I think our hubris lies in the fact that we can't imagine being technologically behind others and severely underestimate how quickly other nations, such as China, can advance. It's entirely possible US tech sector cannibalizes itself, but that doesn't mean that will be the case everywhere. I can't say it would be pretty tho' we should try to minimize the collateral damage.
I wasn't ignoring China, it just wasn't relevant to the point I was trying to make, which is about western companies who sell to western consumers. When there's a hardware market gap due to the AI bubble popping (and assuming Chinese tech isn't too embroiled or affected by it, look at AI investment stats in China, and they're not as crazy as in the west, but there's still a big chunk of cash in AI), China and other countries will have an opportunity to fill it themselves, that's true, and they will certainly try to go in.
However, infrastructure takes time to build, workers take time to train, and sales channels are hard to construct from scratch. Doesn't matter if you have the immortal science of Xi Jinping thought on your side, it will take time and investment, which might not be easy to find in the aftermath of a stock bloodbath as the one we're anticipating.
All in all, the western consumer market, largely impoverished by the aftershocks of the AI bubble bursting and accelerated de-dollarization, will be the last priority for hardware makers everywhere. And I don't see this changing short of world revolution happening overnight.
You're right, I forgot to mention commissions from the merchant side as part of their revenue stream. Klarna reports about 2.76% average commission, so the rest is only consumer loan repayments.
As to how do they make money? The short answer is they don't, because they don't have to. Revenue or profit don't matter to investors and the people trading the stock; they are interested in user growth, with the hope of one day jacking up the interests and commissions once they have become indispensable and have enryone hooked on cheap, easy credit.
The slightly longer answer: I've been looking at Klarna's financial reports for a while, and they are bleeding money.
The problems will come if/when anything disrupts the hype cycle: either making delinquency rates much higher because of a financial crash, bond sales/ratings lower, stock prices drop, or a combination of the three makes everyone realize an average loan of 28 bucks for 6 months is a terrible business model, and the whole house of cards comes crashing down, bringing who knows what with it. I don't think it'll go down like in 2008, because some Obama-era regulations to prevent that are still in place, but it'll be a big shock to consumer debt markets for sure, and will more than likely mean that you'll only be able to buy a car for dodge charger sold outside of an army base kind of rates, or a house with a generation-spanning repayment plan.
Disclaimer: I only know the barest bones of finance and bookkeeping, so I might be out of my depth here. But if it looks bad to a dumbass like me, imagine how bad it can actually be.