The most frustrating thing to me about this most recent rash of biz guy doubting the future of AI articles is the required mention that AI, specifically an LLM based approach to AGI, is important even if the numbers don't make sense today.
Why is that the case? There's plenty of people in the field who have made convincing arguments that it's a dead end and fundamentally we'll need to do something else to achieve AGI.
Where's the business value? Right now it doesn't really exist, adoption is low to nonexistent outside of programming and even in programming it's inconclusive as to how much better/worse it makes programmers.
I'm not a hater, it could be true, but it seems to be gospel and I'm not sure why.
Mapping to 2001 feels silly to me, when we've had other bubbles in the past that led to nothing of real substance.
LLMs are cool, but if they can't be relied on to do real work maybe they're not change the world cool? More like 30-40B market cool.
EDIT: Just to be clear here. I'm mostly talking about "agents"
It's nice to have something that can function as a good Google replacement especially since regular websites have gotten SEOified over the years. Even better if we have internal Search/Chat or whatever.
I use Glean at work and it's great.
There's some value in summarizing/brainstorming too etc. My point isn't that LLMs et al aren't useful.
The existing value though doesn't justify the multi-trillion dollar buildout plans. What does is the attempt to replace all white collar labor with agents.
That's the world changing part, not running a pretty successful biz, with a useful product. That's the part where I haven't seen meaningful adoption.
This is currently pitched as something that will have nonzero chance of destroying all human life, we can't settle for "Eh it's a bit better than Google and it makes our programmers like 10% more efficient at writing code."
>the required mention that AI, specifically an LLM based approach to AGI, is important...
I don't think that's true. The people who think AI is important call it AI. The skeptics call it LLMs so they can say LLMs won't work. It's kind of a strawman argument really.
Article is behind paywall and is simply saying the same things that people have been saying about the post tech crash.
Now, what this sort of article tends to miss (and I will never know because it’s paywalled like a jackass) is that these models services are used by everyday people for every day tasks. Doesn’t matter if they’re good or not. It enables them to do less work for the same pay. Don’t focus on the money the models are bringing in today, focus on the dependency they’re building on people’s minds.
I don't think it'll contract. The people dumping their money into AI think we are at end of days, new order for humanity type point, and they're willing to risk a large part of their fortune to ensure that they remain part of the empowered elite in this new era. It's an all hands on deck thing and only hard diminishing returns that make the AI takeoff story look implausible are going to cause a retrenchment.
Every financial bubble has moments where, looking back, one thinks: How did any sentient person miss the signs?
Well maybe a lot of people agree already with what the author is saying : the economics might crash, but the technology is here to stay. So we don't care about the bubble
> Some people think artificial intelligence will be the most important technology of the 21st century
We're just at 25% of it. Raising such a claim is foolish at least. People will be tinkering as usual and it's hard to predict the next big thing. You can bet on something, you can postdict (which is much easier), but being certain about it? Nope.
I'm not following the arguments in the blog at all tbh.
The small huge companies investing in AI are tech companies who already make a lot of money. They did not invest in 'manufacturing' or other things on the side as relevant as the blog makes it.
The offshoring of manufacturing to China was a result of cost and shareholder value. But while USA got rich in 60-90 for manufacturing, now this moved over to China.
The investment is not just going into LLM, its going into ML and Robotics. The progress of ML and Robotics in the last x years is tremendous.
And the offshoring of Datacenters? DCs have very little personel they need, they are critical infrastructure you want to control. There is very little motivation to just 'offshore' critical infrastructure espescially from companies who are so rich, that they don't need to move them in some weird shitty location which only makes sense because energy is cheap but everything else is bad.
The 'AI Bubble' i'm experiencing, is adding real value left and right. And no i'm not talking about only LLMs. I'm talking about LLMs and ML in general.
This 'Bubble' is disrupting every single market out there. Everyone is searching for the niche not optimized yet and only accessable now tx to LLMs and ML.
And if you think this is just some hype and will go away, have you even tried Chat GPTs voice mode? This was literaly NOT possible 5 years ago. And i have real gains like 20% and more in plenty of things i'm now leveraging ML and LLms which was also NOT possible 5 years ago.
Also no one is talking about how exposed we are to Taiwan. Nvidia, AMD, Apple, any company building out GPUs (so Google, Microsoft, Meta etc), even Intel a bit, are all manufacturing everything with one company, and it's largely happening in Taiwan.
If China invades Taiwan, why wouldn't TSMC, Nvidia and AMD stock prices go to zero?
I don't think they really need to invade for this. It is almost in artillery range (there are rounds that can go 150km).
They also could just send a big rocket barrage onto the factories. I assume it would be very hard to defend from such a short distance.
Then most ports and cities in taiwan are towards east (with big mountains on the western side). Would be very bad if China decides to blockade it by shooting ships from their main land...
Also very little the west could do imo. A land invasion in china or a nuclear war don't seem very reasonable.
So much in this AI bubble is just fueled by a mixture of wishful thinking (by people who know better), Science Fiction (by people who don't know enough) and nihilism (by people who don't care about anything other than making money and gaining influence).
>data-center related spending...probably accounted for half of GDP growth in the first half of the year. Which is absolutely bananas.
What? If that figure is true then "absolutely bananas" is the understatement of the century and "batshit insane" would be a better descriptor (though still an understatement).
"The “pop” won’t be a single day like a stock market crash. It’ll be a gradual cooling as unrealistic promises fail, capital tightens, and only profitable or genuinely innovative players remain."
> It’s not clear that firms are prepared to earn back the investment
I am confused by a statement like this. Does Derek know why they are not? If hes does, I would love to hear the case (and no, comparisons to a random countries GDP are not an explanation).
If he does not, I am not sure why we would not assume that we are simply missing something, when there are so many knowledgable players charting a similar course, that have access to all the numbers and probably thought really long and hard about spending this much money.
By no means do I mean that they are right for that. It's very easy to see the potential bubble. But I would love to see some stronger reasoning for that.
What I know (as someone running a smallish non-tech business) is that there is plenty of very clearly unrealized potential, that will probably take ~years to fully build into the business, but that the AI technology of today already supports capability wise and that will definitely happen in the future.
I have no reason to believe that we would be special in that.
When there was a speculative mania in railways, afterward there were railroads everywhere that could still be used. A bubble in housing has a bunch of houses everywhere, or at the very least the skeleton of a house that could be finished later.
These tech bubbles are leaving nothing, absolutely nothing but destruction of the commons.
I've been talking about the limited bandwidth of investors as a major problem with capital allocation for some time so it's good to see this idea acknowledged in this context. This problem will only get bigger and more obvious with increasing inequality. It is massive scale capital misallocation whereby the misallocation yields more nominal ROI than optimal allocation (if you were to consider real economic value and not numbers in dollars). Facilitated by the design of the monetary system as the value of dollars is kept decoupled from real economic value due to filter bubbles and dollar centralization.
Back of the envelope calculation: Nvidia market cap is 4.5T$, their profit margin is 52%. This means Nvidia would need to sell 1067$ worth of equipment per human being on Earth for investors that buy Nvidia stock today to break even on the investment. Nvidia, unlike Apple, doesn't sell to end users (almost), but to AI companies that provide services to end users. The scale of required spending on Nvidia hardware is comparable to tech companies collectively buying IPhones for every human on Earth, because the value that IPhone users deliver to tech companies is large enough that giving away IPhones is justified.
I feel kind of like a Luddite sometimes but I don't understand why EVERYONE is rushing to use AI? I use a couple different agents to help me code, and ChatGPT has largely replaced Google in my everyday use, but I genuinely don't understand the value proposition of every other companies offerings.
I really feel like we're in the same "Get it out first, figure out what it is good for later" bubble we had like 7 years ago with non-AI ChatBots. No users actually wanted to do anything important by talking to a chatbot then, but every company still pushed them out. I don't think an LLM improves that much.
Every time some tool I've used for years sends an email "Hey, we've got AI now!" my thought is just "well, that's unfortunate"...
I don't want AI taking any actions I can't inspect with a difftool, especially not anything important. It's like letting a small child drive a car.
This period feels extremely similar to the early 2000s, where people were saying that the web hadn't really done much and that it seemed to be at an "end". And then Amazon, Facebook, Twitter, Reddit, and pretty much the entirety of the modern web exploded.
How tech innovation happens is very different from how people think it happens. There are nice, simple stories told after the fact, but in the beginning and middle it is very messy.
AI, if nothing else, is already completely up-ending the Search industry. You probably already find yourself going to ChatGPT for lots of things you would have previously gone to Google for. That's not going to stop. And the ads marketplaces are coming.
We're also finding incredibly valuable use for it in processing unstructured documents into structured data. Even if it only gets it 80-90% there, it's so much faster for a human to check the work and complete the process than it is for them to open a blank spreadsheet and start copy/pasting things over.
There's obviously loads of hype around AI, and loads of skepticism. In that way this is similar to 2001. And the bubble will likely pop at some point, but the long tail value of the technology is very, very real. Just like the internet in 2001.
Until recently everyone was bragging about predicting bitcoin's bubble. To the best of my knowledge there was no huge crash, crypto just got out of fashion in mainstream media. I guess that's what's going to happen with AI.
Calling this an “AI bubble” reads like pure sour grapes from folks who missed the adoption curve. Real teams are already banking gains - code velocity up, ticket resolution times down, and marketing lift from AI-assisted creative while capex always precedes revenue in platform shifts (see cloud 2010, smartphones 2007). The “costs don’t match cash flow” trope ignores lagging enterprise procurement cycles and the rapid glide path of unit economics as models, inference, and hardware efficiency improve. Habit formation is the moat: once workers rely on AI copilots, those workflows harden into paid seats and platform lock-in. We’re not watching a bubble pop; we’re watching infrastructure being laid for the next decade of products.
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[ 3.7 ms ] story [ 74.0 ms ] threadI don’t, I think a workable fusion reactor will be the most important technology of the 21st century.
* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...
* https://en.wikipedia.org/wiki/Canal_Mania
Why is that the case? There's plenty of people in the field who have made convincing arguments that it's a dead end and fundamentally we'll need to do something else to achieve AGI.
Where's the business value? Right now it doesn't really exist, adoption is low to nonexistent outside of programming and even in programming it's inconclusive as to how much better/worse it makes programmers.
I'm not a hater, it could be true, but it seems to be gospel and I'm not sure why.
Mapping to 2001 feels silly to me, when we've had other bubbles in the past that led to nothing of real substance.
LLMs are cool, but if they can't be relied on to do real work maybe they're not change the world cool? More like 30-40B market cool.
EDIT: Just to be clear here. I'm mostly talking about "agents"
It's nice to have something that can function as a good Google replacement especially since regular websites have gotten SEOified over the years. Even better if we have internal Search/Chat or whatever.
I use Glean at work and it's great.
There's some value in summarizing/brainstorming too etc. My point isn't that LLMs et al aren't useful.
The existing value though doesn't justify the multi-trillion dollar buildout plans. What does is the attempt to replace all white collar labor with agents.
That's the world changing part, not running a pretty successful biz, with a useful product. That's the part where I haven't seen meaningful adoption.
This is currently pitched as something that will have nonzero chance of destroying all human life, we can't settle for "Eh it's a bit better than Google and it makes our programmers like 10% more efficient at writing code."
I don't think that's true. The people who think AI is important call it AI. The skeptics call it LLMs so they can say LLMs won't work. It's kind of a strawman argument really.
Now, what this sort of article tends to miss (and I will never know because it’s paywalled like a jackass) is that these models services are used by everyday people for every day tasks. Doesn’t matter if they’re good or not. It enables them to do less work for the same pay. Don’t focus on the money the models are bringing in today, focus on the dependency they’re building on people’s minds.
We're just at 25% of it. Raising such a claim is foolish at least. People will be tinkering as usual and it's hard to predict the next big thing. You can bet on something, you can postdict (which is much easier), but being certain about it? Nope.
The small huge companies investing in AI are tech companies who already make a lot of money. They did not invest in 'manufacturing' or other things on the side as relevant as the blog makes it.
The offshoring of manufacturing to China was a result of cost and shareholder value. But while USA got rich in 60-90 for manufacturing, now this moved over to China.
The investment is not just going into LLM, its going into ML and Robotics. The progress of ML and Robotics in the last x years is tremendous.
And the offshoring of Datacenters? DCs have very little personel they need, they are critical infrastructure you want to control. There is very little motivation to just 'offshore' critical infrastructure espescially from companies who are so rich, that they don't need to move them in some weird shitty location which only makes sense because energy is cheap but everything else is bad.
The 'AI Bubble' i'm experiencing, is adding real value left and right. And no i'm not talking about only LLMs. I'm talking about LLMs and ML in general.
This 'Bubble' is disrupting every single market out there. Everyone is searching for the niche not optimized yet and only accessable now tx to LLMs and ML.
And if you think this is just some hype and will go away, have you even tried Chat GPTs voice mode? This was literaly NOT possible 5 years ago. And i have real gains like 20% and more in plenty of things i'm now leveraging ML and LLms which was also NOT possible 5 years ago.
[0]: https://www.wheresyoured.at/the-haters-gui/
If China invades Taiwan, why wouldn't TSMC, Nvidia and AMD stock prices go to zero?
They also could just send a big rocket barrage onto the factories. I assume it would be very hard to defend from such a short distance.
Then most ports and cities in taiwan are towards east (with big mountains on the western side). Would be very bad if China decides to blockade it by shooting ships from their main land...
Also very little the west could do imo. A land invasion in china or a nuclear war don't seem very reasonable.
Looking how west has little willpower to truly sanction russia, against China there will be even less sanctions.
All my friends and family are using the free version of ChatGPT or something similar. They will never pay (although they have enough money to do so).
Even in my very narrow subjective circles it does not add up.
Who pays for AI and how? And when in the future?
What? If that figure is true then "absolutely bananas" is the understatement of the century and "batshit insane" would be a better descriptor (though still an understatement).
(This comment was written by ChatGPT)
I am confused by a statement like this. Does Derek know why they are not? If hes does, I would love to hear the case (and no, comparisons to a random countries GDP are not an explanation).
If he does not, I am not sure why we would not assume that we are simply missing something, when there are so many knowledgable players charting a similar course, that have access to all the numbers and probably thought really long and hard about spending this much money.
By no means do I mean that they are right for that. It's very easy to see the potential bubble. But I would love to see some stronger reasoning for that.
What I know (as someone running a smallish non-tech business) is that there is plenty of very clearly unrealized potential, that will probably take ~years to fully build into the business, but that the AI technology of today already supports capability wise and that will definitely happen in the future.
I have no reason to believe that we would be special in that.
These tech bubbles are leaving nothing, absolutely nothing but destruction of the commons.
Sure, AI as a tool, as it currently is, will take a very long time to earn back the $B being invested.
But what if someone reaches autonomous AGI with this push?
Everything changes.
So I think there's a massive, massive upside risk being priced into these investments.
The definition is that the assets are valuated above an intrinsic value.
The first graph is Amazon, Meta, Google, Microsoft, and Oracle. Lets check their PE ratio.
Amazon (AMZN) ~ 33.6
Meta (META) ~ 27.5
Google (GOOGL) ~ 25.7
Microsoft (MSFT) ~ 37.9
Oracle (ORCL) ~ 65
These are highish pe ratios, but certainly very far from bubble numbers. OpenAI and others are all private.
Objectively there is no bubble. Economic bubble territory is 100-200+ PE ratios.
Not to mention, who are you to think the top tech companies arent fully aware of the risks they are taking with AI?
I really feel like we're in the same "Get it out first, figure out what it is good for later" bubble we had like 7 years ago with non-AI ChatBots. No users actually wanted to do anything important by talking to a chatbot then, but every company still pushed them out. I don't think an LLM improves that much.
Every time some tool I've used for years sends an email "Hey, we've got AI now!" my thought is just "well, that's unfortunate"...
I don't want AI taking any actions I can't inspect with a difftool, especially not anything important. It's like letting a small child drive a car.
How tech innovation happens is very different from how people think it happens. There are nice, simple stories told after the fact, but in the beginning and middle it is very messy.
We're also finding incredibly valuable use for it in processing unstructured documents into structured data. Even if it only gets it 80-90% there, it's so much faster for a human to check the work and complete the process than it is for them to open a blank spreadsheet and start copy/pasting things over.
There's obviously loads of hype around AI, and loads of skepticism. In that way this is similar to 2001. And the bubble will likely pop at some point, but the long tail value of the technology is very, very real. Just like the internet in 2001.