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AI is too expensive

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Re: AI is too expensive

#91

Post by tomxor »

> You are not recovering these investments

OK, Question: Would this outcome still benefit society overall?

In the aftermath of this bubble "AI" will still have utility, like the dotcom bubble. So lets say FANG doesn't make a return, how much should we care? How much of this investment is sunk cost that would continue to provide value, and how much of it is operation costs just keeping the lights, I mean GPUs on, that would become unviable post-bubble? As an immediate effect, what happens to these AI companies? or if they become insolvent, what happens to the assets and tech? and what are the secondary economical effect to society if FANG doesn't get their ROI?

Re: AI is too expensive

#92

Post by triceratops »

toasty228 wrote: post #84
WarmWash wrote: post #71

Earlier quoted context omitted.

AI will likely cost $60-$80 per user per month. Akin to an average cellphone bill. The infrastructure costs are comparable and the ROI would be 5-10 years for the current insane build out. Yes, chinese and local models exist. But so do $20 cell phone plans. People go with what is convenient, works, and is readily available.

> $60-$80 > Akin to an average cellphone bill. Where? You get unlimited mobile plans for like 10-20 euros in Europe

Places that have dollars and not euros. North America, usually, has phone bills that high. If you don't shop around and bring your own device, at least.

Re: AI is too expensive

#93

Post by didgetmaster »

Although the data centers are probably optimized for AI workloads; they can probably be used for all kinds of computing tasks. If AI revenue does not meet projections, the hardware is not going to be unused.

Re: AI is too expensive

#94

Post by semiquaver »

This guy is the master of goalposts.

He never cops to the fact that he is constantly being proven wrong and changing his tune every few months to a new theme which he will abandon as soon as it’s not supported.

I’d like to think that if I was as catastrophically, publicly, consistently incorrect on the main thing I do, I’d have a little more humility than this charlatan.

Re: AI is too expensive

#95

Post by semiquaver »

triceratops wrote: post #92
toasty228 wrote: post #84

Earlier quoted context omitted.

> $60-$80 > Akin to an average cellphone bill. Where? You get unlimited mobile plans for like 10-20 euros in Europe

Places that have dollars and not euros. North America, usually, has phone bills that high. If you don't shop around and bring your own device, at least.

It is extremely easy to get unlimited mobile internet in the US for $30/mo.

Re: AI is too expensive

#96

Post by hansvm »

tim333 wrote: post #90
operatingthetan wrote: post #85

Earlier quoted context omitted.

Why did you criticize his past arguments instead of the claims in this article? The one relevant claim you address is basically a shrug on your part. This seems to be purely a character attack of Zitron. I agree that he is very one-sided, but I doubt his hit-rate is much worse than other pundits in the industry.

It's not really a character attack so much as a poor track record attack.

It's the same idea. The crux of the argument is that the author has a history of bad predictions, so this must also be a bad prediction, or it's at least likely enough to be bad that we done need to invest further analysis into it.

I don't think that's necessarily a bad argument style (at this point it's by far the easiest way to argue that a Musk project won't work for example), but you have to be careful with it.

In this case, there are only two previous predictions being considered. Suppose the author would have been right 75% of the time given their available information; there was still a >6% chance of those predictions not working out. That's a pretty rough bound for ruling them out just on principle in a world where they do actually know a lot about how AI will progress. There isn't enough "track record" to confidently say much about the author's predictions.

Re: AI is too expensive

#97

Post by nate »

I'm actually surprised how much now I'm reaching for Apple Intelligence as a thing to play and build on top of because of its freeness :) I have it summarizing articles for me, a task I thought I'd only want at a minimum Claude Sonnet doing, but alas, I'm not caring as much as I thought about Claude's much better quality over Apple's on device models version. For non anecdotal evidence, I saw people balking at the price of having to put more tokens/credits towards using AlliHat (the Safari extension I have out there for Claude). And so all I did was put Apple Intelligence as an alternative into it, and my conversion rate has tripled. Still measuring this out but I'm becoming more bullish on just using the free tokens we get from our apple devices.

Re: AI is too expensive

#98

Post by raincole »

jayd16 wrote: post #24
changoplatanero wrote: post #16

Imagine you were looking at Google, a sustainable and profitable business, and you thought you saw a once in a lifetime opportunity to compete with them and take their position as a leading tech company. How much money would you need to spend to make a credible attempt? Google has had decades to accumulate intellectual and physical capital. Catching up quickly means spending >500 billion. If you can actually dethrone…

What a strange train of thought. Why would you need that amount in this hypothetical? Why would dethroning them alone be worth it? It would literally only be worth it if you could do so profitably. More realistically, it seems like someone calculated that it could still be profitable up to several hundreds of billions of dollars which explains the initial investment. And continued investment can be explained by tryin…

> Why would you need that amount in this hypothetical?

They didn't say you need that amount. They say how much you're willing to spend. Need = floor, willing = ceiling.

It's a very reasonable argument, except one fact: the chance that you actually dethroning Google is practically zero as Google also has capital, infra and data to train AI. The best plausible outcome is to share the market with Google.

Re: AI is too expensive

#99

Post by clearstack »

luk212 wrote: post #80

A lot of the current AI economics seems to depend on three assumptions being true at once: 1. inference costs fall fast enough 2. usage grows into very large recurring revenue 3. customers don't cut once handed the bill We should draw a distinction between "AI is valuable" and "AI justifies its current investment levels." There's real productivity value in AI, especially for things like search, boilerplate, tests, re…

MSFT, GOOGL, META, AMZN guided ~$285B combined capex for 2025 — roughly matching their total net income. Every dollar of profit is being plowed back in, which only works if #1 and #2 both hold.

Re: AI is too expensive

#100

Post by etempleton »

czhu12 wrote: post #36

I really respected Ed Zitron, but I feel like he's very much lost the plot on AI. Scroll back not too far and he was publishing criticisms that no one wants to spend actual money AI. Anthropic has shattered all notions of that since then. Then there was the idea that even if people want it, we have way too much GPU capacity to ever be saturated. Now almost all providers are hitting limits. Now, its the next iteration…

Well, I think he is probably right about this one. The costs are just too high and the spend is entirely too high. If the build out and demand is as advertised component prices will keep going up and costs will too offsetting any revenue gains and if they aren’t then they will never be able to justify the investment already made. Either way their entire business model involves a constant carousel of new investors either through private capital or by IPO and they need to keep that charade going for another five or more years or the whole thing explodes.

AI is a neat tool, but I think it becomes a race to the bottom. Who can provide the minimum viable product at the lowest price. And that price has to be pretty darn low for it to make sense for companies and essentially free for it to make sense for consumers.

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