Comment by Insanity
11 days ago
I think most level-headed people can see this is a giant bubble which will eventually burst like the dot-com crash. And AI is technology that's hard to understand to non-technical (and even some technical) investors.
But of course, every company needs to slap AI on their product now just to be seen as a viable product.
Personally, I look forward to seeing the bubble burst and being left with a more rational view of AI and what it can (and can not) do.
I too am waiting for the bubble to burst. Particularly because I think it's doing real harm to the industry.
Every company seems to be putting all their eggs in the AI basket. And that is causing basic usability and feature work to be neglected. Nobody cares because they are betting that AI agents will replace all that. But it won't and meanwhile everything else about these products will stagnate.
It's a disasterous strategy and when it comes crashing down and the layoffs start, every CEO will get a pass on leading this failure because they were just doing what everyone else is doing.
OpenAI has a reasonable path to reduce their costs by 10-100x over the next 5 years if they stop improving the models. That would make them an extremely profitable company with their only real risk being “local ai”. However customers have wanted their data in the cloud for years, local inference would likely just mean 0 cost tokens for OpenAI.
The challenge is the rest of the industry funding dead companies with billions of dollars on the off chance they replicate OpenAI’s success.
I don't see how this works though. OpenAI doesn't exist in a vacuum, it has competitors, and the first company to stop improving their model will get obliterated by the others. It seems like they are doomed to keep retraining right up until the VC funding runs out, at which point they go bankrupt.
Some other company, that doesn't have a giant pile of debt will then pick up the pieces and make some money though. Once we dig out of the resulting market crash.
The winner takes all thesis would be that like TSMC, the capex of competing in this field keeps growing until only one vendor can both raise sufficient capital to compete and effectively execute with that capital. OpenAI doesn't need to be the first to stop raising money and go profitable, they need to be the last vendor to go profits first.
It's not impossible that the crash will hit all companies at the same time and they might all stop training.
The problem is OAI has very firece competition - folks who are willing to absorb losses to put them out of business.
Uber and Amazon are really bad examples. Who was Amazons competition? Nobody. By the time anyone woke up and took them seriously it was too late.
Uber only had to contend with Lyft and a few other less funded firms. Less funded being a really important thing to consider. Not to mention the easy access to immense amounts of funding Uber had.
The problem is that their competitor is Google and they are much better at most of the things that OpenAI needs to be good at.
OpenAI is trying to launch a hardware product with Jony Ive, an ads company, a AI slop-native version of TikTok and several other "businesses". They look well on their way to turning into a Yahoo! than a Cisco or VMWare.
Yeah they are all over the place and this should be a huge red flag.
Some marginal investors know this but they are okay because the music is still playing - but when they think its time to leave the bubble will pop.
People seem to forget that its not about whether or not its actually a bubble, its really about when will certain people who set these stock prices for valuations, decide its time to exit and take their profit.
How is AI hard to understand when you enter a cafe and everyone is chatting with their LLM?
dotcom bubble had tons of activity, too.
it was making money off those idea at the valuations expected that was problem.
the Internet really did revolutionize things, in substantial ways, but not to the tune of millions of dollars for pets.com
>dotcom bubble had tons of activity, too.
The difference now is that this is all (or mostly) idle cash being invested. The massive warchests built up by FAANG over the last decade are finally being deployed meaningfully rather than sitting in bonds or buying back stock. Much different scenario than companies with non-viable business models going IPO on a wish and a dream.
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The part that’s hard to understand is how the sunk costs of hundreds of billions in capex gets repaid by all those people in cafes paying hundreds of dollars per month to use those LLMs.
Where do you see that?
In some Hollywood reality, probably.
(Like those people that casually assume that everyone has a therapist or a lawyer.)
Chat rooms webs were sold by millions in the dotcom era.
And everybody used them.
Nowdays everybody see them as useless.
They evolved into Instagram(8 billion), WhatsApp(20 billion) and FB(trillion)
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Pretty sure discord and slack are not useless…
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People have no idea how much concern there was around whether FB would ever be able to monetize social media. That company went public at $15, and nearly closed below that on IPO day.
AI is more useful than social media. This is not financial advice, but I lean more toward not a bubble.
> AI is more useful than social media.
Communication is a fundamental human need.
Generating slop isn't.
Not hard to use. I meant hard to understand what the limitations are for non tech users. E.g people who think AGI is just around the corner because we now have stochastic parrots.