Ask HN: What Makes AI a Bubble? (news.ycombinator.com)
What I'm confused about though is what makes current AI evaluations a bubble.
Bubbles usually exists when future speculation outpaces productivity: eventually some realization leads the market to no longer believe in that future speculation, causing devaluation which triggers a mass sell-off.
However, AI companies currently have very high revenues and are growing extremely fast. Their valuation is backed by actual commerce. I can't imagine that there is any room for a bubble, as it is very clear where the market is at, and why demand for AI is so high.
Now, certain specific companies I can imagine losing a lot of valuation, but only contingent on the fact that they serve a middle-man role in the market that improvements in the underlying AI models will solve, which would likely only mean more revenue for the frontier labs, and thus less reason for a bubble.
Is it?
Is that revenue actually tied to something in the market, or is it just all of these companies and investors blowing air into the bubble?
You're also ignoring the fact that these companies have been shifting things around to make their books look better than they actually are. Here's a good example explaining how META has been keeping debt and lease obligations off its books to fuel growth (and who's at risk if META doesn't pay up):
https://www.reddit.com/r/economy/comments/1soent7/if_the_ai_...
As for Meta’s shady accounting, I also inside most tech companies leverage whatever they can to remain competitive in a high growth market. They certainly have the money to get away with it though for now.
This is not discussed publicly and is covered up for by raises, because there is growth and the hope that at some point the economics could work out. Which remains to be seen.
It's a variant on a Ponzi scheme. Investor hope is that at some point someone invents a way to stop losing money.
If at any point investors start to lose faith that this is going to be the case, the bubble pops.
Just because of an invention is useful and world changing doesn’t mean it won’t cause a bubble.
Airlines are a great example - they are everywhere, nobody can imagine life without them, and yet they are yet to make any money ! Maybe they will figure it out before oil runs out on planet Earth.
As for Buffett speach - ther is a specific quote about airlines in it: "If a capitalist had been present at Kitty Hawk back in the early 1900s he should’ve shot Orville Wright"
Yet, thanks to our times, at least one major company appears to be thought-bubbling. It appears to hope (if it's not just window-dressing) that fusion will suddenly appear in the next 2 years ... to avoid driving regional electric rates sky high.
This is just like the Dot Com Bubble, where a lot of companies popped up saying they were going to "use the internet" without actually having a plan.
2.) the speculative debt - Oracle is (was?) the most buried
In all the companies i have worked for, ai hasn’t been a productivity multiplier
The same thing applies to Chargbee, Chargify, and other such tools. These ready-made solutions have many features, and they are complex. Most companies only need a subset of those features but the ability to customise them. Making a general-purpose tool is very difficult.
The same thing I’ve noticed for Uptimerobot, PagerDuty, and others.
As a result, I suspect SaaS revenue will drop further and further.
Companies are questioning why we pay $x,xxx per month for a SaaS solution when we can roll it out for some token expense, highly customizable? And it's nothing new, Google has its software managing its internal stuff.
the companies with real moats (proprietary data, network effects, deep domain integration) will be fine. The ones charging $20/month for a nice UI on top of GPT wont survive the next price cut, but that's just my opinion.
1. Access to closed source model outputs for distillation,
2. A capital-rich environment which would allow a company to justify spending millions to billions training a model they release for free
3. Research driven by frontier labs (yes I know frontier labs often don't open source their research, but it's an open secret that many of the research breakthroughs leak soon after they're made.
If a is not true, the prices will fall to their value. If b is not true, overpriced goods don't move, and the price doesn't blow up as fast as it does.
Yes, they increase productivity, but how much? Is OpenAI really contributing a trillion dollars of value to the world? A thousand billion, a million million. 50 billion months of a $20 subscription. 80 million lifetime subscriptions of $20/month. That much value?
I would say that the valuation of OpenAI et al exceeds a normal multiplier based on how much productivity it is contributing, but much of its value is based on the premise that the improvements to its models that have occurred in lockstep over the past 5 years won't just suddenly stop, and will continue for at least as long as the underlying compute for training scales.
All AI companies are selling are tokens, which aren't really a speculative asset in that they are consumed at the moment of inference. The question is whether this token of intelligence has a multiplicative effect on the applications towards which it is directed, which currently I believe many companies are seeing positive signals towards, which is why their revenues are accelerating so much so fast.