Ep. 022 - Market Drawdown, Historic Bubbles, Funding The Buildout, AI Politics (Doug is Back)

**Doug O'Laughlin** (0:01)
Welcome to the new SemiAnalysis uniform. This is what we wear every day in the New York City office. I come in, I clock in, I put on the Jensen Rapture.
They're just, apparently they're sold out, or sold out everywhere in Taiwan, but it's just like, come on, you got them and this goes on.

**Jordan Nanos** (0:20)
Amazing. Shout out to Timothy. Thank you, buddy.
Hello, everyone. Welcome back to SemiAnalysis Weekly. I'm joined this week by Doug O'Loughlin, who for some reason hasn't been on the podcast for a little while. Doug, what's going on, man?

**Doug O'Laughlin** (0:38)
I thought I wasn't allowed to come on anymore, but apparently, that was never the case. I don't know. I've been doing a lot of things here at SemiAnalysis.
And it's been a crazy season. And yeah, so.

**Jordan Nanos** (0:51)
Doug has been busy, but he's back. Yeah, today, we're going to talk a little bit about the drawdown that's going on in stocks right now. Memory, optics, lots of AI names are down. We're going to either fan the flames or provide people with some...
Soothing positivity. TBD on that one.
And we're going to basically juxtapose that drawdown with some of what's going on in the labs, like Sam Altman warning staff that their new pre-trained Doug is going to be RSI in six months. And them just continuing to build a ton of models. I mean, anthropic as well. Rumors of new versions of their models coming out. We saw Opus 5 get released, KBK3 get Doug's reaction to that, and some moves around the industry with people leaving. So, okay, let's start with a lay on the land, man. What's going on with these stocks drawdown? What's going on?

**Doug O'Laughlin** (1:47)
So, let's just talk about... So, I mean, okay, I've been doing this. I've been doing this spiel just a wee bit.
So, pretty much up until very recently, let's say by June 30th at the end of Q2, it was pretty much the best performance in SemiCopter history, and we've had a little bit of an unwind since then. And what you can say is a lot of it, you can argue is quote-unquote technical, meaning there's like reasons, because of factors, and people may be over-levered, and some stuff like that. But the reality is, it's like what goes up really, really fast often has a little bit of gravity, and we're just kind of paying for the massive, almost crazy momentum rally we've had. But it's gone a little sloppy, and it's been very interesting, the tape recently. South Korea is pretty fucking crazy. Every single day, the stock markets essentially hit limit, like they literally limit. There's a tweet right now where it's like, how do I even do my job? The head of HR lost everything, and everyone's super depressed, and because their stocks are all down. And it's kind of crazy. If you look back in the history of Asian financial markets, this ironically seems to happen a lot more often than you think.
Probably one of my favorite books of all time is the great Taiwanese stock bubble. I think Taiwan on a per capita basis had a 100x bubble, like just incredible numbers, like just everything went to like a thousand types of people. Like, you know, we're talking like a bank trading 500 times price earnings, like just crazy stuff everywhere.

**Jordan Nanos** (3:11)
When was this?

**Doug O'Laughlin** (3:14)
It was in the late 80s.

**Jordan Nanos** (3:15)
Okay. So are you comparing the current situation in Korea to the late 80s in Taiwan or vibes are similar?

**Doug O'Laughlin** (3:24)
Vibes are similar. The bubble in Taiwan is truly historic. Like, I just don't think anything. I don't know if, okay, just put it this way, if we were to hit that bubble in Korea today, I think Korea's stock market would be worth 15 to 20 times more. It's such a crazy bubble. I don't think we should ever be able to possibly recreate that.
It just shouldn't happen. If they can go off, I guess. But I do think some of the lessons learned and some of the behaviors that happened during that bubble are often indicative of this one.
I'm not going to call it a bubble or whatever, but maybe this crazy runoff. What happens is you have these blow-off tops that get absolutely crushed. And at the absolute top, everyone's buying as much as they can. They go super levered. They're buying 2X ETFs. People are literally getting second mortgages on their house to buy more stocks. And this is actually what happened in Korea. And Koreans particularly, for some reason, have this crazy hit rate of always buying the top of every cycle. They were buying banks in 2007 I'm not joking. They're buying CNBS in 2007 They're buying SaaS companies in 2021