This is another way that bubbles form, a cabal of cross-dealing giants that don't have solid revenue to ground the valuations is a very scary position.
I believe that a lot of AI is real, but the realness of AI's impact on the economy does not prevent a bubble. The dot com bubble didn't make the internet any less real or impactful on everyone's lives. So it feels like very scary times ahead.
Also, the devaluation of the dollar is an extremely tricky situation for the US. Morgan Stanley puts it at 10% less value in 2025, and another 10% drop by the end of 2026:
I was never scared with the inflation during Biden because it seemed like we would be on track to put the economy in the right position, because it was global and the US was doing so much better than the rest of the world. But now, it feels like the US is intentionally entering recession and choosing a future of poverty.
If AI were real, companies would charge market price for it now and reduce the price as model training costs fell over time. That is how things worked in microcomputer market between the '80s and '90s as hardware prices fell and software became commoditized. Giving it away for peanuts in the hope that prices can be raised 10x later is destined for failure.
So $400B per year is currently spent on datacenter buildout?
To see if that is too much or not, we have to put that number in relation to the value those datacenters will create in the future.
If global GDP is $100T and labor is 50% of that, then the current TAM for intelligence is around $50T.
How much of that has to be automated per year to justify $400B of investment? For a 10% ROI it would be around 1%, right? But the datacenters will not be the only cost of generating artificial work. We also need energy, software and robots. So let's say 2%.
So it comes down to the question whether those datacenters built for $400B will automate 2% of global GDP in the foreseeable future.
And there is another option: That the TAM increases. That we use the new possibilities we have to build more products and services. And see global GDP grow. 2% AI driven global GDP growth would also justify the $400B datacenter buildout.
So let's think about a mix: 1% labor automation and 1% GDP growth per year via AI. That would be needed to justify continued spending of $400B per year for the AI buildout.
I don’t know why everyone’s confident that the investments won’t pay off. Every such post in HN is such a way. 800 million weekly active users from ChatGPT implies that people actually like LLM’s and likely the growth will still keep increasing. Every signal points to this - so investment in data centers make sense?
Oh well, I guess we have another once-in-a-lifetime economic crisis ahead of us. Ready your tax dollars, prepare the bailouts! We've got some billionaires to save.
I am surprised that Taiwan and China are not mentioned in the article or in these comments. Given the threat that China will get to Taiwan and capture control over the unrivaled TSMC, investing into silicon while we can is pure and simple de-risking in a de-globalizing world.
It’s worth noting that pretty much all the growth in AI / Data centres is an accounting trick as well.
Nvidia just announced it’s investing X billion dollars into OpenAI who will turn around and spend 98% of that on Nvidia chips, so GDP rises, stocks rise but actual free market activity? Not so much
> absent the AI boom we would probably have lower interest rates [and] electricity prices, thus some additional growth in other sectors.
In other words, the AI hype comes at the cost of lower growth rates in other sectors of the economy?
It makes sense, since investor money is spent exactly once. If it goes to AI then it doesn't go elsewhere. And if it didn't go to AI then it would go elsewhere.
Sad for folks outside tech. But at least they can AI generate cat pictures now, and watch their tech friend use AI tooling to write software.
I'd think investment banks, law firms and management consultancies must be doing very well in this inflated market. They get a piece of every financing deal and consulting engagement that drives these bilkion dollar spending decisions.
Reminds me of many discussions in Ireland like "if we didn't have big tech giants, we'd have a government budget deficit". Sure, but we do have big tech giants. If I didn't have a job, I'd be poor.
Isn't this normal? That if you stripped whatever is currently hot from the economy, the rest would be... lackluster? For one, any "special effort" investment money is pouring in there instead of somewhere else, or many somewhere elses?
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[ 2.8 ms ] story [ 46.2 ms ] threadhttps://www.bloomberg.com/news/features/2025-10-07/openai-s-...
This is another way that bubbles form, a cabal of cross-dealing giants that don't have solid revenue to ground the valuations is a very scary position.
I believe that a lot of AI is real, but the realness of AI's impact on the economy does not prevent a bubble. The dot com bubble didn't make the internet any less real or impactful on everyone's lives. So it feels like very scary times ahead.
Also, the devaluation of the dollar is an extremely tricky situation for the US. Morgan Stanley puts it at 10% less value in 2025, and another 10% drop by the end of 2026:
https://www.morganstanley.com/insights/articles/us-dollar-de...
I was never scared with the inflation during Biden because it seemed like we would be on track to put the economy in the right position, because it was global and the US was doing so much better than the rest of the world. But now, it feels like the US is intentionally entering recession and choosing a future of poverty.
Inflation, unemployment, GDP.
It’s like we’re incapable of nuance on a societal level.
To see if that is too much or not, we have to put that number in relation to the value those datacenters will create in the future.
If global GDP is $100T and labor is 50% of that, then the current TAM for intelligence is around $50T.
How much of that has to be automated per year to justify $400B of investment? For a 10% ROI it would be around 1%, right? But the datacenters will not be the only cost of generating artificial work. We also need energy, software and robots. So let's say 2%.
So it comes down to the question whether those datacenters built for $400B will automate 2% of global GDP in the foreseeable future.
And there is another option: That the TAM increases. That we use the new possibilities we have to build more products and services. And see global GDP grow. 2% AI driven global GDP growth would also justify the $400B datacenter buildout.
So let's think about a mix: 1% labor automation and 1% GDP growth per year via AI. That would be needed to justify continued spending of $400B per year for the AI buildout.
Nvidia just announced it’s investing X billion dollars into OpenAI who will turn around and spend 98% of that on Nvidia chips, so GDP rises, stocks rise but actual free market activity? Not so much
In other words, the AI hype comes at the cost of lower growth rates in other sectors of the economy?
It makes sense, since investor money is spent exactly once. If it goes to AI then it doesn't go elsewhere. And if it didn't go to AI then it would go elsewhere.
Sad for folks outside tech. But at least they can AI generate cat pictures now, and watch their tech friend use AI tooling to write software.
I'd think investment banks, law firms and management consultancies must be doing very well in this inflated market. They get a piece of every financing deal and consulting engagement that drives these bilkion dollar spending decisions.
AI sucked the air out of the room for almost no return, the crash is going to be something to behold.