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The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

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Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#11

Post by vmg12 »

awongh wrote: post #8

I get the structural comparison they are trying to make. But mortgages are not a frontier AI lab. They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets. I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by pe…

The dynamics are interesting. If all businesses get productivity increases from AI, the margins they could have claimed are competed away. The model companies also have their margins competed away because of open models. The only companies that have a moat are the ones with capital as a barrier to entry and even then there is cut throat competition.

We might end up with massive consumer surplus from AI because no business will be able to raise prices due to competition. This is why it's so important that we don't allow for regulatory capture in this space.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#12

Post by rootusrootus »

awongh wrote: post #8

I get the structural comparison they are trying to make. But mortgages are not a frontier AI lab. They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets. I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by pe…

The value is going up, but the pricing is going down, right? At least at the token level. So the usage would have to go up dramatically to compensate for that.

> there is an upper bound for the price of a house set by people’s income

Isn't that essentially true here too? The money to pay these expected future AI prices is coming from someone's income. Sure, the pie will be growing at the same time, but enough?

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#14

Post by compiler-guy »

awongh wrote: post #8

I get the structural comparison they are trying to make. But mortgages are not a frontier AI lab. They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets. I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by pe…

"The underlying product, the model keeps improving and therefore increases its value."

That's not exactly true. Yes, the fundamental capabilities of the models do seem to be growing dramatically, but the economic value of any particular model may be steady, or even falling, because of commoditization, or other issues external to the model itself.

Without a moat, improvement in model capability does not necessarily translate into economic value--and the labs need economic value to pay their obligations.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#15

Post by harshaw »

Some other commentators said this was AI slop. I don't have enough expertise to say if it really is, but it sure has the "claudish" cadence of AI generated text that makes it hard to take it seriously. The authoritative and strong statements, the use of phrasing with colons and dashes, the use of bold, etc.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#16

Post by Octoth0rpe »

awongh wrote: post #8

I get the structural comparison they are trying to make. But mortgages are not a frontier AI lab. They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets. I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by pe…

> The underlying product, the model keeps improving and therefore increases its value.

I think this is true, but a customer's willingness to spend is based on _perceieved_ value, not actual value. For many companies, the _perceived_ value of AI has been trending down as internal projects fail and cost skyrocket, even as models on paper improve.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#17

Post by jonwinstanley »

Octoth0rpe wrote: post #16
awongh wrote: post #8

I get the structural comparison they are trying to make. But mortgages are not a frontier AI lab. They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets. I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by pe…

> The underlying product, the model keeps improving and therefore increases its value. I think this is true, but a customer's willingness to spend is based on _perceieved_ value, not actual value. For many companies, the _perceived_ value of AI has been trending down as internal projects fail and cost skyrocket, even as models on paper improve.

And the Open Weight models keep improving.

For many tasks, you don’t need a frontier model.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#18

Post by plasticchris »

vmg12 wrote: post #11
awongh wrote: post #8

I get the structural comparison they are trying to make. But mortgages are not a frontier AI lab. They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets. I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by pe…

The dynamics are interesting. If all businesses get productivity increases from AI, the margins they could have claimed are competed away. The model companies also have their margins competed away because of open models. The only companies that have a moat are the ones with capital as a barrier to entry and even then there is cut throat competition. We might end up with massive consumer surplus from AI because no bus…

Yes and much like the technological leaps of the past, everyone’s standard of living goes up.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#19

Post by Espressosaurus »

harshaw wrote: post #15

Some other commentators said this was AI slop. I don't have enough expertise to say if it really is, but it sure has the "claudish" cadence of AI generated text that makes it hard to take it seriously. The authoritative and strong statements, the use of phrasing with colons and dashes, the use of bold, etc.

The claims and data are interesting (perhaps overstated in the usual Claude way) but it's about 20x more prose than is actually justified.

Re: The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

#20

Post by Synaesthesia »

IMO there is overinvestment in compute and this will turn out to be a bubble.

But all of the money was anyway just lying around doing nothing. An enormous amount of capital has been building since the 80's thanks to corporate profits. A small sector of the population is so rich they don't know what to do with their capital.

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