Klarna CEO Sebastian Siemiatkowski has identified a structural flaw in modern markets: “automatic wealth.” He argues that the massive valuations of companies like Nvidia are partly the result of passive index funds blindly buying shares without regard for price. This automated flow of money has inflated an AI bubble that is now threatening to burst.
The danger of an automated bubble is that it works in reverse. When volatility hits—as seen in the current crypto crash—algorithms and risk-parity funds automatically sell to reduce exposure. This creates a “flash crash” dynamic where prices fall faster than humans can react. The $1 trillion wiped off crypto markets in six weeks is a prime example of algorithmic de-risking.
This mechanism explains why “no company is immune,” as Google’s Sundar Pichai warned. Even solid companies get sold off when the indices drop. The FTSE 100’s four-day losing streak is partly collateral damage from the selling of global baskets of stocks.
Siemiatkowski’s call for “thoughtful thinking” is a plea for active management. He warns that pension funds are exposing regular people to massive downside risk by blindly tracking overvalued indices.
If the “correction” predicted by JP Morgan accelerates, it will be exacerbated by these same automatic flows. The machines that drove the market up will drive it down, with ruthless efficiency.