No place to hide?

The stock market’s structural problems are getting worse and nobody wants to talk about it. Not investment advice. I’m not a financial advisor and nothing here should inform your investment decisions. Do your own research. TLDR: HFT has broken price discovery. AI infrastructure is being funded through circular capital flows that generate fake-looking-but-technically-real revenue. Regulatory changes are quietly being made that will force passive investors into speculative AI IPOs and shift private equity’s bad bets onto pension holders. The “safe” passive investing strategy is being hollowed out from the inside and most people won’t notice until it’s too late. High frequency trading has broken price discovery. This isn’t controversial among market microstructure researchers, it’s just ignored. HFT firms co-locate servers at exchanges to shave microseconds off execution time. They’re not providing liquidity in any meaningful sense; they’re identifying your order intent and moving the price before it fills. Michael Lewis documented this in Flash Boys a decade ago and nothing changed. The SEC knows. The exchanges know. The exchanges actually profit from selling co-location space and data feeds to HFT firms, so the incentive to fix it doesn’t exist. The AI infrastructure funding loop is out of control. This one doesn’t get nearly enough attention. The basic structure: • Nvidia invests in CoreWeave • CoreWeave spends that capital purchasing Nvidia GPUs • CoreWeave leases compute capacity back to AI companies including OpenAI • OpenAI is substantially backed by Microsoft, which is also a major Nvidia customer • Nvidia books real chip revenue. CoreWeave books real leasing revenue. Everyone’s financials look legitimate. The money is largely moving in a circle but it’s generating auditable revenue figures at each step that then justify the valuations of all the companies involved. CoreWeave’s IPO was priced on revenue that is structurally dependent on the same pool of capital that created it. Now add another layer. The Huang Foundation, Jensen Huang’s personal charitable foundation, reportedly has an arrangement to purchase any unused CoreWeave compute capacity and donate it to universities and research institutions. On the surface this looks like philanthropy. Look closer and it’s also a price floor. If CoreWeave has idle GPUs which is the central risk that every CoreWeave bear has pointed to, the foundation absorbs that excess capacity rather than letting it show up as unutilized inventory on a balance sheet. The compute gets donated, the foundation gets a tax-deductible contribution, the schools get GPUs, and CoreWeave’s utilization numbers stay clean. Everyone wins, technically. But the practical effect is that a privately controlled foundation is acting as a hidden demand backstop for a publicly traded company whose largest supplier is run by the same family. This isn’t unique to CoreWeave. The pattern is repeating across the AI infrastructure stack, Lambda Labs, Crusoe, and others are operating in similar capital ecosystems where the investors and the customers significantly overlap. When that’s the case, “revenue” means something very different than it does for a company selling to genuinely independent customers. Two things worth watching: First, there’s ongoing pressure to modify the criteria for S&P 500 inclusion, specifically the profitability requirements, ahead of anticipated AI IPOs. If that goes through, passive index funds and the 401ks that hold them would be required to buy into companies like xAI or OpenAI on or near day one of listing, regardless of whether those companies have ever turned a profit or have a credible path to doing so. Passive investing was supposed to remove individual stock-picking risk. Forcing it to absorb speculative IPOs at peak valuation undermines that entirely. Second, there are proposals circulating that would expose pension funds and retail-facing investment vehicles to more of the downside risk currently sitting on private equity balance sheets, particularly debt tied to data center buildout. The framing is always about “expanding access to alternative investments” but the practical effect is that if the AI infrastructure buildout doesn’t generate the returns being projected, the losses get distributed to people who had no meaningful say in the original lending decisions. None of this is illegal. That’s the point. The system is being shaped by people with significant capital and regulatory access in ways that are individually defensible but collectively represent a transfer of risk onto retail investors and pension holders who can’t opt out. You can’t boycott your 401k without paying a penalty. You can’t opt your index fund out of new S&P inclusions. The “passive” choice is increasingly not passive at all, it’s a mechanism for distributing exposure that sophisticated money doesn’t want to hold at these valuations. I’m not saying don’t invest. I’m saying it’s worth being clear-eyed about what the market actually is right now versus what the “just buy index funds” conventional wisdom was built on. Again, not investment advice. Consult an actual financial advisor before making any decisions.