Despite widespread concerns of an AI sector bubble, the stock gambling platform Robinhood said it plans to allow “normal people” in on the purportedly juiciest action.
Robinhood CEO Vlad Tenev told the Financial Times that his company will give users the option to pour their money into privately held AI startups. Robinhood did not say which ones would be in the fund.
People can already invest in the AI sector through publicly traded companies (e.g., Nvidia), but apparently there is an appetite for even greater risk. The company behind gambling on stocks like Krispy Kreme will give the people what they apparently want.
YOLO on AI
Robinhood, which recently entered the sports gambling business through a Kalshi partnership, plans to offer tradable shares in a new fund managed by its subsidiary, Robinhood Ventures, and may use leverage.
From the report:
Robinhood’s move to open the door for small-time investors to back these [artificial intelligence] groups has caused concern, given the proposed fund’s structure and the trading venue’s relative lack of experience managing money.
The fund will be closed-end, meaning traders will not be able to quickly redeem their shares at will and could find their money trapped if too many investors rush for the exit.
Tenev said retail customers notorious for buying stock market dips are clamoring for such opportunities despite the significant amount of risk and the knowledge that investments could go to zero.
Reaction to Robinhood’s AI Fund
Benn Eifert, managing partner of QVR Advisors:
“Vlad Tenev is partnering with billionaire private equity titans to dump their bags on unsuspecting retail investors at insane bubble prices.
You, a highly sophisticated venture capital or private equity firm, have investments in a bunch of AI companies. After a few years you have a lot of information about them. Which ones do you put in the portfolios of your highly sophisticated institutional investors? Your retail?”
Alex Imas, a professor at the University of Chicago, Booth School of Business:
“You had me at ‘retail investors’ and ‘leveraged’, ‘closed-end’. Robinhood, democratizing the transfer of money from the poor to the rich.”
Jim Cramer, CNBC host and commentator:
“People will snicker […] Robinhood is going to give individuals access to private AI companies through a fund, according to the FT. Robinhood’s stock is up over 200% this year because it gives people what they want. Nothing wrong with that.”
Why it Matters
A generation of young people who use Robinhood to bet on the prices of meme stocks and cryptocurrency would be able to “invest” in some AI startups. Robinhood hasn’t announced which firms would be in the fund.
The Robinhood AI fund would increase engagement and revenue on the app as the economy worsens and job losses mount.
Robinhood’s new AI fund comes amid growing consensus that AI is in bubble territory. People with little wealth could suffer financial harm directly through their AI startup investments on Robinhood.
OpenAI, the world’s most valuable AI startup, recently began an effort to position itself as “too big to fail.” An AI bubble can severely harm the broader U.S. and global economy. Gambling on AI startups through Robinhood could exacerbate the pain.
Image by Sergei Tokmakov, Esq. from Pixabay
Discover more from GamblingHarm.org
Subscribe to get the latest posts sent to your email.
