There is no AI bubble. The housing bubble was about artificially inflated housing assets.
People have been calling Bitcoin a bubble since it was introduced. Has it popped? No. Has it reached the popularity and usability crypto shills said it would? Also no.
AI on the other hand has the potential to put literally millions of individuals out of work. At a minimum, it is already augmenting the value of highly-skilled intellectual workers. This is the final capitalism cheat code. A worker who does not sleep or take time off.
There will be layoffs and there will be bankruptcies. Yes. But AI is never going to be rolled back. We are never going to see a pre-AI world ever again, just like Bitcoin never really went away.
> When the early-electrification bubble built, we were left with the grid. And when the dot-com bubble burst, we were left with a lot of valuable infrastructure whose cost was sunk, in particular dark fibre. The AI bubble? Not so much.
Except for the physical buildings, permitting, and power grid build-out.
>When companies buy expensive stuff, for accounting purposes they pretend they haven’t spent the money; instead they “depreciate” it over a few years
I thought there was a US IRS Law that was changed sometime in the past 10/15 years that made companies depreciate computer hardware in 1 year. Am I misremembering ?
I thought that law was the reason why many companies increased the life time of employee Laptops from 3 to 5 years.
I think the interesting thing to think about its that we _already_ fired people in the name of AI (because AI was supposed to be this huge efficiency gain).
When the bubble pops, do you fire _even more_ people? What does that look like given the decimation in the job market already?
I have been thinking. The reality is that in general employees are not paid for value/revenue/profit they generate. That sets the floor. But they are paid what market sets as rate for their demand. See people putting together high cost electronics. Clearly lot of value there with margins what they are, but not lot of pay.
Wouldn't AI largely be race to bottom? As such even if expensive employees get replaced, the cost of replacing them might not be that big. It might only barely cover the costs of interference for example. So might it be that profits will actually be lot lower than costs of employees that are being replaced?
> Nobody who is doing this is willing to come clean with hard numbers but there are data points, for example from Meta and (very unofficially) Google.
The Meta link does not support the point. It's actually implying a MTBF of over 5 years at 90% utilizization even if you assume there's no bathtub curve. Pretty sure that lines up with the depreciation period.
That article makes a big claim, does not link to any source. It vaguely describes the source, but nobody who was actually in that role would describe themselves as the "GenAI principal architect at Alphabet". Like, those are not the words they would use. It would also be pointless to try to stay anonymous if that really were your title.
That is not merely an unofficial source. That is just made up trash that the blog author just lapped up despite its obviously unreliable nature, since it confirmed his beliefs.
> It's actually implying a MTBF of over 5 years [...] Pretty sure that lines up with the depreciation period.
You're assuming this is normal, for the MTBF to line up with the depreciation schedule. But the MTBF of data center hardware is usually quite a bit longer than the depreciation schedule right? If I recall correctly, for servers it's typically double or triple, roughly. Maybe less for GPUs, I'm not directly familiar, but a quick web search suggests these periods shouldn't line up for GPUs either.
The AI bubble is causing large scale resource mis-allocation. That means that resources that could and should have been allocated to useful things have instead gone into data centre build outs and the panoply of marketing, executive hot air, forced/frivolous use of LLMs etc etc - the list goes on.
This means that society as a whole is perhaps significantly poorer than if LLMs had been properly valued (i.e. not a bubble), or had simply never happened at all.
Unfortunately it will likely be the poorest and most vulnerable in our societies that will bear the brunt. 'Twas ever thus.
> I think the people telling us that genAI is the future and we must pay it fealty richly deserve their impending financial wipe-out.
I think people need to realize that if the bubble gets bad enough, there will absolutely, positively, 100% be a bailout. Trump doesn't care who you are or what you did, as long as you pay enough (both money and praise) you get whatever you want, and Big Tech has already put many down payments. I mean, they ask him "Why did you pardon CZ after he defrauded people? Why did you pardon Hernandez after he smuggled tons of cocaine in?" and he plainly says he doesn't know who they are. And why should he? They paid, there's no need to know your customers personally, there's too many of them.
> I wonder who, after the loss of those tens of millions of high-paid jobs, are going to be the consumers who’ll buy the goods that’ll drive the profits that’ll pay back the investors. But that problem is kind of intrinsic to Late-stage Capitalism.
> Anyhow, there will be a crash and a hangover. I think the people telling us that genAI is the future and we must pay it fealty richly deserve their impending financial wipe-out. But still, I hope the hangover is less terrible than I think it will be.
Yup. We really seem to be at a point where everyone has their guns drawn under the table and we're just waiting for the first shot—like we're living in a real-world, global version of Uncut Gems.
Its the whole layer of feature companies built on top of the core models what will pop (openai, anthropic, google resellers). Existing services will add AI bit by bit for features and survive. The core owners of models I think will survive (exception might be open ai, maybe). For the hardware there really are not that many TSMC wafers going around so max sales are capped for everyone at the newest nodes.
There's many questions about the overall economics of AI, its value, is it overvalued, is it not, etc. but this is a very poor article I suspect made by someone with little to no financial or accounting knowledge with a strong "uh big tech bad" bias.
> When companies buy expensive stuff, for accounting purposes they pretend they haven’t spent the money; instead they “depreciate” it over a few years.
There's no pretending. It's accounting. When you buy an asset, you own it, it is now part of your balance sheet. You incur a cost when the value of the asset falls, i.e. it depreciates. If you spend 20k on a car you are not pretending to not having spent 20k by considering it an asset, you spent money but now you have something of similar value as an asset. Your cost is the depreciation as years go by and the car becomes less valuable. That's a very misleading way to put it.
> Management gets to pick your depreciation period, (...)
They don't. GAAP, IFRS, or whatever other accounting rules that apply to the company do. There's some degree of freedom in certain situations but it's not "management wants". And it's funny that the author thinks that companies in general are interested in defining longer useful lives when in most cases (this depends on other tax considerations) it's the opposite because while depreciation is a non-cash expense you can get real cash by reducing your taxable income and the sooner you get that money the better. There's some more nuance to this, tax vs accounting, how much freedom management has vs what is industry practice and auditors will allow you to do... my point is, again, "management gets to pick" is not an accurate representation of what goes on.
> It’s like this. The Big-Tech giants are insanely profitable but they don’t have enough money lying around to build the hundreds of billions of dollars worth of data centers the AI prophets say we’re going to need.
Actually they do, Meta is the one that has the least but it could still easily raise that money. Meta in this case just thinks it's a better deal to share risk with investors that at the moment have a very strong appetite to own these assets. Meta is actually paying a higher rate through these SPVs compared to funding them outright. Now, personally I don't know how I would feel about that deal in particular if I was an investor just because you need to dig a little deeper in their balance sheet to have a good snapshot of what is going on but it's not any trick, arguably it can make economic sense.
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[ 4.7 ms ] story [ 31.7 ms ] threadPeople have been calling Bitcoin a bubble since it was introduced. Has it popped? No. Has it reached the popularity and usability crypto shills said it would? Also no.
AI on the other hand has the potential to put literally millions of individuals out of work. At a minimum, it is already augmenting the value of highly-skilled intellectual workers. This is the final capitalism cheat code. A worker who does not sleep or take time off.
There will be layoffs and there will be bankruptcies. Yes. But AI is never going to be rolled back. We are never going to see a pre-AI world ever again, just like Bitcoin never really went away.
Except for the physical buildings, permitting, and power grid build-out.
[citation needed]
I thought there was a US IRS Law that was changed sometime in the past 10/15 years that made companies depreciate computer hardware in 1 year. Am I misremembering ?
I thought that law was the reason why many companies increased the life time of employee Laptops from 3 to 5 years.
I think the first part of this is probably true, but I don’t think everyone knows it. A lot of people are acting like they don’t know it.
It feels like a bubble to me, but I don’t think anyone can say to a certainty that it is, or that it will pop.
When the bubble pops, do you fire _even more_ people? What does that look like given the decimation in the job market already?
Wouldn't AI largely be race to bottom? As such even if expensive employees get replaced, the cost of replacing them might not be that big. It might only barely cover the costs of interference for example. So might it be that profits will actually be lot lower than costs of employees that are being replaced?
The Meta link does not support the point. It's actually implying a MTBF of over 5 years at 90% utilizization even if you assume there's no bathtub curve. Pretty sure that lines up with the depreciation period.
The Google link is even worse. It links to https://www.tomshardware.com/pc-components/gpus/datacenter-g...
That article makes a big claim, does not link to any source. It vaguely describes the source, but nobody who was actually in that role would describe themselves as the "GenAI principal architect at Alphabet". Like, those are not the words they would use. It would also be pointless to try to stay anonymous if that really were your title.
It looks like the ultimate source of the quote is this Twitter screenshot of an unnamed article (whose text can't be found with search engines): https://x.com/techfund1/status/1849031571421983140
That is not merely an unofficial source. That is just made up trash that the blog author just lapped up despite its obviously unreliable nature, since it confirmed his beliefs.
You're assuming this is normal, for the MTBF to line up with the depreciation schedule. But the MTBF of data center hardware is usually quite a bit longer than the depreciation schedule right? If I recall correctly, for servers it's typically double or triple, roughly. Maybe less for GPUs, I'm not directly familiar, but a quick web search suggests these periods shouldn't line up for GPUs either.
This means that society as a whole is perhaps significantly poorer than if LLMs had been properly valued (i.e. not a bubble), or had simply never happened at all.
Unfortunately it will likely be the poorest and most vulnerable in our societies that will bear the brunt. 'Twas ever thus.
I think people need to realize that if the bubble gets bad enough, there will absolutely, positively, 100% be a bailout. Trump doesn't care who you are or what you did, as long as you pay enough (both money and praise) you get whatever you want, and Big Tech has already put many down payments. I mean, they ask him "Why did you pardon CZ after he defrauded people? Why did you pardon Hernandez after he smuggled tons of cocaine in?" and he plainly says he doesn't know who they are. And why should he? They paid, there's no need to know your customers personally, there's too many of them.
> Anyhow, there will be a crash and a hangover. I think the people telling us that genAI is the future and we must pay it fealty richly deserve their impending financial wipe-out. But still, I hope the hangover is less terrible than I think it will be.
Yup. We really seem to be at a point where everyone has their guns drawn under the table and we're just waiting for the first shot—like we're living in a real-world, global version of Uncut Gems.
> When companies buy expensive stuff, for accounting purposes they pretend they haven’t spent the money; instead they “depreciate” it over a few years.
There's no pretending. It's accounting. When you buy an asset, you own it, it is now part of your balance sheet. You incur a cost when the value of the asset falls, i.e. it depreciates. If you spend 20k on a car you are not pretending to not having spent 20k by considering it an asset, you spent money but now you have something of similar value as an asset. Your cost is the depreciation as years go by and the car becomes less valuable. That's a very misleading way to put it.
> Management gets to pick your depreciation period, (...)
They don't. GAAP, IFRS, or whatever other accounting rules that apply to the company do. There's some degree of freedom in certain situations but it's not "management wants". And it's funny that the author thinks that companies in general are interested in defining longer useful lives when in most cases (this depends on other tax considerations) it's the opposite because while depreciation is a non-cash expense you can get real cash by reducing your taxable income and the sooner you get that money the better. There's some more nuance to this, tax vs accounting, how much freedom management has vs what is industry practice and auditors will allow you to do... my point is, again, "management gets to pick" is not an accurate representation of what goes on.
> It’s like this. The Big-Tech giants are insanely profitable but they don’t have enough money lying around to build the hundreds of billions of dollars worth of data centers the AI prophets say we’re going to need.
Actually they do, Meta is the one that has the least but it could still easily raise that money. Meta in this case just thinks it's a better deal to share risk with investors that at the moment have a very strong appetite to own these assets. Meta is actually paying a higher rate through these SPVs compared to funding them outright. Now, personally I don't know how I would feel about that deal in particular if I was an investor just because you need to dig a little deeper in their balance sheet to have a good snapshot of what is going on but it's not any trick, arguably it can make economic sense.
"Special Purpose Vehicles" reminds me of "Special Purpose Entities" from the 90s and 00s, e.g., for synthentic leases