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How the AI Bubble Bursts

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Re: How the AI Bubble Bursts

#151

Post by gruez »

hirako2000 wrote: post #117
Aperocky wrote: post #58

Earlier quoted context omitted.

Demand of tokens is absolutely skyrocketing. And unlike the traditional "this will replace humans right away", I think what this introduce is a lot of incentive to spread those token in places where there was never any incentive to hire a software engineer for previously. In turn, that will drive a lot of business activity in those area that will potentially fail given the current quality of the output. This feels li…

Tulips sales also skyrocketed. Seriously, what value are tokens providing other than justifying layoffs. Concretely. Today. Not in the speculating scenario that cardiologist could be replaced with models. We see this new trend of agentic coding, again a promise software will be written that way going forward, despite the number of fiasco already experienced when trusting a model turned bad. The use case may provide v…

>Seriously, what value are tokens providing other than justifying layoffs. Concretely. Today.

It's adding tests for me and doing medium complexity refactors that I'd otherwise have to spend hours on

Re: How the AI Bubble Bursts

#152

Post by leoc »

chasd00 wrote: post #127
dash2 wrote: post #26

Earlier quoted context omitted.

Is that right? I think that you can serve tokens without training the next models. It would be bad strategy, but it would work. So it's an important question, are they covering their operating expenditure? If they are the business has legs (and it will be worth spending a lot to train the next models). If not, maybe not.

i don't think it will work, it's too easy to switch models. When google comes out with a new model people will just switch. I think Google wins in the long run, they have the money to just wait until everyone else goes bankrupt and they also have the Apple contract and therefore the mobile market.

And apparently the most efficient training and inference thanks to their TPUs, IIUC?

Re: How the AI Bubble Bursts

#153

Post by pydry »

amelius wrote: post #97
joshstrange wrote: post #53

> RAM prices are crashing because new models won’t need as much Reality begs to differ [0] and following the link for that text goes to an article [1] where they talk about Google's TurboQuant which supposedly will lower the RAM requirements. Now if that means RAM prices come down (as speculated, not reported on, in the link) or the AI companies just do more things with their extra ram is yet to be determined. The fa…

> Now if that means RAM prices come down (as speculated, not reported on, in the link) or the AI companies just do more things with their extra ram is yet to be determined. I think it is determined: https://en.wikipedia.org/wiki/Jevons_paradox

Jevons paradox only applies if demand hasnt already been saturated.

The fact that public LLM usage is leveling off at a price of $0 and Jensen "we make the shovels in this gold rush" Huang is rather desperately claiming that you need to spend $250k/year in tokens to be taken seriously suggests that demand saturation may not be that far off.

Whether Jevons' Paradox applies to software engineers I think is another open question. Im constantly being told that it doesnt and that LLMs make half of us redundant now, but Im skeptical - so much automation I see is broken or badly done.

Re: How the AI Bubble Bursts

#154

Post by 9rx »

SirensOfTitan wrote: post #56
infecto wrote: post #30

It’s incredible how polarizing the AI rush is. I keep the perspective that the technology is an absolute step change but I have no idea where the cards will fall. I take a lot of issue with these style of articles. I get a sense that the authors are being overly defensive. The cost to serve tokens is absolutely profitable today and that’s been true for at least a year. What’s unclear is how R&D and capex fit into the…

This is a classic HN mistaking the map for the territory. R&D and capex absolutely figure into de-facto profitability and sustainability for AI labs, despite their separate treatment in accounting. > well most of us here on HN have benefited from decades of overinflated engineering salaries being paid by often companies that were not profitable and not only unprofitable This is a really concerning perspective: people…

> This is a really concerning perspective: people were paid what they were worth.

The parent comment doesn't discount that, only pointing out that "what they were worth" was inflated due to a speculative environment. Wherein lies your concern?

Re: How the AI Bubble Bursts

#155

Post by piker »

curtisblaine wrote: post #112
piker wrote: post #31

> They lose a big customer for their cloud services. Even worse considering that now, using the AI they helped fund, everyone can compete with their sub-par products. GitHub is a good candidate for disruption, and that’d be just the start. Look, I'm a Microsoft hater like the rest of us, but calling Microsoft's products sub-par discredits the author a good bit. I invite anyone who thinks this to try and compete with…

I'm sure Word is full of arcane backwards compatible tricks that 20% of users use, but I find it hard to differentiate the Pareto 80% of the product from Google Docs or any other competitor (LibreOffice?) Adding rich text, tables, headings and colors is pretty much a solved problem for all of these softwares. Adding images or handling more complex layouts sucks everywhere, it's not like that Word has a great user exp…

Yes. That 80% you find useful is served fine by Google Docs, but there’s a good reason the enterprise overwhelmingly goes for Word, and it lives deep in that 20% and a lot of the time has zero overlap with others.

Re: How the AI Bubble Bursts

#156

Post by 14113 »

Aurornis wrote: post #60

This article tries to build upon a lot of half-truths or incorrect facts, like this: > OpenAI is struggling to monetize. They turned to showing ads in ChatGPT, The ads aren’t going into your paid plans (except maybe a highly discounted tier, depending on the market). The ads are a play to offer a free version. Having an ad-supported free tier isn’t new. The discussion about being unprofitable also repeats the reducti…

> companies are supposed to lose money while they grow

At what point do we declare that a company has "grown" and now must make money? OpenAI is a multi-billion dollar company right now, surely that's a point at which they should be profitable, instead of propped up by further investment and borrowing.

> We have very strong indicators that inference is not a money loser for these companies

All of the economic analysis that I've read strongly states the opposite. Running a GPU is a net loss /even for the data centre operators/. For them to break even, they currently charge OpenAI/Anthropic/Etc more than OpenAI/Anthropic/Etc make per-token.

Re: How the AI Bubble Bursts

#157

Post by adjejmxbdjdn »

smt88 wrote: post #115
Izkata wrote: post #79

Earlier quoted context omitted.

> The ads aren’t going into your paid plans (except maybe a highly discounted tier, depending on the market). The ads are a play to offer a free version. Having an ad-supported free tier isn’t new. Sounds like it is new for ChatGPT though. That's also how it started with TV and Youtube, first on the free tier then expanding to the paid ones.

YouTube, Spotify, and most video steamers have zero ads on paid tiers. I never see video ads.

YT has a Premium Lite paid tier (at least in the U.S.) that does show ads on music and in certain other areas of the app, such as shorts, searching, browsing, etc.

Re: How the AI Bubble Bursts

#158

Post by mattmanser »

baq wrote: post #32
atwrk wrote: post #20

Earlier quoted context omitted.

But are they actually profitable, or do they employ creative accounting where only parts of overhead expenses are counted against all of inference revenue, similar to what Uber did? OpenAI's numbers show that they definitely are not profitable on inference, and even worse, revenue growth scaled linearly with inference cost from 2024 to 2025, which means they can't outgrow this problem. See https://www.wheresyoured.at…

If they shut down all training today they’d be absolutely printing money for the next couple quarters and then die with a bang once the other lab releases the next frontier to the public.

Try doing some inference with local models.

I'd be surprised if they're making money on inference just from that. There's no way someone paying $20 p/m and using it all day is not spending way more on even just the electricity for tokens, let alone the capex.

Re: How the AI Bubble Bursts

#159

Post by raincole »

ajay-b wrote: post #123

I would be very sad to lose services like ChatGPT. It has significantly improved my workflow by digesting and analyzing huge documents, and helping me to synthesize and respond better. May be I am part of a minority.

Don't worry lol. It's not going anywhere. The article is just ragebaitng. Verbatim:

> Anthropic is already in a push to reduce costs and increase revenue

Yeah, it's totally a bad sign when a company tries to... reduce costs and increase revenue.

Re: How the AI Bubble Bursts

#160

Post by drakythe »

adjejmxbdjdn wrote: post #141
joshstrange wrote: post #53

> RAM prices are crashing because new models won’t need as much Reality begs to differ [0] and following the link for that text goes to an article [1] where they talk about Google's TurboQuant which supposedly will lower the RAM requirements. Now if that means RAM prices come down (as speculated, not reported on, in the link) or the AI companies just do more things with their extra ram is yet to be determined. The fa…

I’m not disagreeing with you, but consumer RAM prices are lagging indicators. If commercial RAM prices are dropping then consumers will see those price drops last, especially given the fact that several consumer manufacturers turned to commercial only.

Is there a source that says commercial RAM prices are dropping? I was recently told (without a source, so I am not sure if it is true or not) that OpenAI never even bought any of the RAM they signed deals on last year, and that those deals were just letters of intent. So if prices are coming down I wouldn't be shocked but the economy is pretty well vibe coded these days so who even knows.
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