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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

#121

Post by dgellow »

worik wrote: post #99
defactor wrote: post #15

Warren Buffet way Revolutionary technology + massive adoption ≠ good investment Investors have poured money into a bottomless pit, attracted by the growth and glamour of the industry. The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. Commodity Product, no switching costs. Infinite competition

> The airline industry since its birth has had a collective net loss True. But it has added enormous benefits to many other parts of the economy. Airlines do not capture that value. That is where the AI companies are. Adding value they cannot capture

Yep, and similar to airlines, the real money is in suppliers

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

#122

Post by dgellow »

aurareturn wrote: post #24
defactor wrote: post #15

Warren Buffet way Revolutionary technology + massive adoption ≠ good investment Investors have poured money into a bottomless pit, attracted by the growth and glamour of the industry. The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. Commodity Product, no switching costs. Infinite competition

It isn't a commodity product in my opinion. Far from it. I think it will ultimately be a monopoly or duopoly for SOTA. The mid to low end is commodity, yes. But SOTA models are not commodities. The number of competitors for SOTA drops by a few every year. The winners make more money, get more revenue, buy more compute, train better model with compute, buy best talent, and the cycle goes. I think it's easier to fall b…

There is literally no moat…

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

#123

Post by dgellow »

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.

Your business is spending way, way, way more for compute. How can you ignore the economic of your business? That’s pretty much what a business is about

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

#124

Post by dgellow »

shususjhs wrote: post #69
abtinf wrote: post #36

Earlier quoted context omitted.

Ceteris paribus, all other things are never equal.

That’s nonsense and saying “nah-ah” with Latin won’t improve your argument. If we couldn’t isolate a variable we would never be able to argue. Using a better model is an advantage even if only for the coders. There are a million ways to turn that into profit, both proper and not so proper but that’s the beauty of ceteris paribus: the other factors do not matter now.

> There are a million ways to turn that into profit

Mind pointing where that profit for companies consuming AI is? I don’t mean hypotheticals. Where are the proof that current AI contributes positively to ROI?

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

#125

Post by grey-area »

eru wrote: post #76
rapind wrote: post #71

Earlier quoted context omitted.

Yeah I couldn't figure that out with Questrade (Canada). It's a pretty new feature, but I think it's great, so I hope they expand their baseline indexes. I was considering writing a tool that simply follows any index you choose with a .toml of simple config options, like which stocks to exclude, potential fixed locks for specific stocks (or maybe upper and lower percentage of portfolio settings), a hard per stock cap…

I'm in Singapore. My money is in VWRA (without bothering to remove AI companies). Your idea for the tool sounds interesting. I suspect even just copy-and-pasting the paragraph you wrote here into your favourite AI programming agent would get you pretty close to a prototype you can play around with. At least in terms of 'spit out buy / sell orders' and leaving out the API integration.

You are perhaps not as diversified as you think in this top heavy market.

https://stockanalysis.com/quote/lon/VWRA/holdings/

~ 5% Nvidia as biggest holding and 20% in US listed tech companies (most of which are heavily invested in AI), over 60% in the US market, so this ticker is very similar to investing in the US market alone.

Also when a bubble like this deflates it hits almost everything so it is very hard to avoid, but world indexes are particularly exposed.

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

#126

Post by grey-area »

gpt5 wrote: post #57
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?

Not seeing any significant disruption showing up in revenue etc from inside the industry, there’s growing skepticism about these tools and the claims made for them. They can be useful but are not world changing or actually replacing jobs.

We’ll see how they develop but so far they are not capable of operating independently.

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

#127

Post by blitzar »

aurareturn wrote: post #61
anukin wrote: post #17

Earlier quoted context omitted.

That’s because they were reinvesting the profits. I think they had given a profitable quarter just to show that they could do it.

And I'm sure Anthropic would be immensely profitable if they stopped investing their inference profits into training newer models.

An LLM model depreciates to $0 in a year or two.

An Amazon fulfilment warehouse depreciates to $0 over 30 years.

One type of investment is different to the other.

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

#128

Post by oersted »

aurareturn wrote: post #119
oersted wrote: post #113

Earlier quoted context omitted.

It's never that simple, that's not the only possible endgame. We have seen plenty of examples in other industries where you can never really stop investing a ton on R&D with diminishing returns (like in semiconductors or pharma), because the moment you stop newcomers overtake you. Or the whole thing becomes a commodity with lots of competitors, where technological advantage is overtaken by marketing as the dominant f…

We have seen plenty of examples in other industries where you can never really stop investing a ton on R&D with diminishing returns (like in semiconductors or pharma), because the moment you stop newcomers overtake you. In semiconductors, it almost always become a monopoly or dupoly. x86 CPUs - only AMD and Intel left. Discrete gaming GPUs - only Nvidia and AMD left. 5G chips - only Qualcomm left in western market bu…

Check their R&D expenditures and profit margins they are quite poor.

Their revenue has always been sustained by the fact that their technology needs to be constantly replaced because it keeps getting better. The moment it stops getting better, the replacement rates plummet and so do their revenues. It's also really not that hard to compete with them when they get complacent.

I'm not counting Nvidia because they don't produce semiconductors themselves, they are a different kind of business.

They are indeed an example of those that cater to consumers and/or build popular products based on foundational tech from others, like Apple or Sony, which do tend to be quite profitable.

But the actual deep-tech semiconductor firms? They may be critical to the world economy, but they don't actually make that much money comparatively. In many cases they are not real monopolies, it's just that no one else wanted to continue investing in a shitty business model. Only the likes of TSMC and Samsung were okay in playing the low-margin game, but most US players left the board.

I believe AI has a lot of the same characteristics.

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

#129

Post by aurareturn »

blitzar wrote: post #127
aurareturn wrote: post #61

Earlier quoted context omitted.

And I'm sure Anthropic would be immensely profitable if they stopped investing their inference profits into training newer models.

An LLM model depreciates to $0 in a year or two. An Amazon fulfilment warehouse depreciates to $0 over 30 years. One type of investment is different to the other.

How much does that warehouse make vs that LLM model? IE. How much has Opus 4.5 made for Anthropic?

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

#130

Post by danans »

byzantinegene wrote: post #50
danans wrote: post #35

Earlier quoted context omitted.

> if this doesn't change the near term trajectory of humanity to a parabolic move upward there is going to be a lot of economic pain "trajectory of humanity to a parabolic move upward" is poorly defined here. Whether we are headed to a machine god ruled scenario or "just" incredibly powerful productivity tools, there will be a lot of economic pain for some (most) and a lot of economic gain for a few. I've yet to a se…

such a business plan has not yet created economic value, being able to roll out features at rocket speed is not a huge determinant of a startup's success.

> such a business plan has not yet created economic value, being able to roll out features at rocket speed is not a huge determinant of a startup's success.

Speed of feature implementation isn't the objective. High feature throughput with labor cost reduction is.

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