2006
The Tipping Point for a House of Cards
Everyone has built a house of cards at some time. Many of us may have even watched the Netflix series. Regardless, we all know that any house of cards is always one moment away from reaching its tipping point.
The Jay Martin Show recently published a YouTube video 2008 vs 2026: The Same Dominoes are Falling, identifying a financial house of cards and its tipping point. Martins’ 25-minute video utilizes graphics to describe the details of the current stock market AI bubble in which $2 trillion locked in future income from AI companies (like Open AI & and Anthropic) are due to the Big 10 tech giant companies (like Microsoft, Oracle, Google, Amazon) that make up 40% of the S&P 500 Index Fund.
Explaining the AI Bubble
Entrepreneurial AI companies, whose expenses are substantially higher than their revenues, need to continue to raise new money to pay those higher expenses. To raise more new money in the stock market, these companies’ valuations must continue to increase.
These AI companies’ valuations are growing as they ‘sell’ future revenues to the Big 10 companies. Effectively, these sales are IOUs. Once new IOUs are sold, the AI companies valuation rises, and they can in turn raise ever-greater investments from the market to pay for ever larger expenses. Concurrently, the Big 10 tech giants account for IOU’s (or future payments) they’ve bought as assets, in the form of backlog of guaranteed future income. The same $2 trillion mentioned earlier. These Big 10 tech giants are then using their IOU assets as collateral to finance the debt utilized to build their growing operations, primarily new data centers. This sounds like a house of cards to me.
Is there a Historical Rhyme for this scenario?
No one remembers 2006, when headlines were still saying everything was fine. But everyone remembers the crash of 2008.
In 2006, many US mortgages were structured based on house prices going up forever. Rules allowed mortgage refinancing every two years and you could use the higher house value to pay off the old smaller mortgage and start again with a new larger mortgage. The mortgage was never paid off, only replaced. In hindsight, this too looks like a house of cards.
House prices continued to climb in 2006, to new all-time highs. The subtle, unnoticed change was prices climbing more slowly, an 8% increase rather than 15%. All was good, no worries, right? But the smaller increase was not enough to pay off the old mortgage and restart with a new mortgage. The resulting house price crash came in 2007, and the market panic came in 2008. Note the mortgage loans did not fail when the housing prices fell. The tipping point was earlier, in 2006 when all still looked good.
If the 2006 historical rhyme can be applied to the 2026 AI Bubble, it would be due to AI company IOU sales slowing and in turn their valuation increases also slowing. While the US remains the world leader in entrepreneurial development of AI technology, this shouldn’t be any concern.
AI Tipping Point?
China has spent the last 30 years replacing the US as the world’s leading developer and producer of so many products and services. This included textiles, steel and ships, lately solar panels and EVs with BYD now superseding Tesla.
Most recently, in July 2026 a Chinese AI lab called Moonshot released a coding model, within weeks beating the best models from Open AI and Anthropic. As their Kimi K3 model increases user base, the ability of US AI companies to sell their IOUs and raise valuations may continue to grow to new all-time highs, but more slowly. Is this the tipping point of the AI Bubble?
How could this affect us?
The belief in American AI holds up the S&P 500. The S&P 500 holds up the world’s savings in American stock markets. And Canada has 47% of its investment in the US, largely in the stock market.
No one can predict the timing of a tipping point. However, you can know if your investments are a house of cards. What percent of your investments are impacted by the AI house of cards? Be Prepared.