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The AI trade now runs on borrowed money, and the lenders are repricing it

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Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#51

Post by eru »

rapind wrote: post #39
klodolph wrote: post #4

A while ago I was thinking, “Gee, AI is so complicated, how can I keep up with the landscape?” After reading these articles go by so often, it feels like what I actually can’t keep up with is the bond market. To paraphrase Trotsky, you may not be interested in the bond market, but the bond market is interested in you. I want to be able to read the signals at the bottom of this article, and divine some kind of predict…

I was able to create a custom index based on the top 500 that I stripped the big AI stocks from (shovels too). Then I added decent chunks of international, small cap, and treasury ETFs to it. I have no illusions that I can time a bubble, but I'm hopeful I'm at least partially shielded, and most importantly I feel better about ignoring wall street again.

Instead of starting with the top 500 American stocks, and then adding international and small caps, you can start with a global all-market stock index--and then remove AI from that.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#52

Post by eru »

reddalo wrote: post #44
rapind wrote: post #39

Earlier quoted context omitted.

I was able to create a custom index based on the top 500 that I stripped the big AI stocks from (shovels too). Then I added decent chunks of international, small cap, and treasury ETFs to it. I have no illusions that I can time a bubble, but I'm hopeful I'm at least partially shielded, and most importantly I feel better about ignoring wall street again.

>I can time a bubble What do you mean? Selling everything before this bubble pops?

Oh, if you could time a bubble, you wouldn't just sell everything: you'd sell more than everything. Ie you'd sell short.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#53

Post by Valodim »

aurareturn wrote: post #29
orwin wrote: post #26

Earlier quoted context omitted.

But who needs SOTA models, really? It was necessary 10 months ago, but now?

All things equal, let's say your SaaS startup uses GPT 5.0 (release 10 months ago) and my business uses Fable 5. We have the same business goals, same talent level, same strategies. I think the chance of my business winning against yours is higher. I can't prove it. It's just my opinion.

It's easy to agree to that, but you're disregarding that the resources you spend on the stronger model could be allocated elsewhere. Conversely, you're assuming that spending more on AI will always yield better results and be worth it, compared to spending the money on other things.

This might actually still hold true now, or or at least many actors in the market behave that way. But I'm not so sure there isn't a cliff to that effect. At some point, if SOTA models remain expensive, it'll turn into a market advantage to figure out how to get things done without depending on the most expensive tooling available.

Similar scenario, different phrasing: if your company relies on overqualified workers to deliver 100% quality, the market may still decide that it's fine to go with 90% quality for 50% the price.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#54

Post by 4fggfd »

mrloopex wrote: post #5
klodolph wrote: post #4

A while ago I was thinking, “Gee, AI is so complicated, how can I keep up with the landscape?” After reading these articles go by so often, it feels like what I actually can’t keep up with is the bond market. To paraphrase Trotsky, you may not be interested in the bond market, but the bond market is interested in you. I want to be able to read the signals at the bottom of this article, and divine some kind of predict…

Don’t forget there is a constant pressure for everyone to have an opinion on how this is going to end while hoping it ends tomorrow so they can be vindicated. The dotcom bust took a decade to grow and collapse. I think it is too early to make predictions with AI. I mean the sentiment here is either it will dry up the world and kill us all or transcend humanity, there’s no gray area. I don’t want to fall into the emot…

[dead]

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#55

Post by eru »

tehjoker wrote: post #31
onion2k wrote: post #25

Earlier quoted context omitted.

The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. The industrialisation essentially socializes the cost across a lot more people though, so even though it doesn't make a profit it does mean people can have air travel without it costing millions per flight for the few people who can afford it. Essentially the economies of scale from having…

in the case of airplanes the only thing thats the private market is the planes and the ticket, the entire system of airports, safety, navigation is state subsidized and when the market fails it gets bailed out. the oil is subsidized by constant warfare. it's just an illusion for reganomics so a few rich ppl can make a buck off of a public utility.

How does constant warfare subsidise oil? In case you haven't noticed: both the latest US-vs-Iran war and Russia-vs-Ukraine war have made oil and gas a lot more expensive than the peaceful counterfactual.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#56

Post by tyre »

> Grey Swans: risks that were in the data but overlooked or dismissed because few had synthesized the signals into a coherent picture.

Directly conflicts with

> Alert and Critical signals represent readings that have historically been associated with meaningful financial stress.

These are all pretty standard things to track and are regularly (and publicly!)

Not saying we’re not in a bubble or near/far from it popping, but these metrics aren’t going to precisely tell you _when_, which is pretty much the only thing that matters.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#57

Post by gpt5 »

okzgn wrote: post #37

Key reports to understand the root problem (no ROI): - Gen AI: Too Much Spend, Too Little Benefit?: https://www.goldmansachs.com/insights/top-of-mind/gen-ai-too... (Goldman Sachs) - AI’s $600 Billion Question: https://sequoiacap.com/article/ais-600b-question/ (Sequoia Capital) - The Simple Macroeconomics of AI: https://www.nber.org/system/files/working_papers/w32487/w324... (MIT / Daron Acemoglu)

How can people in Hacker News still doubt AI's benefit when they are seeing in front of their eyes every technical profession getting disrupted to oblivion in the last year. Just ask basically any software engineer how much their profession has changed over the last 12 months

Obviously there is risk, but can't we really extrapolate the AI gains forward and just see how big it's ahead to become?

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#58

Post by aurareturn »

Valodim wrote: post #53
aurareturn wrote: post #29

Earlier quoted context omitted.

All things equal, let's say your SaaS startup uses GPT 5.0 (release 10 months ago) and my business uses Fable 5. We have the same business goals, same talent level, same strategies. I think the chance of my business winning against yours is higher. I can't prove it. It's just my opinion.

It's easy to agree to that, but you're disregarding that the resources you spend on the stronger model could be allocated elsewhere. Conversely, you're assuming that spending more on AI will always yield better results and be worth it, compared to spending the money on other things. This might actually still hold true now, or or at least many actors in the market behave that way. But I'm not so sure there isn't a cli…

@orwin has claimed that SOTA LLMs have already hit that diminishing return where spending more money on a SOTA LLM today does not add more value than a non-SOTA LLM (assuming high value tasks).

I never said there will never be a diminishing return. I'm challenging the statement that we've already hit.

Note: We're still scaling chip nodes. It's still worth it for TSMC and chip design companies to invest hundreds of billions into every new chip node every 2-3 years. This is after decades of scaling already.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#59

Post by 4fggfd »

Valodim wrote: post #53
aurareturn wrote: post #29

Earlier quoted context omitted.

All things equal, let's say your SaaS startup uses GPT 5.0 (release 10 months ago) and my business uses Fable 5. We have the same business goals, same talent level, same strategies. I think the chance of my business winning against yours is higher. I can't prove it. It's just my opinion.

It's easy to agree to that, but you're disregarding that the resources you spend on the stronger model could be allocated elsewhere. Conversely, you're assuming that spending more on AI will always yield better results and be worth it, compared to spending the money on other things. This might actually still hold true now, or or at least many actors in the market behave that way. But I'm not so sure there isn't a cli…

[dead]

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#60

Post by losteric »

aurareturn wrote: post #29
orwin wrote: post #26

Earlier quoted context omitted.

But who needs SOTA models, really? It was necessary 10 months ago, but now?

All things equal, let's say your SaaS startup uses GPT 5.0 (release 10 months ago) and my business uses Fable 5. We have the same business goals, same talent level, same strategies. I think the chance of my business winning against yours is higher. I can't prove it. It's just my opinion.

I'd guess it depends on the type of business. If it's some genuinely deep technical space, the model would give an edge but even then I think luck would be a significant factor. In a monte carlo of such scenarios, the business with the stronger model might win 6 out of 10 times, but it's no sure thing between the two of us. If we were comparing two businesses building Yet Another Generic CRUD, I would guess it's closer... perhaps even a net-negative to spend money on Fable versus marketing.
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