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Is the A.I. Boom Turning Into an A.I. Bubble?

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Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#61

Post by justcallmejm »

"In the A.I. economy, it seems possible that many of the rewards will go to top firms that can afford to build and maintain large A.I. models..."

This is a flawed (and common, still, somehow!) idea of where value is within AI. The gigantic models are commoditizing rapidly. They practically incinerate cash.

There is real value being created at the layer where users can use a product they can actually trust. LLMs are certainly not that.

Our system, Aloe, is model agnostic - so when next month's model comes out we just get better. And we already beat the pants off the frontier models in capability, spending a tiny fraction of a percent of the capital to build the system.

The existing concentration of capital into big LLM companies is indeed a bubble. Eventually some of those VCs will wake up and invest where the value is being created, I presume.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#62

Post by eaglelamp »

it_citizen wrote: post #13

> The global pandemic will tank the stock market > War in Ukraine will tank the stock market > High interest rates will tank the stock market > Tariffs will tank the stock market > IA will tank the stock market All those statements made sense to me at the time. And I have no doubt that one of these days, someone will make a correct prediction. But who the hell know what and when. Diversify, be reasonable and be prepa…

The primary harm of a bubble is *not* a crash in equity values, it is the misallocation of capital. The worst outcome would be for the misallocation to continue due to the intervention of asset owners with the most to lose who are also in control of the state.

All of the events you listed have had significant economic effects and required massive intervention from the state to buoy asset prices. The longer this continues the more our economy becomes geared to producing "value" for this small, and shrinking, group of owners at the expense of everyone else.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#63

Post by matthewdgreen »

Fernicia wrote: post #21
apwell23 wrote: post #15

Earlier quoted context omitted.

Trump election will tank the stock market - Many nobel prize economists and experts .

He did though. The S&P 500 fell 18% around Mar/Apr. That's unprecedented for a US market experiencing no external shocks.

And the US dollar is still down 10%.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#64

Post by impossiblefork »

it_citizen wrote: post #13

> The global pandemic will tank the stock market > War in Ukraine will tank the stock market > High interest rates will tank the stock market > Tariffs will tank the stock market > IA will tank the stock market All those statements made sense to me at the time. And I have no doubt that one of these days, someone will make a correct prediction. But who the hell know what and when. Diversify, be reasonable and be prepa…

The way I see it, prices are too high. War is one thing, but it's abroad and the restrictions have been minimal. But interest rates went from Tesla has a P/E ratio something like 26 times what other well-run automotive companies have. Boeing has a price like Airbus, despite no profits, etc.

Commercial real estate prices have gone down, and that's reasonable, but you've had both the interest rate increases and this WFH+hybrid remote thing becoming common, and since the interest rates have gone up from such a low level I think this is still overvalued, because 1% -> 2% should in theory mean halving the value if the rent is constant, and it went I think it's a miracle that there hasn't been a crash. I wonder what weird things have been going on that have ensured that there hasn't been one yet. So I think your perspective is strange. The situation is absolutely crazy, and has been for years, but that doesn't make it not crazy.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#65

Post by jonfromsf »

koolba wrote: post #59
it_citizen wrote: post #13

> The global pandemic will tank the stock market > War in Ukraine will tank the stock market > High interest rates will tank the stock market > Tariffs will tank the stock market > IA will tank the stock market All those statements made sense to me at the time. And I have no doubt that one of these days, someone will make a correct prediction. But who the hell know what and when. Diversify, be reasonable and be prepa…

> Diversify, be reasonable and be prepared for it to happen someday. Indeed, but even with something like SPY, there’s quite the concentration in tech: Top 10 Holdings (37.99% of Total Assets) NVDA 8.07% MSFT 7.37% AAPL 5.77% AMZN 4.11% META 3.12% AVGO 2.57% GOOGL 2.08% GOOG 1.68% BRK-B 1.61% TSLA 1.61% Now that’s intentional as it’s market cap weighted. But the investing world is in for a rude awakening if things st…

Just buy $RSP or a similar equal-weightage ETF.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#66

Post by matthewdgreen »

hodgehog11 wrote: post #18

I get this sinking feeling that this "bubble" may never burst on its own, since the political environment now is different from the 2000s. Inequality is much higher post-COVID, with the ultra-wealthy sucking up the assets of the middle class. Those assets are going into the stock market for AI companies with the objective of eventually replacing people so they never need to pay the working or middle class ever again.…

I saw a figure yesterday showing that current AI data center investment exceeds all consumer spending in terms of GDP. This is important, because consumer spending is normally 2/3rds of GDP. This means consumer spending isn't great, and data center investments probably can't sustain this pace forever. It's also not clear that there will be a return on these investments (one that flows to the specific companies seeing the investment.)

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#67

Post by SantalBlush »

simianwords wrote: post #39
Hikikomori wrote: post #20

Earlier quoted context omitted.

All of these did tank the stock market, but it also recovered quickly.

Therefore the dips were an aberration - they should not have happened. Recovery is a sign that the previous dip was an incorrect prediction by the market.

No, the dips resulted in government interventions--like the Fed raising liquidity or Trump removing some tariffs--which then caused stocks to rally again.

The term "Fed put" is decades old.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#68

Post by seanmcdirmid »

marcosdumay wrote: post #60
seanmcdirmid wrote: post #51

Earlier quoted context omitted.

People have been predicting an AI winter ever since DNNs hit it big, and that was 2012/2013 or so. And then every year since 2015 they've been saying "this is the year the AI bubble will finally burst!" And then repeat that the next year. ChatGPT was just another big leap in a bunch of big leaps that occurred in the last 15 years. You are being disingenuous in pretending that people didn't see AI as being hyped befor…

The finance bubble is pretty much a post-ChatGTP phenomenon. There was some hype about AI before it, for completely unrelated products, with varying levels of real value behind them. What bubble there was about those has already popped long ago, missing the headlines because of the crypto hype.

If you've been with HN for awhile, or you search the archives, similar topics to "Is the AI booming turning into an AI bubble" kept popping up long before CHatGPT came out. And this was DNNs, and it was same people (e.g. Hinton and his students) who were at the forefront of that also. And no, their previous projects didn't go bust.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#69

Post by matthewdgreen »

antithesizer wrote: post #3

I remember reading this two years ago. And one year ago, too.

I remember reading this for years before the dot com bubble imploded, years before the housing bubble impoded, and months before the market woke up to the fact that COVID existed. (At least governments decided to print that last one away.)

On a more serious note, the fundamental issue in the first two crashes was that the markets stopped being able to rationally price things. My view is that this doesn't always mean there will be an immediate crash. It just means that when the inevitable downturn does happen, nobody will be able to figure out the correct pricing for anything -- and so a correction turns into a catastrophe.

Re: Is the A.I. Boom Turning Into an A.I. Bubble?

#70

Post by jraph »

seanmcdirmid wrote: post #51
marcosdumay wrote: post #26

Earlier quoted context omitted.

Oh, man, there have been 10 years since ChatGPT made the news in 2022? How time flies!

People have been predicting an AI winter ever since DNNs hit it big, and that was 2012/2013 or so. And then every year since 2015 they've been saying "this is the year the AI bubble will finally burst!" And then repeat that the next year. ChatGPT was just another big leap in a bunch of big leaps that occurred in the last 15 years. You are being disingenuous in pretending that people didn't see AI as being hyped befor…

AI was over-hyped. I remember how "AI" felt like marketing bullshit at the lab when I was there between 2015 and 2020.

Generative AI took it at the next level though. There is no comparison.

The meaning of AI has brutally changed. It used to refer to ML, deep learning and all these things. Now, it is a synonym of generative AI.

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