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The AI Demand Bubble

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Re: The AI Demand Bubble

#151

Post by dgellow »

maleldil wrote: post #144
dgellow wrote: post #62

Earlier quoted context omitted.

Because it’s economics, a social science. Not a physics experiment you can replicate in a lab. You do what a serious person does: look at the thesis, look at the sources, look at the numbers, and do your own analysis

You can't feasibly read all posts about AI in the world and analyse each one individually with the level of care you prescribe. You have to apply some heuristics to decide what to read, and someone being consistently wrong in the past is an effective one.

If you don’t want to engage with his work, sure. Was this thesis wrong though? That’s the only thing that matters. My point is that the predictions of future aren’t what matters to evaluate a research. A thesis can be right, but the prediction of the next steps at play wrong. A prediction can be right for the wrong reasons.

Very often predictions are useless to evaluate an analysis, you need to look at the underlying assumptions and facts, and see how they reflect reality. Ignore the person, look at the story and decide for yourself if it makes sense or not

Re: The AI Demand Bubble

#152

Post by tim333 »

surgical_fire wrote: post #149
tim333 wrote: post #146

Earlier quoted context omitted.

I thought the Boyle vid was good. The thing about "hyping AI way beyond its capabilities" is that the future capabilities will no doubt be greater than the current ones so they may just be talking about the future a bit. There's a bit of a tipping point in usefulness between AI being a bit worse than humans and a bit better, like for mathematical theorems that's probably happened where being not very good was kind of…

The problem is the numbers and the timeframe. I avoid making predictions on tech: - AI may speed up on improvements and be a singularity moment, truly a new industrial revolution. - AI may have only incremental improvements in the next few decades with diminishing returns. - AI improvements may plateau and fizzle out. All those are possible scenarios, and if you dig you may find evidence and historical precedence for…

I see your point but there's been a Moore's law like trend in compute/dollar that's progressed steadily for about a century and has a very high probability of continuing. How that maps into AI products is a bit uncertain but there's definitely a trend in that direction.

As an example of the predictability, Hand Moravec wrote quite a well argued paper in 1989 predicting human level hardware capabilities would be available in inexpensive machines around the mid 2020s which I think was fairly spot on. He also argued once those capabilities were there, software guys would figure things to use if for.

Re: The AI Demand Bubble

#153

Post by no_multitudes »

jackb4040 wrote: post #54
no_multitudes wrote: post #37

Earlier quoted context omitted.

For the record, I agree that the generative AI industry might collapse. But I think Ed Zitron is ideologically committed to this belief in a way that is not a reflection of the evidence, and doesn't seem to update this belief based on new evidence. >What the AI bulls don’t seem to understand is that AI could be a great technological achievement AND an impending economic collapse This doesn't seem to be Ed Zitron's po…

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".

I do not watch podcasts or news videos. I am basing my opinions on the content he writes in his free 5-10,000 word blog posts.

Re: The AI Demand Bubble

#154

Post by bigbadfeline »

pu_pe wrote: post #148
LarsDu88 wrote: post #139

Earlier quoted context omitted.

I think the nuance that's being missed here is that the profit margin of inference serving when there's perfect competition is close to 0. Zero profit means no recouping investment costs effectively bursting the bubble. Technological progress can come at extreme pace but the lack of profits can still torch both the startup frontier labs and the hyperscalers. We plebians can then pick up H100 gpus off Ebay to help us…

Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine with a model where they make huge investments in infrastructure and you pay to access them per use/per hour. That is already their model for cloud compute and it is highly profitable, even though the vast majority of what people do with it (storage, VMs, etc.) is a commodity.

> The hyperscalers would be fine... their model for cloud compute... is highly profitable.

"fine" and "highly profitable" are doing a whole lot of heavy lifting here, actually masking the quantitative reality that these "high profits" are nowhere near the height required to pay back their debts and remain profitable enough to prevent a sharp drop of their stock prices - that kind of development is the opposite of "fine" as far as investors, ordinary people and the wider economy are conserned.

> Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine.

That's not how the market works, if OAI or Anthro default, they'll bring down the whole market, it'll be 2008 on steroids. Assuming the fire can be contained to only two trees misses the reality of how dense the forest is and how hot and strong are the winds blowing towards it.

Re: The AI Demand Bubble

#155

Post by bigbadfeline »

LarsDu88 wrote: post #138
bigbadfeline wrote: post #126

Earlier quoted context omitted.

> 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 an…

>Anyone who invests while convinced that only a monopoly would save his investments has got his brain screwed on backwards Whats the common trait between Warren Buffet and Peter Thiel? They only invest in companies that are monopolies or on their way to being monopolies. As Thiel (who very much has his head screwed on backwards) says "Competition is for losers" What does Rockerfeller, Carnegie, Gates, and Musk have i…

> Warren Buffet and Peter Thiel...

Past Performance Is No Guarantee of Future Results

> "Competition is for losers"

That's how we got where we are, losing the global competition game, high polarization, inflation, debt, and wars. Communist China managed to surge ahead mainly due to their purposeful development of a highly competitive industry and market. Oh, the irony.

> The only way these companies are going to make their investments back is by being monopolies.

Well, they aren't and they won't be, the game has changed. Seems like when you say "monopoly" you mean "on the US market" but that's not enough to sustain anything resembling a good life here. You may be thinking of an isolated and self-sufficient national economy but that's a mirage. The world is still global and only a major extinction event, like an all out world war, can change that - do you want to go there?

Buffet, Thiel, Gates, Musk, etc have nice bunkers to hide in... you don't.

Re: The AI Demand Bubble

#156

Post by MattyRad »

dofm wrote: post #116
supern0va wrote: post #113

Earlier quoted context omitted.

> Ed Zitron is enjoyably mouthy and rude about AI and AI people Another read: Ed provides great content to help people afraid of AI self-soothe and pretend that it's not going anywhere.

He doesn't pretend it's not going anywhere. He does think the market is going to crash. Like I say, I find his tone enjoyable, some of his predictions are interesting (and he has already been proved right on its risks to Oracle for example). I'm not interested in self-soothing and I am not afraid of AI. I am even a bit less bearish than Zitron. I am concerned about a world that is fucking stupid enough to fall for th…

I admit that I read this stuff for self-soothing, although the self-sooth is not about AI going away, just that SotA will become expensive enough that everyone stops shilling digital garbage everywhere all the time.

If SotA does not go up in price (ala open weights), then everyone will continue to shill digital garbage AND the stock market will presumably get ravaged. So I'm really crossing my fingers about cost increase and- full circle- this hope is why I like to self-soothe with these articles (i.e. I cannot attest the articles' veracity but it makes me feel good that a human writer is speculating convincingly about instability).

That said, I sense that the ravaging is a forgone conclusion, unless someone pulls a(nother) rabbit out of a hat. I'd qualify agentic coding was a rabbit, so it could happen again I suppose.

Re: The AI Demand Bubble

#157

Post by pu_pe »

bigbadfeline wrote: post #154
pu_pe wrote: post #148

Earlier quoted context omitted.

Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine with a model where they make huge investments in infrastructure and you pay to access them per use/per hour. That is already their model for cloud compute and it is highly profitable, even though the vast majority of what people do with it (storage, VMs, etc.) is a commodity.

> The hyperscalers would be fine... their model for cloud compute... is highly profitable. "fine" and "highly profitable" are doing a whole lot of heavy lifting here, actually masking the quantitative reality that these "high profits" are nowhere near the height required to pay back their debts and remain profitable enough to prevent a sharp drop of their stock prices - that kind of development is the opposite of "fi…

I meant that the current business model of the hyperscalers is highly profitable, and that model is selling compute that you could build yourself but you'd rather not to. If OpenAI or Anthropic default because people prefer open source models, they will still have compute for rent. The only scenario in which they are truly screwed is if demand for AI goes down.

Re: The AI Demand Bubble

#158

Post by pydry »

jackb4040 wrote: post #56
pydry wrote: post #18

Earlier quoted context omitted.

>In july 2024, Zitron wrote at length about how the economics of OpenAI were likely to collapse in the next 1 to 2 years [1]. One of my clearest memories of the first tech bubble was of a number of people who accurately identified that it WAS a bubble and then predicted it would go pop 12-18 months before it did. They attracted plenty of scorn and derision for being 80% right from people who were 100% wrong. Some als…

Is that the prediction they're claiming is "wrong"? The year's nowhere near out yet.

well, it is over 2 years since July 2024

Re: The AI Demand Bubble

#159

Post by dofm »

MattyRad wrote: post #156
dofm wrote: post #116

Earlier quoted context omitted.

He doesn't pretend it's not going anywhere. He does think the market is going to crash. Like I say, I find his tone enjoyable, some of his predictions are interesting (and he has already been proved right on its risks to Oracle for example). I'm not interested in self-soothing and I am not afraid of AI. I am even a bit less bearish than Zitron. I am concerned about a world that is fucking stupid enough to fall for th…

I admit that I read this stuff for self-soothing, although the self-sooth is not about AI going away, just that SotA will become expensive enough that everyone stops shilling digital garbage everywhere all the time. If SotA does not go up in price (ala open weights), then everyone will continue to shill digital garbage AND the stock market will presumably get ravaged. So I'm really crossing my fingers about cost incr…

I think the big picture is whether the big two can mask the real cost of tokens (inference and training) long enough to survive; that OpenAI is seeking government investment suggests that they can't.

Ed Zitron helps you see the broad absurdities in this situation and more importantly helps you understand that at various levels there is chicanery: they need more money constantly so they make weird unprovable claims to people who lack the skills to critique them, they exploit not jusT FOMO but actually fear of their own products to market them, their suppliers are making such ruthless use of SPVs as to conjure a possible apparently entirely legal Enron-scale disaster, they are attempting to scare the US government into backing them, and they have tried to get the index funds to back them before they have any hope of profit. None of it is normal; much of it is operating in the face of whatever still passes for principle in the US tech and finance industries. The broad picture is obscured by smoke.

But as fascinating as it is, it's only background information and it only broadly supports one's instincts; anything can still happen. For me, the main instinct it provides some support for is that the market is so terrifyingly lacking in verifiable fundamentals and stable predictable pricing that ultimately people will be driven to open weights and local models to keep control of their businesses; anything else is not a sane bet. So it broadly supports my instincts about my local-first approach, to find sustainable value.

The thing about pulling rabbits from hats is that the rabbit was always there; it's not a new rabbit. With a bit of understanding about how GPTs and LLMs work it is clear that code analysis and generation is not just a good application, it is the utmost practical and profitable one, because nowhere else in broad human effort do we communicate only in context-free grammars. Nothing else is actually going to prove to be more valuable financially).

(Formal pure maths is the "purest" one which is why we see its value in chugging through maths puzzles. But is there as much money to be found there?)

Re: The AI Demand Bubble

#160

Post by runamok »

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…

Which makes me cynically believe that all this capital being burned that has made memory, storage and GPUs in some cases 5x is a feature, not a bug. "Can't use open weight models if you can't find or afford the hardware to run them on!"
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