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AI revenues are growing fast, but not fast enough

economist.com

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Re: AI revenues are growing fast, but not fast enough

#41

Post by woeirua »

A couple anecdotes:

I noticed that were a lot of traditional, non-tech companies interviewing for AI engineers in the Feb/March timeframe that have halted hiring in those roles entirely. It seems that if those roles didn't close by mid-April that they didn't close at all. This seems to match the timeframe in which cost suddenly became prominent in the AI zeitgeist.

I don't know _anyone_ outside of SV who has successfully replaced even a single employee completely with the current models. Maybe someone has pulled this off in call centers, but the POCs have all failed.

I'm very much pro-AI, but I just think we're on a false summit. As the article points out, there is absolutely no way to recoup the investment costs unless the models allow companies to start displacing human workers by the millions _and_ recapture a significant fraction of the displaced workers total comp. If either of those aren't true, then the bubble is going to pop... soon.

Re: AI revenues are growing fast, but not fast enough

#42

Post by bigmadshoe »

p-e-w wrote: post #13
an0malous wrote: post #6

> A back-of-the-envelope calculation finds that covering aicapex through identifiable ai income requires revenue on the order of $2.5trn per year, more than tech’s entire combined revenue today. … > All these complex calculations roughly tally with a much simpler one: adding up the ai revenue of the firms selling most of the ai. Anthropic pulls in perhaps $75bn, annualised; Openai makes tens of billions; Google, via…

Why would capex need to be covered by income during a time of investment and infrastructure buildup? Did income from the Apollo program cover its expenses?

The Apollo program wasn’t for profit and if it was it never would have yielded a return on investment.

Re: AI revenues are growing fast, but not fast enough

#43

Post by WarmWash »

jgalt212 wrote: post #27
softwaredoug wrote: post #10

You really see the first mover disadvantages in US AI labs. And how second movers (open Chinese labs) can disrupt them. First movers tend to get overcapitalized and way ahead of their skis. You saw a smaller version of this in the vector database market (remember that?) where companies like Pinecone were getting billion+ valuations for capabilities which now seem like a commodity. There's vector DB companies now with…

> And how second movers (open Chinese labs) can disrupt them Yes, I will concede this point. But how are the Chinese labs going to thrive with giving the weights away for free? Will they suffer the same fate open source database companies did at the hands of AWS?

They don't need to run a business, they are a Chinese state enterprise. The tax dollars of Chinese workers covers the cost. China is a communist country with mock free enterprise, it is not the team blue version of the US.

Re: AI revenues are growing fast, but not fast enough

#44

Post by woeirua »

pu_pe wrote: post #35

> Exponential View, a consultancy, counts $175bn of generative-AI revenue, on an annualised basis, in June. In a recent paper Anton Korinek of Anthropic and Patrick McKelvey of the Bank of Canada estimate total “AI services” revenue. Adapting their methodology, we reckon this was $220bn (again annualised) in the first quarter of this year. Ramp’s data imply that 2-3% of business spending now goes on AI, pointing to $…

This is also at the end of the tokenmaxxing era, so I'm not sure I would draw a straight line out from here. A LOT of companies are clamping down on token costs right now.

Re: AI revenues are growing fast, but not fast enough

#45

Post by ant6n »

VCFundedGenYer wrote: post #22

I mean, all one has to do is review https://isaiprofitable.com/ to see just how bad it is. None of this is a profitable venture. It's just a money pit for all players involved, all the while draining our ability to buy electronics and drink water. This has to end at some point.

It's kind of funny. I was looking at the top of the page thinking 1.5T investment for so far 770B revenue isn't bad at all, that could break even after some time. But then you look the listed companies, there costs vs revenue.

Turns out 516B of the revenues are from Nvidia, which is not an AI company, but just selling shovels. Nvidias revenues are effectively costs to actual AI companies.

Re: AI revenues are growing fast, but not fast enough

#46

Post by ben_w »

misterderpie wrote: post #28
nemomarx wrote: post #18

Earlier quoted context omitted.

Investors expect that they will, I guess. If you really believe the strong ai use cases (like exponential improvements, or it replacing hundreds of knowledge workers at every company" then maybe this isn't unreasonable.

If many people lose their jobs, thus consumers having less and less money, where would that money come from?

Depends how many people, but don't forget that:

1) people like me exist: I don't live in the USA, yet it is possible for me to buy things which are made in the USA

2) fiat money is only created or deleted by laws the government controls (plus a tiny quantity from forgery and damage to coins and notes), so everyone losing their jobs doesn't make the money disappear, just who has it available to spend

3) previous waves of automation have created new business opportunities; while this has not been too good for the people who lost jobs to the automation, it has generally boosted the overall economies this happened in, so it is absolutely possible to wipe out tech employees without it seriously harming consumers collectively

Re: AI revenues are growing fast, but not fast enough

#47

Post by misterderpie »

nemomarx wrote: post #34
misterderpie wrote: post #28

Earlier quoted context omitted.

If many people lose their jobs, thus consumers having less and less money, where would that money come from?

If you look at recent trends in consumer spending, a lot more of it is from the upper classes and less from the middle. Selling services to the rich can displace the loss of white collar workers. (in theory). as a bonus, ideally you create some more really wealthy people to spend on things during this shift.

I'm yet to see what part of AI really wealthy people would like to spend their money on. It's not like we can get AI Yachts and AI Rockets. What would the premium product for the upper class be?

Re: AI revenues are growing fast, but not fast enough

#48

Post by woeirua »

iammjm wrote: post #3

“ According to Mr Yotzov’s study, nine in ten executives report no impact of ai on their firm’s productivity over the past three years.” Brutal stuff.

A lot of people are slowly realizing that code generation was not the bottleneck in their internal development process, and waving a magic wand to make that go faster doesn't actually lead to more revenue.

Re: AI revenues are growing fast, but not fast enough

#49

Post by jonfw »

nemomarx wrote: post #26
p-e-w wrote: post #13

Earlier quoted context omitted.

Why would capex need to be covered by income during a time of investment and infrastructure buildup? Did income from the Apollo program cover its expenses?

If I give you 5 trillion dollars I want to get that back plus a percentage increase on top for my troubles, right? Government programs might run without the expectation of paying back taxpayers but investors are less generous.

Investors can be very generous if they see opportunities for market capture of the next big thing

Re: AI revenues are growing fast, but not fast enough

#50

Post by softwaredoug »

jgalt212 wrote: post #27
softwaredoug wrote: post #10

You really see the first mover disadvantages in US AI labs. And how second movers (open Chinese labs) can disrupt them. First movers tend to get overcapitalized and way ahead of their skis. You saw a smaller version of this in the vector database market (remember that?) where companies like Pinecone were getting billion+ valuations for capabilities which now seem like a commodity. There's vector DB companies now with…

> And how second movers (open Chinese labs) can disrupt them Yes, I will concede this point. But how are the Chinese labs going to thrive with giving the weights away for free? Will they suffer the same fate open source database companies did at the hands of AWS?

For the companies it's not clear.

For the state, like BVD, the goal is to be a loss-leader for Chinese infrastructure + manufacturing.

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