It feels like the 2000 dot-com bubble all over again—excessive investments in every internet company out there.
Ask HN: What Makes AI a Bubble?
41–50 of 56 posts
Re: Ask HN: What Makes AI a Bubble?
#42Is it a bubble?
I'm not sure. Most bubbles are characterised by people overpaying for investments because the prices are going up - whether dot com shares, tulip bulbs, houses in 2006 etc. With AI there's not so much of that. A lot of investment is out of cash from the likes of Google and Microsoft who probably have an idea what they are doing.
Re: Ask HN: What Makes AI a Bubble?
#43Re: Ask HN: What Makes AI a Bubble?
#44Bubbles happen when a) someone buys something where they don't understand the value to, b) sell it off to another sucker who also doesn't understand the value. If a is not true, the prices will fall to their value. If b is not true, overpriced goods don't move, and the price doesn't blow up as fast as it does. Yes, they increase productivity, but how much? Is OpenAI really contributing a trillion dollars of value to…
The valuation of a company != an approximation of how much it is contributing to the world, it's more of an estimated total future potential value, a market aggregate of demand for a piece of it.
I would say that the valuation of OpenAI et al exceeds a normal multiplier based on how much productivity it is contributing, but much of its value is based on the premise that the improvements to its models that have occurred in lockstep over the past 5 years won't just suddenly stop, and will continue for at least as long as the underlying compute for training scales.
All AI companies are selling are tokens, which aren't really a speculative asset in that they are consumed at the moment of inference. The question is whether this token of intelligence has a multiplicative effect on the applications towards which it is directed, which currently I believe many companies are seeing positive signals towards, which is why their revenues are accelerating so much so fast.
Re: Ask HN: What Makes AI a Bubble?
#45[flagged]
Those AI wrappers are going to survive longer than the AI providers as their moat got commoditized.
How would the AI wrapper companies survive without the companies they wrap around? Many people have claimed open source models, but most open source models are as good as they are due to factors dependent on the frontier labs, including
1. Access to closed source model outputs for distillation,
2. A capital-rich environment which would allow a company to justify spending millions to billions training a model they release for free
3. Research driven by frontier labs (yes I know frontier labs often don't open source their research, but it's an open secret that many of the research breakthroughs leak soon after they're made.
Re: Ask HN: What Makes AI a Bubble?
#46Earlier quoted context omitted.
Those AI wrappers are going to survive longer than the AI providers as their moat got commoditized.
How would the AI wrapper companies survive without the companies they wrap around? Many people have claimed open source models, but most open source models are as good as they are due to factors dependent on the frontier labs, including 1. Access to closed source model outputs for distillation, 2. A capital-rich environment which would allow a company to justify spending millions to billions training a model they rel…
> How would the AI wrapper companies survive without the companies they wrap around?
Running their own models in another place or using way cheaper APIs? There are so many more sustainable alternatives to OpenAI and Anthropic API. They going out of business won't make LLMs go away.
Re: Ask HN: What Makes AI a Bubble?
#47[dead]
Re: Ask HN: What Makes AI a Bubble?
#48Earlier quoted context omitted.
How would the AI wrapper companies survive without the companies they wrap around? Many people have claimed open source models, but most open source models are as good as they are due to factors dependent on the frontier labs, including 1. Access to closed source model outputs for distillation, 2. A capital-rich environment which would allow a company to justify spending millions to billions training a model they rel…
> How would the AI wrapper companies survive without the companies they wrap around? Running their own models in another place or using way cheaper APIs? There are so many more sustainable alternatives to OpenAI and Anthropic API. They going out of business won't make LLMs go away.
>They going out of business won't make LLMs go away.
Frontier labs push the state of the art in LLMs. Based on my three points the favorable environment, on many levels, that open source has depends on them.
The frontier labs exist because there is huge leverage to being at the frontier, and getting there is an extremely capital-intensive process. Saying that wrapper companies will be able to exist in the same favorable circumstances if OpenAI/Anthropic were to go away is like saying that car dealerships would continue along just fine if car factories were to go away.
Re: Ask HN: What Makes AI a Bubble?
#49Earlier quoted context omitted.
Exactly that. There was a very nice talk by Warren Buffett explaining that to business leaders at the height of the dot-com bubble - if I remember correctly it's full text is the introduction to his biography 'The Snowball: Warren Buffett and the Business of Life'. Airlines are a great example - they are everywhere, nobody can imagine life without them, and yet they are yet to make any money ! Maybe they will figure…
They make no money because competition has essentially turned them into commodities. There is no differentiation thus no producer or consumer surplus.
Yes about commodities, but what you said about surplus is actually wrong. Consumer surplus is at a maximum when there is no differentiation. That is because when producers struggle to differentiate amongst competition, they must compete fiercely on price, so customers often pay far less than their maximum willingness to pay.
And arguably your own statement here doesn't help the view that the industry is not a bubble, as one could argue most LLM models are not substantially different from each other, and most products integrating them are offering similar features. The industry may need to do better at differentiating if it wants to avoid being commodified.
Re: Ask HN: What Makes AI a Bubble?
#50Earlier quoted context omitted.
Now do costs. You're also ignoring the fact that these companies have been shifting things around to make their books look better than they actually are. Here's a good example explaining how META has been keeping debt and lease obligations off its books to fuel growth (and who's at risk if META doesn't pay up): https://www.reddit.com/r/economy/comments/1soent7/if_the_ai_...
Many tech companies operate at a loss initially, that is the point of venture markets in firms that invest heavily in R&D, the initial investment will pay off once the technology matures. As for Meta’s shady accounting, I also inside most tech companies leverage whatever they can to remain competitive in a high growth market. They certainly have the money to get away with it though for now.
> the initial investment will pay off once the technology matures
That's not guaranteed. Just look at the Metaverse. It did not pay off.