AI Implodes! Private Credit Collapses! And a Trillion Dollar TGA Looms

November 19, 2025 | In this issue of The Institutional Risk Analyst, we focus on our finance company surveillance group in the wake of the recent market weakness. All of the names in the group are down from the October peak for the major indices, in some cases by mid-double digits. Is this a buying opportunity or a signal to move to the sidelines and watch? We think the latter.

The larger context behind the retreat of financials is more profound. How does the accelerating implosion of the latest global marketing con known as "AI" or artificial intelligence figure into the broader equity market selloff? If you have not yet heard Yann LeCun, the former head of AI research for Meta Platforms (META), dismiss the current efforts to build real AI by focusing on large language models (LLMS), please watch the clip below. H/T to Alex Kantrowitz:

Basically what Yann LeCun is saying is that the hundreds of billions in capital raised to pursue the idea of AI by staring up our collective ani has been wasted on useless infrastructure, data centers and programmers. LeCun rejects models that are focused on analysis of LLMS rather than the real world, but you won't hear that from anybody at META, Nvidia (NVDA), IBM (IBM), Alphabet (GOOG), Oracle (ORCL) or Microsoft (MSFT). ORCL's expenditures on AI may eventually bankrupt the leading software company.

Most public companies are so invested in the false gospel of AI that they dare not even hint at the truth, namely that the vast majority of AI projects will never be profitable or even relevant. As LeCun notes, consumers will benefit from more robust search tools, but the AI that emerges in the next decade will be too feeble and too fallible to be deployed by business. Recall the costly fiasco of the early AI charade called "Watson" from IBM. But as long-time followers of Big Blue know, sales and execution are two different things.

We've called AI an electronic parrot, but that is unkind to psittacines, which do indeed have remarkable real world intelligence and reasoning capacity. How, we wonder, would the markets react to NVDA earnings later today if most investors watched the LeCun video clip above? And what would happen to all of the finance company stocks below, many of which have goosed their stock prices by referring disingenuously to AI in their investor presentations?

We have been anticipating a correction in many sectors for some while and have trimmed our portfolio accordingly, but the weakness in the nonbank finance group is pronounced and includes both names with crypto and credit private exposures, and some other stocks that may surprise our readers. But perhaps the biggest threat to our finance company surveillance group is the growing awareness that AI is a complete bust. We spoke about this insight on Monday with Carol Massar and Tim Stenovic on Bloomberg BusinessWeek.

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