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The AI Demand Bubble

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Re: The AI Demand Bubble

#121

Post by dwaltrip »

surgical_fire wrote: post #120
dwaltrip wrote: post #117

Earlier quoted context omitted.

I don’t trust someone who is dumb enough to think LLMs aren’t useful at all. Of course, he may just be deceiving himself or his audience about this belief. I don’t think he is actually dumb. But this alternative is equally problematic.

I choose evaluate claims on their merit. Many times in the past I was convinced by good arguments that came from people I dislike. I think Zitron is wrong in the usefulness of AI; but then again, so are the people hyping AI way beyond its capabilities. The numbers he brings up in the article are solid though. That said, if Zitron irks you, you can watch the most recent Patrick Boyle video on the big tech debt: https:…

Thanks for an alternative source! I’ll check it out.

Re: The AI Demand Bubble

#122

Post by jackb4040 »

dwaltrip wrote: post #118
jackb4040 wrote: post #54

Earlier quoted context omitted.

This is his position, he doesn't have time to say it on corporate media that give him 5 minutes but he starts basically every podcast with (paraphrasing) "LLMs are rightfully a boring several-hundred-million-dollar business that will be important in some industries like coding but the vast majority of the population won't care about".

He has admitted to being grotesquely wrong about LLMs being useful?

I'm providing you with factual information and encouraging people to engage with his long-form content and not just caricatures and hostile MSM segments. Whether you do so is up to you, I'm not interested in sparring.

Re: The AI Demand Bubble

#123

Post by dubeye »

InsideOutSanta wrote: post #10
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…

> that is growing It seems like user numbers are stagnating, and the ad play isn't working out so far. Where is the revenue growth coming from? I don't think API can be the answer, because API has absolutely no switching costs. > The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x Presumably, that was the plan, but I don't see how that can possibly work with how quickly the Chinese models caug…

revenue is probably the better indicator of whether revenue is growing or not

Re: The AI Demand Bubble

#124

Post by dwaltrip »

jackb4040 wrote: post #122
dwaltrip wrote: post #118

Earlier quoted context omitted.

He has admitted to being grotesquely wrong about LLMs being useful?

I'm providing you with factual information and encouraging people to engage with his long-form content and not just caricatures and hostile MSM segments. Whether you do so is up to you, I'm not interested in sparring.

Fair enough.

Re: The AI Demand Bubble

#125

Post by keeda »

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…

Thanks, that is indeed a much better piece than most financial reporting on the AI industry. Like everyone goes on about "Circular investment! Bad!!" and many even interpret it as fraudulent accounting, but as this points out instead, it is a different, pretty valid, and perfectly legal strategy with significant but well-understood risks.

I'll just pick a nit, on the topic of demand concentration, it cites that "MIT NANDA study / 95% AI pilots failed" number without considering the provenance (and, frankly, accuracy and relevance) of that number: https://archive.md/AvSYL

Re: The AI Demand Bubble

#126

Post by bigbadfeline »

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…

> 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

How do you know it's not "as bad"? Whenever things got that bad a crash followed, a lot of people lost their shirts and savings. For them it's that bad and then some. Why mislead these people?

> The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x and reducing inference cost by half... then simply fire software engineers.

OK, I didn't know that brutal/shmutal was the only way to do business these days. If I could only get with the program, I would understand how rosy-smelly the situation is and not at all "as bad as the author makes it out to be".

> The thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor.

Oh, wait, I thought it wasn't that bad? Which way is it? Brutal/shmutal failed to work? But, but but, you said, you promised... "not as bad".

Besides, Chinese competition isn't the only way to commoditize AI, new tech developments are the single most significant risk in tech - a well known fact.

> If you don't have a monopoly, you cannot rugpull and 6x the costs on the consumer.

Anyone who invests while convinced that only a monopoly would save his investments has got his brain screwed on backwards,

Re: The AI Demand Bubble

#127

Post by tim333 »

surgical_fire wrote: post #106
tim333 wrote: post #92

Earlier quoted context omitted.

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.

This is the thing - I enjoy Zitron's work. His criticism to AI has two angles. The weak angle is on AI usability. I think he is wrong there; AI is clearly useful. Now, there is a discussion if it is multi-trillion dollar useful; I think it isn't, but it is useful nonetheless. Now, there is a strong angle, which is the economic viability of AI, and the gargantuan amount of money being burned in what is a very risky be…

It's kind of complicated to argue on the economic viability as the spending does seem a bit excessive but if you assume an industrial revolution kind of situation it can be justified, if you assume it's just another tech product to hype then it isn't and will all fall apart. I think Zitron is wrong on that but can't prove it as I can't see the future.

You can look as past quotes like "that sound you hear is the slow deflation of the bubble I've been warning you about since March" in July 2024 and say he was over pessimistic on the economics but it's hard to prove he still is.

There's a fundamental issue that in standard finance the present value of an investment is the discounted value of the future cash flows which are hard to estimate with a developing tech like AI but Ed I guess thinks they'll be low and optimists high. I'm not sure he'd even be up on the concept of discounted future cash flows.

If you look at the other end of financial knowledge with Warren Buffett, he's bought in, in spite of not being a tech enthusiast, through buying shares in Google. https://finance.yahoo.com/technology/ai/articles/buffett-say...

Re: The AI Demand Bubble

#128

Post by xethos »

InsideOutSanta wrote: post #10
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…

> that is growing It seems like user numbers are stagnating, and the ad play isn't working out so far. Where is the revenue growth coming from? I don't think API can be the answer, because API has absolutely no switching costs. > The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x Presumably, that was the plan, but I don't see how that can possibly work with how quickly the Chinese models caug…

> API has absolutely no switching costs.

Were that true, many embedded maps would have switched to OSM instead of Google Maps after Google massively increased costs. Adding your business to OSM is free, and API costs would fall pretty dramatically

Re: The AI Demand Bubble

#129

Post by surgical_fire »

tim333 wrote: post #127
surgical_fire wrote: post #106

Earlier quoted context omitted.

This is the thing - I enjoy Zitron's work. His criticism to AI has two angles. The weak angle is on AI usability. I think he is wrong there; AI is clearly useful. Now, there is a discussion if it is multi-trillion dollar useful; I think it isn't, but it is useful nonetheless. Now, there is a strong angle, which is the economic viability of AI, and the gargantuan amount of money being burned in what is a very risky be…

It's kind of complicated to argue on the economic viability as the spending does seem a bit excessive but if you assume an industrial revolution kind of situation it can be justified, if you assume it's just another tech product to hype then it isn't and will all fall apart. I think Zitron is wrong on that but can't prove it as I can't see the future. You can look as past quotes like "that sound you hear is the slow…

It's difficult to trust the viability of this when the amount of money that it needs to generate as revenue is in the "several trillions" ballpark just for "break-even".

If you assume that this will be "industrial revolution" situation... maybe? It doesn't help if this happy scenario takes 30 years to materialize. The money needs to be there by sometime in the next few years.

Also, every risky bet has a happy scenario that if successful, all the gamblers become gorillionaires. In the happy scenario, every GME hodler would have wife-changing money by now, with their shares in Gamestop worth infinite dollars.

Re: The AI Demand Bubble

#130

Post by LogicFailsMe »

keeda wrote: post #125
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…

Thanks, that is indeed a much better piece than most financial reporting on the AI industry. Like everyone goes on about "Circular investment! Bad!!" and many even interpret it as fraudulent accounting, but as this points out instead, it is a different, pretty valid, and perfectly legal strategy with significant but well-understood risks. I'll just pick a nit, on the topic of demand concentration, it cites that "MIT…

Great article as well, but I'd even be happy with an initial 5% rate out of the gate given ~90% of startups fail.

AI build out is a risk. Is anyone serious saying it isn't? It might blow up, certainly some egregiously overpriced endeavors will revert to mean, but risk taking is what businesses and investors do for a living. But for giggles, I threw Nvidia's latest 10Q into Sol 5.6 to analyze it as Patrick Boyle suggested that was the only way to understand the games they're playing. And its summary:

"financial distress risk is very low; earnings-volatility risk is moderate to high. NVIDIA’s debt is trivial relative to earnings and liquidity. The main downside scenario is not creditors forcing distress—it is an AI-demand slowdown or regulatory shock colliding with enormous supply commitments, concentrated customers, and investment exposure. Even then, its margins, cash generation, net-cash position, and discretionary buybacks provide a substantial cushion."

So broadly nothing I didn't more or less know already.

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