A while back, we talked about the weirdness in betting against the things you believe in. "Insuring Against Success" was the title of Josh Hendrickson's piece at Economic Forces that I never got around to write about....
That had to do with prediction market and college football... the PEOPLE WORKING AT AI COMPANIES, though, that's a cooler, juicier story.
The AI world certainly keeps life interesting in this regard (#1606965, #1606952). Also, prediction markets and their feeble attempts at hedging real-world stuff, and oh-la-laaaaa are were there! #1605578, #1606497
"Wall Street placed a multitrillion-dollar bet on artificial intelligence. Some investors are desperate to take the other side."
The trade has proved a lasting winner up to now. Excitement about AI’s potential to transform the economy has lifted stocks from tech heavyweights to utilities and chip makers, while driving a speculative frenzy in other corners of the market.
Oopsie, bubble jitters!! #1606952, #1607043
The jitters are starting to show up in a number of ways: the yields lenders demand to finance big data-center projects and chip purchases; the plunging stock and bond prices of some AI “neocloud” companies, such as CoreWeave that are borrowing heavily; and steep selloffs from tech darlings including Alphabet and Intel, which just recorded some of their biggest one-day drops ever. The tech-heavy Nasdaq lost 2.9% Friday, capping its worst month since March 2025.
There has been some thin trading in prediction markets tied to data-center moratoriums in certain states. Kalshi offers trades on which states might halt new data-center developments before 2028, including New Hampshire, Michigan and Maine. So far, though, trades have been sparse.
quitting in order to hedge their stocks (because usually, selling them/engaging in trading without permission isn't allowed by the companies).
Everybody wants them options:
The AI build-out is expected to grow so large that traders are cooking up other ways to hedge its risks. Quant trading firm Jump Trading recently launched a trading desk for computing power. The nascent operation has been taking advantage of wide price differences across providers, the types of inefficiencies that have been tougher to come by in mainstream markets such as stocks and options.
Susquehanna International Group, one of the largest trading firms on Wall Street, has fielded interest—both directly and through intermediaries such as brokers—from data centers and privately held neoclouds seeking to hedge their exposure to semiconductor chips, said Nick Volbi, head of institutional prediction markets at the trading firm. If compute prices sank because of decreased demand or increased supply, the trades would pay out, hedging an option buyer against losses in other parts of its business.
Matt Levine in covering the piece #1607753:
“You might think that giant stock compensation packages would help retain employees, but at some level they apparently drive them away.”