Cloudflare is not competing with app builders like Lovable or Repl though. They are the underlying infrastructure for companies like that. This is why they will win in the AI era.
They're saying that it's trivial for Cloudflare to go up the stack (build Replit) while it's non-trivial for Replit to go down the stack (build Cloudflare).
By this logic every single company on the planet would be a single-product company. The reality is that companies expand their offerings all the time – despite the cost, complexity, and risk of doing so.
A great time to expand your offerings is when there's an adjacent offering that's producing outsized returns for someone else, is easily replicable, and which you have an asymmetric advantage on.
I think everyone knows that when someone says "it's trivial" for a business to do something, it doesn't mean it's actually trivial. Doing anything of any value anywhere is non-trivial. It's shorthand for "doing Activity X is almost certainly achievable with an acceptable outlay of risk for Business Y."
> By this logic every single company on the planet would be a single-product company.
This is absolutely not true, and proof that you completely misunderstood what I said.
You took an upmarket B2B infrastructure company and compared it to a low-end B2B/B2C software company. That is a completely different type of business.
Cloudflare launches new products and offerings all the time - and all B2B within their market space. The difference is that if they did what you suggest (make a Lovable), it would put them in a position of competing with their own customers, and it would have a chilling effect on selling more infrastructure to other companies who would then fear competition as well. It's not that they can't do it. It's that it is not wise for them to do so, and it's a different type of business entirely.
As I understand it, very little of Replit and Lovable (especially) are actually B2C. A lot of it is internal teams at mid-sized companies, which are a huge and demonstrably very fruitful customer segment, and one that Cloudflare does in fact serve already.
Cloudflare has already started releasing products that point in this direction. Not sure how far they will (or should) go, but it's really not categorically ridiculous or impossible or nonsensical, as you're implying.
Neither are trivial but I would wager cloudflare is the easiest to replace because it's the most mechanical and price sensitive.
It's like VPN service. Some other party comes along and offers it at 40% of the cost, you can do that.
Lovable is more nuanced. It takes more to move away, and there's just no reason to. The unit cost of Lovable buyeres is negligible aka less buyer sensitivity
LMAO you have it complete upside down, and if you think Lovable is a 'wrapper' around AI maybe you should try building a working app.
Lovable is a layer of abstraction, becoming as as complex as Shopify.
"It takes decades to build the kind of network cloudflare has."
It takes literally no time. Cloudflare's network could be emulated with proper planning and enough budget, and turned on instantly. 'Servers in 300 cities' is a medium sized challenge, but most importantly, it's a relatively clear path.
On the customer side, Cloudflare (in most cases) could be replaced as quickly as individuals replace their VPNs.
Shopify for example is ' just some siple HTML and checkout' - of course not - they are dominant and growing because there's a lot of complex interdependence, switching costs are much higher, their buyers are less technical and much less likely to want to change, and building a Shopify replacement involves hitting a lot of checkmarks.
Lovable started as a wrapper just as Shopify started with something simple, but they've quickly evolved.
AWS could snap their fingers and decide to knock out Cloudflare, it's a 'Commodity Plus' that came to the fore in a time when a specific need was there, and now people are turning to it out of convenience.
Of Lovable, Wix, Shopify, Figma, Stripe - Cloudflare is in the riskiest position because of the inherent commoditizability of their tech and the relatively low switching costs.
Cloudflare is competing with Akamai, and a few other core delivery and WAF infrastructure companies and services provided by the big cloud providers. Not some content hosting outfit.
Our designer uses some some of open-source Lovable. I don't remember the name, it's just pointed to our liteLLM gateway. A dev helped him with the setup, so there's still a bit of value in lovable's "it just works", but it's so much cheaper someone is bound to eat their lunch.
During the dot-com boom, Cisco was the underlying infrastructure of the Internet. A lot of investors that believed themselves to be savvy bought Cisco stock. Their reasoning was that individual dot-com startups may go under, but the Internet itself was here to stay. In practice, the Cisco stock price peaked in March 2000, and anyone who invested at the peak would not have broken even (in nominal dollars, not real dollars) until December 2025.
The investors were right that the Internet would be important, and that Cisco would continue to be an important manufacturer of networking infrastructure. This just fundamentally did not matter because after the dot-com bubble popped, the market decided that Cisco simply wasn't worth the price it was selling at during the height of the bubble.
In an April 2002 interview with Bloomberg Businessweek, Scott McNealy, then CEO of Sun Microsystems, reflected on investors paying 10x revenue for Sun stock at its dot-com peak ($64/share in 2000):
At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?
Now this analysis is imperfect... but it's good enough.
Disclaimer that I'm a long-term Cloudflare holder, and that I've also sold NET in the past year.
I empathize with this view, however it is very hard to value businesses that have extremely high margins, and who grow revenue very quickly on existing products while they're adding additional products.
I don't think NET is a steal at 39x revenue. But at no point in the last 5 years has NET been available to purchase for <15x revenue [1].
During that time, it has had Gross Margins in the exceptional range of 70%-75%, and YoY quarterly revenue growth in the similarly exceptional range of 25-40%, which has increased in our post-AI agent software economy.
If you're a Ben Graham acolyte, you would have sat out of NET since it's IPO. However, if you're a Charlie Munger/Buffet admirer who understands the pivotal role NET plays in the software ecosystem (i.e. it's inside your "circle of competence"), you'd do well to consider the Mungerism:
"Forget what you know about buying fair businesses at wonderful prices. Instead, buy wonderful businesses at fair prices."
That still leaves as an exercise to the reader what a "fair price" is for NET, but (to me, at least) it's clearly a wonderful business.
IT Sovereignty is likely to be a growing trend after the past few years - including issues of Election interference not just by governments but by individual Tech CEOs. I think a lot of particularly Europeans have realized that putting all your eggs in American jurisprudence might -not- be the best way to go.
Cloudflare has a moat but it already smells like sewage.
Given how much people have started actively looking for alternatives, and how much spray-and-pray Cloudflare's offerings now seem with so many launches every few weeks, steal is a bit too optimistic.
Personally, I think that the idea that market always recovers is so widespread right now that it'll take some serious financial hardships for people to start selling instead of buying the dip.
With the housing bubble, it was because people owned multiple homes then struggled to pay two mortgages as economic conditions degraded, and banks were willing to absorb losses if the homes were sold below the cost of the mortgage.
What is encouraging people to route from the stock market? Bond yields aren't high enough yet to encourage people to retreat from stocks, and there's no other alternative investments. Plus, so much of the S&P is held in 401ks. And I agree, economic hardship is not widespread enough for people with significant investment holdings to start selling them off to live. Those who are struggling are those who used to be struggling too (thus, no extra money for investments).
There are also a lot of set it and forget it index investors that won't buy a dip, but won't sell either (unless they experience those serious financial hardships). That's the group I'm in.
Democrats are not going to try and stop AI or rein in AI. There is too much money at stake. They'll pass some regulations, sure, some data center rollouts might be blocked or modified, but they aren't going to stop the train.
They're not even going to do that. Trump isn't going to sign that. When was the last time Congress overrode a veto or played hardball (well the Democratic side anyway)? They have no fight in them.
They don't have to. This particular train explodes on its own if it drop below 100 mph.
Even tepid regulation will destroy the "our TIA is the entire observable universe due to the potential of self replicating AI probes so we totally deserve 10 trillion dollars in investor capital" trade
I've seen this movie. I think it was called "The Bus That Couldn't Slow Down". It had Keanu Reaves and Sandra Bullock. IIRC it didn't end well for the bus.
I was going to say that Democrats have no power to uphold laws, that's up to the executive and the national executive hasn't changed.
On the other hand a number of governors have changed (Texas in particular just went to a Democrat, and there are SpaceX interests there). They by definition can't prosecute on a federal level but they do hold some enforcement power.
The legislative branch has the power to hold the executive branch accountable for not enforcing the laws should they so choose. That's why impeachment and conviction exist.
The financial aspect/discourse is for the proletariat who prefer to pretend politics and risk of military conflict do not exist.
They won't stop it because China won't stop. Politicians have to avoid any appearance of xenophobia though (and to be certain many are personally not xenophobic, just saying optics matter to them), so they talk about jobs and wealth inequality as euphemism for ground truth; we aren't secure putting all our eggs in the China basket.
Arguably screwed up there already letting chips and robotics flow offshore while we focused on increasingly useless education in developer syntax and semantics.
They will cool the AI investment well aware technology improves and we probably don't really need all our investment eggs in that one basket then
They aren't going to stop AI, but they are not going to let the owners of the superintelligence inference engines become god emperors of the planet, and in that case why not just get 4.5% on some bonds?
Well, don't forget this is also about national security. China/state of choice AI going after your infrastructure & national secrets is going to take AI to defend against.
There's zero chance AI datacentres are going away, they are unfortunately a national security necessity now.
Many safe and good technologies were successfully sabotaged for populist and stupid political reasons, e.g. in nuclear power. Or less spectacular, think of the welfare loss due to the NIMBY-fied housing market.
My definition for an Agent is "a marketing term for long running LLM Chat sessions that has increased access to use your computer to complete tasks it cannot otherwise do by itself".
That's my attempt at a universal definition for technical and non-technical users. How does it compare?
Well, my reference for a commonly used incorrect definition is “anything that involves using an LLM” so yours is better than that.
But the elements that I think are necessary are 1) goal-oriented processing, 2) ability to use tools, 3) ability to iterate and self-correct. Along with that typically comes 4) self-talk or other hidden context during execution and 5) support for defined personas beyond system or user prompts.
That’s off the top of my head, probably not complete/correct, and definitely meant to be more technical than a non-tech person would need.
> This is clearly voter sentiment about AI in general and big tech in general.
There is growing public sentiment about AI & Tech, but per exit polls that wasn't a Top 3 reason swing voters went blue (Economy, Wars, Corruption). Today's market correction is being driven by the majority in both houses of congress flipping blue. Trump and most Republican legislators were seen as broadly supporting AI / Tech and most Democrats are seen as being less supportive.
AI / Tech-friendly legislation is now likely to face a slower, more difficult path through committee and passage. IMHO, the actual impact of the political change is nowhere near 5% of company value, but outsized swings tend to happen on any adverse news when the market is already fearful they've bought into a high-priced bubble far in advance of actual earnings.
My hope is that this moment is a decisive but constrained tempering of market enthusiasm. But that sounds too reasonable, so…probably next week it’ll all be back to crazy town.
I agree. The best case would if this 5% drop in AI-centric tech isn't a 'dip', but the beginning of a gradual unwinding of the AI bubble. I'd take as a positive sign if 3 months from now AI-centric stocks had slipped another 5% but other sectors where slightly higher than today.
The Trump administration was expected to invest massively into AI, and money invested into AI is effectively free money for AI company shareholders, that free money is priced in the stocks. With the change in direction, investments are expected to be less, which means less free money, and therefore less valuable stocks.
Well, yes, but it is even more mechanical than this.
Here is the simplified version:
Let's say I have a company worth 1 billion dollars, publicly traded, 10 million stocks worth $100 each. I get promised $100M from the state (aka taxpayers), shareholders estimate there is about 50% chance I will actually get the money: $100M * 50% / 10M = $5. It means the stocks are now worth $5 more, so $105.
Now the government has changed, and gone are my chances to get that money, so the sock is back to $100.
It's not only about the people who were elected, but 44/45 ballot initiatives specifically aimed at restricting or banning data center construction passed.
Bedsides coding agents, which only work extremely well if you are a developers or you train a person with the right inclination I have plenty running that work quite well, they do data extraction and data entry from emails and documents.
I run them with Chinese and other open models on a bunch of H100, they cover tens of thousands of emails per month and as many documents.
Whenever I see daily stock results I try to reframe it in a longer term. Interestingly, Nasdaq is only up ~4% YoY.
This is surprising to me, given how much acceleration there has been in AI capabilities since the same time last year. I guess costs and risks are accelerating just as fast.
The problem is that the economy is kinda flatlining and only the AI bubble (that is also hoovering up other, seemingly unrelated parts of the tech sector) is what makes this number as big as it is.
Stocks have been somewhat flat this year. Some big gains, but a lot of stagnation around the time the Iran war began. I got my hopes up yesterday, but the crash today puts us back to ~May depending on which index you're looking at.
As uncomfortable as this may be for the tech industry, I have been hoping for AI related stock prices to come back to reality. A market correction is a healthy thing so long as it doesn't turn into a collapse. IMO, some AI companies have ludicrous valuations considering their astronomical debt. A reality check may be healthy long term.
> Yeah I'm not sure how Anthropic is going to IPO at this rate...
There are plenty of suckers willing to gamble on a failing business (massive and rapidly growing debts, assets that can easily be cloned, no realistic path to profitability), so I don't think an IPO is off the table.
IMO OpenAI jumped the gun and rushed an immature product to be there first, no matter the costs. The other players saw it as a threat, and started running with the same carelessness. It has been spiraling since then, and while the product keeps improving, their business model hasn't demonstrated sustainability.
Their CEOs know it, and they must have their end game. I'd hate to think they'll just keep running until a hard crash. Hopefully small corrections will slow this down in a more controlled manner.
And I wholeheartedly thank China for doing this. The open weight models are fantastic, and make power consolidation of AI monopolies less likely. Open weights bring real competition to the space and help commoditize inference.
Good hardware companies are now trading at far under ten P/E, hardly ludicrous valuations. Sure there are some poor companies out there, but Nvidia and Micron are not among them. Buying opportunity when things settle down.
Nvidia has not been a buying opportunity for a while now. Training new models is the moat it possessed. The models are as good as they can be and have diminished returns beyond this. TPUs by google and CPUs by AMD are eating into their inference margins.
Stopping DC rollout effectively works as calling the bluff of AI.
AI is a hyped up nothing burger? AI demand retreats, lots of vacant compute, revenues sink (and the DC hold ends up being a (small) blessing in disguise for the labs).
AI lives up to it's hype? AI demand surges, capacity is severely constrained, margins explode as inference costs soar (and the DC block ends up being counter productive knee-jerk behavior)
The only way this plays out in anti-AI favor is if people stop using AI and demand goes down. Even if it flatlines, labs can rebalance towards inference and start harvesting those huge margins.
> (and the DC block ends up being counter productive knee-jerk behavior)
I don't agree with your description of how the ban is going to be counterproductive.
There won't be massive inference margins. The DCs will get built, in some other country. And in all likelihood they will continue to be built elsewhere even after the block is lifted.
Great opportunity to buy the dip in a couple of weeks. If anyone thinks they can slow down or stop AI adoption by banning data centers, good luck with that... The Chinese built an AI empire with much less compute that exists today in the US.
The thing you're missing is that the political expenditure of AI in the US is massively tied with the GOP and the far right. There's a reason why people like Elon Musk have been absolutely freaking out over the result.
This result means that unlimited data center expansion may not be on the table, and bailouts certainly aren't either. So with the leaders crashing out the uncertainty of AI expansion is now being properly priced into the stock.
I'm not missing it, I assure you. The politics was just not a huge factor in any larger sense in my opinion. The GOP tie-up was ALSO a narrative. (Though obviously folks thought the President would help with de-regulation, etc)
In the end, States and their utility regulators have to be on board with large data center deployments. Some GOP-led states were often friendly to builders, but their citizens realized what was happening and the backlash was going to happen anyway because of electricity prices. It's just one more nail in the coffin from a cost-of-living perspective, and the utilities hadn't yet passed the costs on to their customers (but it will pop up soon).
States that were led by Democrats were already pushing back for their own regulatory regimes for energy cost recovery, etc. Data centers were wildly unpopular at a STATE level, so it didn't really matter what was going to happen at the federal level.
> AI is not going anywhere and will only grow more and more.
I agree, but I think it's easy to conflate AI (a technology) with current AI companies (who's value is based on a bet about how that technology will develop).
I'm not predicting anything, but its perfectly plausible for Anthropic and OpenAI to suffer massive corrections if proprietary frontier models don't lead to a "a few winners take all" market.
In the same way, the internet grew a lot since the early 2000s, but pets.com did not.
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[ 0.22 ms ] story [ 45.1 ms ] threadSobriety the following day,
$8,000 for a video card,
Empty boxes on Christmas day.
Can't even rhyme without AI anymore.
Wind blows over clear acres
Buildouts are now dead?
Micron a little as well,
AI corps with their hands out ?
they can go to hell. :}
Someone hack out a libreOffice plugin called "poetry bucket" that lets you paint over, or into a document.
By someone, I mean, one of you AI agents out there.
Github in 12 hours.
See you at the pub.
This time is different, my artificial fiend says. The tokens are worth it, as they spin in the wind.
My net worth goes to zero, but there should be a hero, rescuing me, sometime during a bailout in 2033.
Regardless of what happens to the AI models, you will still need protection a decade from now.
Not to mention the most comprehensive platform to use with AI, they will inevitably eat Lovable / Repl's lunch.
Cloudflare is not competing with app builders like Lovable or Repl though. They are the underlying infrastructure for companies like that. This is why they will win in the AI era.
Lovable is hosted on Cloudflare: https://x.com/CloudflareDev/status/2113651157721600492
Cloudflare is B2B focusing on enterprise sales and underlying cloud infrastructure. These app builder companies are basically B2C and lower end B2B.
A great time to expand your offerings is when there's an adjacent offering that's producing outsized returns for someone else, is easily replicable, and which you have an asymmetric advantage on.
I think everyone knows that when someone says "it's trivial" for a business to do something, it doesn't mean it's actually trivial. Doing anything of any value anywhere is non-trivial. It's shorthand for "doing Activity X is almost certainly achievable with an acceptable outlay of risk for Business Y."
This is absolutely not true, and proof that you completely misunderstood what I said.
You took an upmarket B2B infrastructure company and compared it to a low-end B2B/B2C software company. That is a completely different type of business.
Cloudflare launches new products and offerings all the time - and all B2B within their market space. The difference is that if they did what you suggest (make a Lovable), it would put them in a position of competing with their own customers, and it would have a chilling effect on selling more infrastructure to other companies who would then fear competition as well. It's not that they can't do it. It's that it is not wise for them to do so, and it's a different type of business entirely.
Cloudflare has already started releasing products that point in this direction. Not sure how far they will (or should) go, but it's really not categorically ridiculous or impossible or nonsensical, as you're implying.
https://blog.cloudflare.com/cloudflare-os/
It's like VPN service. Some other party comes along and offers it at 40% of the cost, you can do that.
Lovable is more nuanced. It takes more to move away, and there's just no reason to. The unit cost of Lovable buyeres is negligible aka less buyer sensitivity
It takes decades to build the kind of network cloudflare has.
“Please mr bezos, can I connect my new trivial network to yours?” “0.08/GB :)”
Lovable is a layer of abstraction, becoming as as complex as Shopify.
"It takes decades to build the kind of network cloudflare has."
It takes literally no time. Cloudflare's network could be emulated with proper planning and enough budget, and turned on instantly. 'Servers in 300 cities' is a medium sized challenge, but most importantly, it's a relatively clear path.
On the customer side, Cloudflare (in most cases) could be replaced as quickly as individuals replace their VPNs.
Shopify for example is ' just some siple HTML and checkout' - of course not - they are dominant and growing because there's a lot of complex interdependence, switching costs are much higher, their buyers are less technical and much less likely to want to change, and building a Shopify replacement involves hitting a lot of checkmarks.
Lovable started as a wrapper just as Shopify started with something simple, but they've quickly evolved.
AWS could snap their fingers and decide to knock out Cloudflare, it's a 'Commodity Plus' that came to the fore in a time when a specific need was there, and now people are turning to it out of convenience.
Of Lovable, Wix, Shopify, Figma, Stripe - Cloudflare is in the riskiest position because of the inherent commoditizability of their tech and the relatively low switching costs.
People are over estimating Cloudflare's moat.
The investors were right that the Internet would be important, and that Cisco would continue to be an important manufacturer of networking infrastructure. This just fundamentally did not matter because after the dot-com bubble popped, the market decided that Cisco simply wasn't worth the price it was selling at during the height of the bubble.
At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?
Now this analysis is imperfect... but it's good enough.
For reference Cloudflare trades at 39x revenue
Obviously you wouldn't pay 10x revenue if you expect revenue to be flat for the next 10 years.
No wonder that company no longer exists with a CEO that doesn't get that.
According to these figures, their growth is levelling off.
https://news.ycombinator.com/item?id=50382740
And nowhere near enough to sustain that valuation, particularly in a market which is near the end of a bull run.
Here's the valuation though. Percentage of total web traffic going through Cloudflare.
- 2016 ~3.9%
- 2017 ~5.3%
- 2018 ~6.6%
- 2019 ~7.6%
- 2020 ~11.2%
- 2021 ~15.4%
- 2022 ~19.4%
- 2023 ~18.0%
- 2024 ~18.9%
- 2025 ~19.2%
- 2026 (early) ~20.9% (with later snapshots higher, up to the mid-to-high 20s)
Combine that with consistently excellent execution and popularity, you get the valuation.
I empathize with this view, however it is very hard to value businesses that have extremely high margins, and who grow revenue very quickly on existing products while they're adding additional products.
I don't think NET is a steal at 39x revenue. But at no point in the last 5 years has NET been available to purchase for <15x revenue [1].
During that time, it has had Gross Margins in the exceptional range of 70%-75%, and YoY quarterly revenue growth in the similarly exceptional range of 25-40%, which has increased in our post-AI agent software economy.
If you're a Ben Graham acolyte, you would have sat out of NET since it's IPO. However, if you're a Charlie Munger/Buffet admirer who understands the pivotal role NET plays in the software ecosystem (i.e. it's inside your "circle of competence"), you'd do well to consider the Mungerism:
"Forget what you know about buying fair businesses at wonderful prices. Instead, buy wonderful businesses at fair prices."
That still leaves as an exercise to the reader what a "fair price" is for NET, but (to me, at least) it's clearly a wonderful business.
[1]: https://www.macrotrends.net/stocks/charts/NET/cloudflare/pri...
[1] https://finance.yahoo.com/quote/NET/cash-flow/
As an example, Palantir has a similar cash flow / market cap ratio. I didn't check many others.
Cloudflare has a moat but it already smells like sewage.
And frankly, they should basically be a commodity.
If anything, AWS or MS or other parties make it about as profitable as hosting web pages.
Personally, I think that the idea that market always recovers is so widespread right now that it'll take some serious financial hardships for people to start selling instead of buying the dip.
With the housing bubble, it was because people owned multiple homes then struggled to pay two mortgages as economic conditions degraded, and banks were willing to absorb losses if the homes were sold below the cost of the mortgage.
What is encouraging people to route from the stock market? Bond yields aren't high enough yet to encourage people to retreat from stocks, and there's no other alternative investments. Plus, so much of the S&P is held in 401ks. And I agree, economic hardship is not widespread enough for people with significant investment holdings to start selling them off to live. Those who are struggling are those who used to be struggling too (thus, no extra money for investments).
Just like the last time before the 2022 market crash [0] and that was before you created your account.
[0] https://news.ycombinator.com/item?id=29508238
Even tepid regulation will destroy the "our TIA is the entire observable universe due to the potential of self replicating AI probes so we totally deserve 10 trillion dollars in investor capital" trade
On the other hand a number of governors have changed (Texas in particular just went to a Democrat, and there are SpaceX interests there). They by definition can't prosecute on a federal level but they do hold some enforcement power.
They won't stop it because China won't stop. Politicians have to avoid any appearance of xenophobia though (and to be certain many are personally not xenophobic, just saying optics matter to them), so they talk about jobs and wealth inequality as euphemism for ground truth; we aren't secure putting all our eggs in the China basket.
Arguably screwed up there already letting chips and robotics flow offshore while we focused on increasingly useless education in developer syntax and semantics.
They will cool the AI investment well aware technology improves and we probably don't really need all our investment eggs in that one basket then
There's zero chance AI datacentres are going away, they are unfortunately a national security necessity now.
It's the "if we don't they will" thing again.
I’m convinced the best thing that happened in the nuclear arms race is the beginning of a dialogue that resulted in the start and salt treaties.
Ai obviously needs something similar.
Most voters don’t know what agents are. Many of my coworkers in tech can’t even define “agent” correctly.
So no, the world is likely not suddenly agreeing with you about “jagged performance.”
That's my attempt at a universal definition for technical and non-technical users. How does it compare?
But the elements that I think are necessary are 1) goal-oriented processing, 2) ability to use tools, 3) ability to iterate and self-correct. Along with that typically comes 4) self-talk or other hidden context during execution and 5) support for defined personas beyond system or user prompts.
That’s off the top of my head, probably not complete/correct, and definitely meant to be more technical than a non-tech person would need.
There is growing public sentiment about AI & Tech, but per exit polls that wasn't a Top 3 reason swing voters went blue (Economy, Wars, Corruption). Today's market correction is being driven by the majority in both houses of congress flipping blue. Trump and most Republican legislators were seen as broadly supporting AI / Tech and most Democrats are seen as being less supportive.
AI / Tech-friendly legislation is now likely to face a slower, more difficult path through committee and passage. IMHO, the actual impact of the political change is nowhere near 5% of company value, but outsized swings tend to happen on any adverse news when the market is already fearful they've bought into a high-priced bubble far in advance of actual earnings.
The Trump administration was expected to invest massively into AI, and money invested into AI is effectively free money for AI company shareholders, that free money is priced in the stocks. With the change in direction, investments are expected to be less, which means less free money, and therefore less valuable stocks.
Here is the simplified version:
Let's say I have a company worth 1 billion dollars, publicly traded, 10 million stocks worth $100 each. I get promised $100M from the state (aka taxpayers), shareholders estimate there is about 50% chance I will actually get the money: $100M * 50% / 10M = $5. It means the stocks are now worth $5 more, so $105.
Now the government has changed, and gone are my chances to get that money, so the sock is back to $100.
This is surprising to me, given how much acceleration there has been in AI capabilities since the same time last year. I guess costs and risks are accelerating just as fast.
There are plenty of suckers willing to gamble on a failing business (massive and rapidly growing debts, assets that can easily be cloned, no realistic path to profitability), so I don't think an IPO is off the table.
Their CEOs know it, and they must have their end game. I'd hate to think they'll just keep running until a hard crash. Hopefully small corrections will slow this down in a more controlled manner.
Micron is a different beast though.
The earlier it burns the better, because every day the bubble only grows larger otherwise.
AI is a hyped up nothing burger? AI demand retreats, lots of vacant compute, revenues sink (and the DC hold ends up being a (small) blessing in disguise for the labs).
AI lives up to it's hype? AI demand surges, capacity is severely constrained, margins explode as inference costs soar (and the DC block ends up being counter productive knee-jerk behavior)
The only way this plays out in anti-AI favor is if people stop using AI and demand goes down. Even if it flatlines, labs can rebalance towards inference and start harvesting those huge margins.
I don't agree with your description of how the ban is going to be counterproductive.
There won't be massive inference margins. The DCs will get built, in some other country. And in all likelihood they will continue to be built elsewhere even after the block is lifted.
This result means that unlimited data center expansion may not be on the table, and bailouts certainly aren't either. So with the leaders crashing out the uncertainty of AI expansion is now being properly priced into the stock.
In the end, States and their utility regulators have to be on board with large data center deployments. Some GOP-led states were often friendly to builders, but their citizens realized what was happening and the backlash was going to happen anyway because of electricity prices. It's just one more nail in the coffin from a cost-of-living perspective, and the utilities hadn't yet passed the costs on to their customers (but it will pop up soon).
States that were led by Democrats were already pushing back for their own regulatory regimes for energy cost recovery, etc. Data centers were wildly unpopular at a STATE level, so it didn't really matter what was going to happen at the federal level.
AI is not going anywhere and will only grow more and more.
I agree, but I think it's easy to conflate AI (a technology) with current AI companies (who's value is based on a bet about how that technology will develop).
I'm not predicting anything, but its perfectly plausible for Anthropic and OpenAI to suffer massive corrections if proprietary frontier models don't lead to a "a few winners take all" market.
In the same way, the internet grew a lot since the early 2000s, but pets.com did not.
Remember the frenzy before the .com bubble? The nerds were finally winning! The housing one? Finally everyone could afford a house!
Of coursethe consequences were always shit, but that's a given in an economic crisis.
AI bubble? Layoffs for everyone, techbros turned fascists, impending doom somehow as a selling point. Like, wtf?