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America's $1T AI Gamble

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Re: America's $1T AI Gamble

#71

Post by mg »

louiereederson wrote: post #67
mg wrote: post #37

My napkin-math approach to get a bird's eye perspective on the situation: A $1T investment needs to produce on the order of $100B in yearly earnings to be a good investment. Global GDP is about $100T. So one way for things to work out for the AI companies would be if AI raises GDP by 1% and the AI companies capture 10% of the created value.

At some point AI may deliver the level of net economic benefit you reference, but it's not entirely clear that we're there yet. Right now much of the direct monetization occurs via OpenAI and Anthropic, who together have around $30B in annualized revenue. They are burning cash like crazy, though admittedly have potentially sustainable unit economics (gross margins around 40-60% before revenue share). However, they ne…

The earnings do not need to come via direct monetization.

Google search revenue for example was over $200B in 2025. This revenue will be tightly coupled to the quality of their AI models in the future.

Re: America's $1T AI Gamble

#72

Post by mg »

bryanlarsen wrote: post #66
mg wrote: post #37

My napkin-math approach to get a bird's eye perspective on the situation: A $1T investment needs to produce on the order of $100B in yearly earnings to be a good investment. Global GDP is about $100T. So one way for things to work out for the AI companies would be if AI raises GDP by 1% and the AI companies capture 10% of the created value.

10% capture seems highly unlikely. That level of capture is only possible for b2b high touch sales, aka "call-me" pricing. For call-me pricing to work, you have to ensure that any sort of public sticker price is not a suitable alternative. You can not have a sticker price, make the sticker price so high essentially nobody will buy it or by finding a feature like oauth that makes the public version infeasible for busi…

I don't think we have seen "all functionality" yet.

We have not seen iterative AI use for example.

The use case, where you tell the model "Solve this task. Then solve it again. Keep the better solution, then solve it again. On and on. Tomorrow, show me the best solution.".

And also not the "Run a company on your own" use case.

Those might make people and companies use models full-time. The price of that will be way different from current subscription prices. The TCO of a single instance of a SOTA model is on the order of $100k per year.

Re: America's $1T AI Gamble

#73

Post by sottol »

mg wrote: post #37

My napkin-math approach to get a bird's eye perspective on the situation: A $1T investment needs to produce on the order of $100B in yearly earnings to be a good investment. Global GDP is about $100T. So one way for things to work out for the AI companies would be if AI raises GDP by 1% and the AI companies capture 10% of the created value.

If I'm mistaken, then the article states that the investment is $1T annualized when taking software development costs into account [1] if the labs don't all suddenly decide to stop development.

That would mean earnings of ~ $1.1T would be required on that investment annually, so maybe on $2T of revenue, capturing 2% of the global GDP - so I'd estimate that GDP would need to go up more like 5-10% to justify this.

[1] https://substackcdn.com/image/fetch/$s_!Gf2t!,f_auto,q_auto:...

Re: America's $1T AI Gamble

#74

Post by goalieca »

mg wrote: post #71
louiereederson wrote: post #67

Earlier quoted context omitted.

At some point AI may deliver the level of net economic benefit you reference, but it's not entirely clear that we're there yet. Right now much of the direct monetization occurs via OpenAI and Anthropic, who together have around $30B in annualized revenue. They are burning cash like crazy, though admittedly have potentially sustainable unit economics (gross margins around 40-60% before revenue share). However, they ne…

The earnings do not need to come via direct monetization. Google search revenue for example was over $200B in 2025. This revenue will be tightly coupled to the quality of their AI models in the future.

Googles search revenue comes from ads which depend somewhat on the quality and speed of the search result. Yeah, a better LLM could do it but a better pagerank with NLP that actually works again could do it.

Re: America's $1T AI Gamble

#75

Post by tim333 »

xyst wrote: post #2

And this gamble is paid for by American taxpayers, increased cost of utilities, and multibillion dollar corporations receiving tax breaks/subsidies from the cities/counties they build in. This country is so awful. Great if you are rich. Awful if you are not in this top 0.01-1%. A massive $79T has been transferred from bottom 90% to top 1% since the 1970s. [1] [1] https://www.rand.org/pubs/working_papers/WRA516-2.html

There's some of that but the vast majority is paid with private sector stuff - business profits and investor money.

Re: America's $1T AI Gamble

#76

Post by mg »

goalieca wrote: post #74
mg wrote: post #71

Earlier quoted context omitted.

The earnings do not need to come via direct monetization. Google search revenue for example was over $200B in 2025. This revenue will be tightly coupled to the quality of their AI models in the future.

Googles search revenue comes from ads which depend somewhat on the quality and speed of the search result. Yeah, a better LLM could do it but a better pagerank with NLP that actually works again could do it.

Are you located in a country where Google does not yet show AI answers?

In most countries, AI answers are the central aspect of Google now. Not the ranked pages.

Re: America's $1T AI Gamble

#77

Post by [deleted] »

co_king_3 wrote: post #13
galleywest200 wrote: post #11

Earlier quoted context omitted.

That is more than one month rent for most of the world. Most people are simply not going to pay this.

Well then I'm sorry but unfortunately they are going to be left behind. People who are cut out to be software developers can afford the means of production.

[deleted]

Re: America's $1T AI Gamble

#78

Post by bryanlarsen »

mg wrote: post #72
bryanlarsen wrote: post #66

Earlier quoted context omitted.

10% capture seems highly unlikely. That level of capture is only possible for b2b high touch sales, aka "call-me" pricing. For call-me pricing to work, you have to ensure that any sort of public sticker price is not a suitable alternative. You can not have a sticker price, make the sticker price so high essentially nobody will buy it or by finding a feature like oauth that makes the public version infeasible for busi…

I don't think we have seen "all functionality" yet. We have not seen iterative AI use for example. The use case, where you tell the model "Solve this task. Then solve it again. Keep the better solution, then solve it again. On and on. Tomorrow, show me the best solution.". And also not the "Run a company on your own" use case. Those might make people and companies use models full-time. The price of that will be way d…

I believe that you're arguing "1% GDP increase due to AI is too conservative" rather than against "capturing 10% of the value increase is possible".

Re: America's $1T AI Gamble

#79

Post by ekjhgkejhgk »

co_king_3 wrote: post #13
galleywest200 wrote: post #11

Earlier quoted context omitted.

That is more than one month rent for most of the world. Most people are simply not going to pay this.

Well then I'm sorry but unfortunately they are going to be left behind. People who are cut out to be software developers can afford the means of production.

LOL you think you own the means of production?

People who own the means of production own the company, which hires the board which hires the CEO who hires the executives who hire the manager who hires you. You think the people who own the means of production code? If you code you're closer to a bricklayer than to owning anything.

Re: America's $1T AI Gamble

#80

Post by goalieca »

mg wrote: post #76
goalieca wrote: post #74

Earlier quoted context omitted.

Googles search revenue comes from ads which depend somewhat on the quality and speed of the search result. Yeah, a better LLM could do it but a better pagerank with NLP that actually works again could do it.

Are you located in a country where Google does not yet show AI answers? In most countries, AI answers are the central aspect of Google now. Not the ranked pages.

I use ddg instead of google but it does show answers. I don't go to google for chatbots, i do go to find answers and more than not i find myself unsatisfied with the LLM answer so i end up diving past SEO spam (also LLM written these days) to find where i need to go. It's very frustrating and i'm feeling very pessimistic about the future of the web. It seems to be atrophying.
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