Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The AI Demand Bubble

wheresyoured.at

Post reply on HN
Print view View original

91–100 of 160 posts

Re: The AI Demand Bubble

#91

Post by Lwerewolf »

altcognito wrote: post #3
LarsDu88 wrote: post #2

This is a bit of a doomer article, but quite honestly, 200 billion dollars a year on a 30 billion dollar a year business that is growing does not really sound as bad as the author makes it out to be, especially when that business consists of growth startups that are currently primarily concerned with completely automating your current revenue stream. The obvious way to recoup spend is to grow, rugpull by cranking up…

> The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor. So much this. I've never touched the Chinese models (no particular reason) but it is having an impact as the frontier companies are pushing the price down as a defensive measure. Is this pulling fo…

Poolside's stuff (US) is pretty good.

Re: The AI Demand Bubble

#92

Post by tim333 »

bluecalm wrote: post #75
LogicFailsMe wrote: post #17

This guy has zero zip nada null AI background. He is a videogame reviewer and PR guy. He is a pure influencer feeding on the AI backlash he helped to create. He has been predicting a crash for how many years now? And while I can totally see Anthropic and OpenAI going through some things on the way to post-IPO FMV, those things do not include AI going away. It truly doesn't matter whether closed source Frontier lab mo…

He doesn't need AI background to commentate on financials. Your post reads like a personal attack. His record talking about stock market doesn't matter either. There is about 0 information in anyone talking about what stock market is going to do. So his point is that big % of cloud revenue of Microsoft/Google/Amazon come from companies that: 1)are very unprofitable 2)need to raise staggering amount of capital to surv…

He doesn't have a finance background either and it's quite a job going through the 7482 words or whatever he's rattled off this week to analyse where he's gone wrong.

His fundamental error I think, illustrated here https://www.youtube.com/watch?v=C0Gcx-6hJJw&t=196s is he thinks AI is just another tech product to hype rather than a comparable revolution to the industrial one.

Re: The AI Demand Bubble

#93

Post by LogicFailsMe »

ElProlactin wrote: post #81
cmiles8 wrote: post #58

Earlier quoted context omitted.

This is the most misquoted bit in that whole fiasco. He apparently had to sell every liquid thing in the portfolio. What’s left is allegedly just some highly illiquid paper assets that they’ve also been trying to unload. The present value of those is iffy at best and may well also plummet before they can be cashed in. That “80%” can’t be realized right now in any traditional sense. No matter how you slice it the whol…

> No matter how you slice it the whole sequence of events last week was an unmitigated disaster. It actually wasn't an unmitigated disaster. He was overleveraged and apparently had the dumbest hedges (he was long AI and short software and when AI was down software was up so his hedges didn't hedge). Citadel swooped in and bought the public equity portfolio. That's the definition of mitigated . There was no propagatio…

"a pristine track record isn't required to raise money."

Didn't hold back Sam Altman. And he's not the only one...

Re: The AI Demand Bubble

#94

Post by arctic-true »

rich_sasha wrote: post #85
arctic-true wrote: post #80

Earlier quoted context omitted.

The cash burn is not the problem. You can’t build a big business without it. The difference is network effects. With ride sharing apps, you need a lot of drivers and riders collected on one platform. It is nearly always better, for both drivers and riders, to switch to a larger platform. Thus, it was worthwhile to spend the money to become the biggest fish. Once this was accomplished, Uber could raise prices because…

This only works up to a point. Plenty of different makers of phones for example all making fungible phones at ever lower prices, yet managing to eke out a profit. I can see a world where OpenAI, Anthropic, Chinese companies corner the market, make themselves indispensable and start charging market rates, while also getting better and more cost efficient.

Here again you have network effects, though. I personally have an iPhone because it’s what all my friends and family use and there are communication functions that are much easier to engage with if you all have the same sort of device. It’s also not trivial to switch, you need to, at minimum, go to the store or wait for something to get delivered - to say nothing of the wasted money from buying multiple phones. If I have unused OpenAI tokens I can burn them on side quests or something. If you have an unused iPhone you need to find a way to sell/return it or eat the cost. There’s also potential violations of your contract with your mobile carrier, etc.

If I’m using ChatGPT and I decide I want to use DeepSeek instead, I am only a couple of keystrokes away from doing it, and that’s if I have never used DeepSeek before.

As for your “corner the market” scenario, it’s possible, but unlikely. It is too easy to enter; even if you somehow got all of the major players to commit to growing their margins - and somehow manage not to violate the antitrust laws in the process - a newcomer could spoil the party far easier than it could in an industry like mobile phones (where you need tons of components, manufacturing capacity, network relationships, etc.) or ride sharing (where you need a large user base to justify your existence).

Re: The AI Demand Bubble

#95

Post by tim333 »

He's saying the demand is artificial because it's all from Anthropic and OpenAI but they have revenue from paying customers of about $74 bn and $49 bn annualized respectively. If those went under the customer demand would still presumably be there.

And it's not like those numbers are static - they are probably up several times on a year earlier.

In July 2024 Anthropic's annualized revenues were ~$0.5 bn when Ed wrote

>And yes, that sound you hear is the slow deflation of the bubble I've been warning you about since March...

>How does GPT – a transformer-based model that generates answers probabilistically (as in what the next part of the generation is most likely to be the correct one) based entirely on training data – do anything more than generate paragraphs of occasionally-accurate text?

which illustrates how spot on he is with understanding AI.

Re: The AI Demand Bubble

#96

Post by vonneumannstan »

cmiles8 wrote: post #58
vonneumannstan wrote: post #55

Earlier quoted context omitted.

Its up 80% on the year. How do your investments compare?

This is the most misquoted bit in that whole fiasco. He apparently had to sell every liquid thing in the portfolio. What’s left is allegedly just some highly illiquid paper assets that they’ve also been trying to unload. The present value of those is iffy at best and may well also plummet before they can be cashed in. That “80%” can’t be realized right now in any traditional sense. No matter how you slice it the whol…

>He apparently had to sell every liquid thing in the portfolio.

You can read in their investor letter exactly what happened and where they stand and explicitly they did not sell every liquid thing nor did they sell all their public equities. Are you just lying or stupid?

Re: The AI Demand Bubble

#97

Post by timpera »

catdog wrote: post #88
rich_sasha wrote: post #74

Earlier quoted context omitted.

I largely agree with this take. What gives me disquiet is that I thought more or less exactly this about Uber, and was proven comprehensively wrong. Despite burning money like a furnace on an app for taxis, it seems that anyone who invested privately made a handsome return, and they are at a profitable steady state. Is AI the same?

Taxis in general are a working and proven business model. You could have been skeptical about the way they approached it but surprise surprise, you can make money providing taxi services. Less so with "AI", it's not proven at all that this can be made profitable in the near future.

A lot of smart people said that Uber could never become profitable because the core economics couldn't work out:

> https://www.bbc.com/news/technology-48227381

> https://www.forbes.com/sites/lensherman/2019/08/22/ubers-dub...

> https://americanaffairsjournal.org/2019/05/ubers-path-of-des...

Cory Doctorow, who is close to Ed Zitron and writes a lot in the same way about AI's economics, was of the same opinion: https://doctorow.medium.com/no-ubers-still-not-profitable-2b...

I used to believe this, so I'm not sure what to think of the AI market.

Re: The AI Demand Bubble

#98

Post by timpera »

sixhobbits wrote: post #52

[off topic] I'm a writer too and I know people have to make their money but - Huge subscribe CTA at top - In-text subscribe CTA - scroll through that get pop up in your face full page subscribe CTA - close that and continue scrolling to yet another subscribe CTA was enough to make me close the page and ask my agent for a summary rather.

It is somewhat ironic considering that he writes at length about pop-ups and the degradation of user interfaces: https://www.wheresyoured.at/what-were-fighting-for/

Re: The AI Demand Bubble

#99

Post by parineum »

francisofascii wrote: post #33
parineum wrote: post #31

Earlier quoted context omitted.

Would you expect someone in the AI industry to predict the collapse of the AI industry? I'm sure there weren't a ton of bankers predicting the mortgage collapse of 2008 but I, a young programmer of mortgage software could see something was weird (but didn't realize that it wasn't the norm).

curious, what weird things did you see?

It's nothing special that's not already pretty well known by now. It was seeing how popular loans that were some combination of zero documentation, baloon payments and jumbo loans.

People were getting multi-million dollar loans with no documentation which had affordable introductory payment and then ballooned to many times the payment.

I had no idea that wasn't normal but I was surprised when I learned that it was possible. I just lacked context and understanding of how the mortgage/banking industry really worked. Had I known as much as I do now after having been adulting for a while and become much more familiar with how banking really works, I could have seen that there was a massive pool of risk that was relying on the value of the housing market to not just keep increasing but increase at an incredible rate. All that it took was for the market to slow down just a little and then all those balloon payments would start defaulting because they couldn't be refinance again.

I couldn't have predicted everything that happened or who exactly would be holding the bag but, with just a couple more pieces of knowledge, I could have easily seen it was unsustainable.

Re: The AI Demand Bubble

#100

Post by arctic-true »

timpera wrote: post #97
catdog wrote: post #88

Earlier quoted context omitted.

Taxis in general are a working and proven business model. You could have been skeptical about the way they approached it but surprise surprise, you can make money providing taxi services. Less so with "AI", it's not proven at all that this can be made profitable in the near future.

A lot of smart people said that Uber could never become profitable because the core economics couldn't work out: > https://www.bbc.com/news/technology-48227381 > https://www.forbes.com/sites/lensherman/2019/08/22/ubers-dub... > https://americanaffairsjournal.org/2019/05/ubers-path-of-des... Cory Doctorow, who is close to Ed Zitron and writes a lot in the same way about AI's economics, was of the same opinion: https:/…

The failures of past doomsayers are important to keep in mind. It’s hard to say “well, but we know things they didn’t know at the time, but this time that won’t happen.” I will observe, however, that Uber’s revenues come from consumers. Consumers are never going to be willing to spend enough on AI to justify OAI and Anthropic’s spending, even if a single company captured all of their demand. They recognized this and pivoted to software engineering and enterprise customers. These are much more sophisticated buyers than someone trying to catch a cab or get a burrito delivered, and more able to be patient or expend resources to find a better, cheaper provider.

It also bears mentioning that if any particular AI lab manages to survive and succeed in the way Uber has, there will be several multibillion dollar corporate gravestones behind it. In fact, I don’t even think that nobody can be the Uber of AI. I just think it can’t be OAI or Anthropic. The debt is too great and it’s priced under old assumptions.

Post reply on HN