US macro conditions — a 30-year Treasury yield at 5.2%, a $2 trillion deficit on $7 trillion of annual spending, $40 trillion of federal debt, and both parties pushing to abolish the debt ceiling — are what reset the AI exuberance: when the government effectively pays 10% pre-tax risk-free for 30 years, bubbles in 50x-earnings semiconductor stocks pop, and they will keep popping until fiscal policy is fixed.

Chamath frames the crash as a macro reset: 30-year Treasuries crossed 5.2% for the first time in 20 years, unproductive government spending is the biggest inflation driver, and once a US government bond pays ~10% pre-tax, paying 50x earnings for a chip stock makes no sense — so more AI-conviction bubbles will pop unless the fiscal/monetary course changes. ✦ AI generated

Chamath Palihapitiya · All-In Podcast · 2026-07-31 · original ↗

Can I can I just frame something up? So if we take the circumstance of there's a good long-term bet in AI that can be made in the markets but in the short term there's an exuberance that arises. The question is what's resetting that exuberance? What's bringing us back down to earth in the short term and I think if you take a zoom out there's a bunch of other statistics and other facts on the ground that I think are big macro drivers at the moment. If you take a look at the 30-year Treasury yield we just crossed 5.2% for the first time in 20 years. So you could buy US treasuries that are paying you 5.2% a year for 30 years, which is on a pre-tax equivalent basis probably 8, 9% from the US government for 30 years. So Nick, if you zoom out, you know, we have not seen this yield on US treasuries since 2007 leading up to the global financial crisis when they cut rates and printed money. At the same time, there was some probability that the Fed Reserve was going to raise rates this week. They didn't, and that obviously would have tampered the inflation risk ahead of us. There's persistent inflation. Kevin Wars in his comments said, 'We still want to see inflation get down to 2%.' There isn't a clear path to doing that. And then there's these inflation drivers. The biggest inflation driver at the moment is government spending. $2 trillion deficit, 7 trillion a year of spending on five trillion a year of revenue. Both Elizabeth Warren and Donald Trump agreed on Twitter this week that they should remove the debt ceiling, which means that we could spend more and continue to borrow more. Federal debt stands at 40 trillion today. Remember the debt ceiling in July of 2025, the debt ceiling was 36 trillion and we now want to raise it above the 41.1 trillion debt ceiling that we have. Elizabeth Warren saying get rid of it. Just have no debt ceiling. So, so when you when you have no debt ceiling and you have no breaks and you spend and the government spending becomes the core of the US economy because that spending is not productive, you end up seeing inflation. You're pumping money into the system. So, everyone's assets inflate and fundamentally people are selling off treasuries around the world because of it. And now we're kind of looking at a situation where there doesn't seem to be an end in sight. There was a rationalization of spending intent coming into this administration. It's proven to be nearly difficult, if not impossible, to get Congress to go that route. The Senate has banded together to keep funds flowing to their states. So, you cannot really radically change spending at the federal level. So if you're running a $2 trillion annual deficit and your economic productivity gain in the near term doesn't make up for all the inflation you're realizing because of that exuberant spending, you're going to see Treasury spike because people don't trust the creditworthiness of the United States over 30 years. And so a treasury spike, I could now buy a US government bond that pays me 10% pre-tax a year. Why the heck would I pay 50 times earnings for a semiconductor stock? So that creates the incentive for markets to move against these big AI conviction bets in the short term and pop these bubbles. And I think we're going to see more of this. As we don't actually course correct the Titanic going into the iceberg, the United States fiscal and monetary situation, we are going to end up seeing more bubbles pop and more of these assets um that we've kind of inflated, if you will, to keep things going. Now look, there may still be great productivity gains from AI. This may end up rationalizing over the long term, but again, short-term markets, I'm better off making 10% by owning federal government bonds. Go to the beach.

verbatim transcript · starts at 15:20