go up in the future. Now we've had this period of high oil prices, which is going to impact the prices of things. And that's something you want to pay attention to. Why does this matter? Because this is all going to ultimately decide and help influence what the Federal Reserve Bank does, which can obviously impact the stock market, the value of the dollar, and the economy. That's why you want to pay attention to this, because all of these things, while it seems like they're happening in isolation, they all impact one another. And previously, the government and the Federal Reserve Bank were very adamant on wanting to boost markets. Well, if concerns continue to get bigger about the economy, if concerns continue to get bigger about inflation, it can put us in the United States in a very tough position. What does that all mean? As an investor, stick with your strategy. If you're a passive investor, ABB, always be buying. Now, I got to remind you, I'm just a random guy on YouTube. Investing has risks. You're never guaranteed to make money when you invest. In fact, you will lose money at some point. So make sure you always do your own due diligence and never blindly trust a random guy on YouTube. But if you are a passive investor, you just keep buying. You buy when markets are up. You buy when markets are down. You buy when markets are sideways, period. If you are an active investor, you find good investments. And when they go down, you buy more of those active investments. Stick with your strategy. There's going to be people freaking out. And sometimes, in fact, a lot of times, when there is pain, it creates opportunity where the pain is. When the real estate market collapsed in 2008, it created huge opportunity in real estate. When the stock market collapses in the past, it had created great investment opportunities in the stock market. When an industry gets hurt, that creates opportunity in that industry. So if private credit continues to get worse, it could create opportunity in the financial sector, depending on how bad it gets and assuming that you're buying a good investment opportunity. So if you want to stay up to date on what's happening, again, Market Briefs is a free resource. I have that for you down in the description. And if you got value out of this video, the best thank you is a referral. So if you could, please share this video with a friend, family member, colleague, or fellow investor. That way, we can continue to spread this type of financial education. Thank you. President Trump just confirmed that he wants to get rid of your income tax. Take a listen. I believe the tariffs paid for by foreign countries will, in the past, substantially replace the modern-day system of income tax, taking a great financial burden off the people that I love.