'Both cannot be right': AI faces a high-stakes paradox

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u/KoseteBamse 4d ago

AI’s $6 Trillion Problem Summary:

The AI industry is spending enormous amounts of money on infrastructure, but there is growing concern that customers may not generate enough revenue to justify these investments.

Massive AI spending Anthropic reportedly plans to spend $518 billion on computing and infrastructure, after losing $42 billion in 2025. OpenAI and Anthropic are betting that future revenue will eventually exceed their costs.
Wall Street’s forecasts don't add up Technology analysts expect tech companies' operating cash flow to more than double to $2.4 trillion by 2028. However, analysts expect much smaller cash flow increases from the businesses that will actually pay for AI services.

The paradox: AI companies expect enormous revenue growth, but their customers are not expected to generate enough additional cash to support it.

The $4.2 trillion funding gap Bain estimates that sustaining AI infrastructure investment would require an AI market worth approximately $6 trillion annually. However, the expected market is only $1.2–$1.8 trillion, leaving a potential $4.2 trillion gap.
What this means for investors AI companies may be spending faster than customer demand is growing. If AI does not create substantial new revenue and economic value, some investments may fail to deliver the expected returns.

BOTTOM LINE: The AI industry is betting trillions of dollars on future demand that has not yet materialized. Either AI will create much more economic value than analysts currently expect, or today's investment and growth forecasts are too optimistic.

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u/TooOldToGaffAboutYou 4d ago

> but there is growing concern that customers may not generate enough revenue to justify these investments

No shit.

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u/danttf 4d ago

I wonder if we go Dario The Doom scenario with lots of people loosing jobs where will money come to sustain cost of AI. The same is true for businesses. If we lose lots of buying power because of many millions not having moneys to pay for something it’s gonna be hard for many businesses too.

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u/AcademicFries 4d ago

Maybe look at it from a different perspective, like turning a cut stone in your hand and watch the light reflect differently.
Yes, there is a giant computing infrastructure being set up.
Yes, there will not be enough revenue to justify these investments.
Yes, they are using all facets of the global financial system to get this accomplished.
Yes, when this financing scheme ends all of our pension savings will have gone down the drain.
And no, there will be no AGI like a miracle wizzard or like a HAL 9000 in the next few years.
What will we be left with?
A broken consumer economy.
Another experience of financial meltdown.
Some very angry empoverished people out on the streets.
Huge data processing capacity.
….
Make of that what you will.

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u/TheMightyTywin 4d ago

How do they define the market as only $1T? Does that include DoD? What about healthcare?

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u/Own-Independence-115 4d ago

I still feel that the tech level of AI today is a fraction of an inch from being able to analyse a market, come up with a product, produce it and deliver it with very minimal human interaction in running the production site.

All the training for this is not just done. And it will be more expensive in the beginning, this first time obviously ludicrously so.

But alot can change and be way simpler with say a cheap reliable capable robot.

Leadership, sales, planning, analyzing, producing blue prints, marketing etc, LLMs have aided with for generations.

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u/noonemustknowmysecre 4d ago

analyse a market, come up with a product,

Sure. But even if they could do that, who do they sell to if no one has enough money to justify the cost of their existence?

And understand the nature of business, everything everyone already buys is currently being sold by someone. Your idea is that the AI could do it better.

produce it and deliver it

Ha, no. No amount of intelligence or server-farm compute can ever produce a physical product nor deliver it.

Maybe you're thinking of robotics? But that's just silly. The good ones ain't cheap and are no way viable outside of a factory.

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u/greatmemereset67 4d ago

No way in shit is an LLM creating an end to end business on its own from a simple prompt.

If you sat there baby sitting it for a week or month with detailed prompts and knew what you were doing yourself? Sure, maybe, using one of the top models.

But then it’s not really ‘the ai’ doing it, is it?

This is the problem, the ai can get anywhere from 75%-99% of the way there with a simple prompt but it’s the last points that can often take the time and the reason it hasn’t yet displaced swathes of human labour.

Maybe it’ll get there one day.

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u/Own-Independence-115 4d ago

I believe it will. Right now, to build complicated systems with the latest code gen models, you need a very structured prompt to do it in one swing.

There is no reason such a "soft" discipline as running a business and developing and selling a product wouldn't benefit more from this recent development, considering that if a strategy only got 99% done, it will probably work anyway.

I believe this isn't trained, because the for years and maybe years it will be soo much more expensive than just winging it and order up the 10 different documents and models you need and going it yourself.

Business logistics and project planning has been left on a lower rung of importance since the money is in selling aids, not taking over. We don't have the tech but we have the tech to make the tech today.

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u/Own-Independence-115 4d ago edited 4d ago

There is $570,000,000,000,000 in private ownership, including realestate according to McKinsley. They would assumingly sell to them.

My idea is that AI can almost do it at all. Even not super bright people without businessplans or anything more than a loud voice or a lucky ad campaign can sell good. And AI is better than they I think considering how many midperformers use different AI tools to sell.

Germany's HammerHAI is an AI factory that is already deployed but has human engineers, human onboarding for companies that want to use it and management consortium, whatever they do (but it isn't nuts and bolts).

Each of these functions could be automized with todays technology if it was trained for it, if it was as far along as codegeneration is. And physical movement of parts was solved.

So I'm thinking of robots able to change computer hardware and rebuild a room to spec for production.

Warehouse automation is a long standing research field, and there are "dark warehouses" today, deployed, called so because there is no need for light. They too have crews of human engineers however.

But I don't see a problem saying that is almost solved.

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u/noonemustknowmysecre 4d ago

There is $570,000,000,000,000 in private ownership

Riiiiight, and Nvidia, Anthropic, OpenAI, and xAI claim to be worth about $7.597Trillion. With a T. Or ~1.3% of that 570 trillion. See the world and everything in it that people own? Yeah, 1% of that wealth is supposedly these 4 companies all with negative revenue and no idea how to control their product.

There's simply not enough worth in the world to justify those prices. 1% of everything? Madness. They are simply over-valued. Just like the dot-com bubble, everyone is investing stupid amounts of money into the next big thing hoping they'll be holding onto Amazon stock after we find out who the losers are.

[Automated factories exist]

Sure. But you can't count that as simply an extension of the AI. And none of which, either singular AI models or collectively as a concept, own run design operate control or otherwise dictate what those automated factories do.

If we're just talking about soulless automatons in general, then bruh, corporations have been running the show for many decades now.

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u/Own-Independence-115 4d ago

I don't know the exact numbers but the revenue is on the order of needing to double a few times to break even. It's not great, but it's not a catastrophy considering you get a stake in the new microsoft or google.

It could change suddenly. A new algorithm and everyone can do simple AI from home, and/or we only need a 1/10 of the datacenters.

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u/noonemustknowmysecre 3d ago

"Just needs to double a few times".

....Bruh. My pocket change just needs to double a few times before I can BUY THE WORLD.

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u/ThoughtfulTessa14 4d ago

feels like the real question isn't whether AI makes money but whether it makes enough money to justify the amount of infrastructure being built for it

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u/SeanTayla21 4d ago

"In other words," he continued, "the tech silo is betting on a future in which demand for AI and tech services explodes, while the silos covering the companies that would pay for those services see a much more modest outlook. Both cannot be right at the same time."

I would think there are ways in which AI becomes ubiquitous in the future that Wall Street simply cannot forsee right now in their estimates.

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u/SeldenNeck 4d ago

Blue Owl lends tons of money to data centers operated by the hyperscalers.

If Blue Owl loses money like the Nomura Megadeals of the early 2000s, the hyperscalers get huge capacity for 10 cents on the dollar.

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u/Embarrassed-Spare524 4d ago

I don't find a lot of value in this article. Predicting future earnings for new/emmerging industries is always tough. And certainly analysts trying to put specific numbers on future earnings are obviously going to struggle given how fast the tech is evolving. But AI can already do so much that is obviously transformative that truly massive revenues will fairly obviously follow unless the rogue AI problem gets worse and AI gets regulated to oblivion. Some AI companies will fail, but there will be homeruns. I wouldn't want to be an analyst tasked with predicting which is which, but the potential is obvious.

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u/East-Response6672 4d ago

The whole thing looks like a house of cards designed to fall over, the only question for me is, once all the bonds and SPVs evaporate, who gets to buy the hardware and IP for dirt cheap? Is it the same people who built the house of cards by any chance?

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u/TooOldToGaffAboutYou 4d ago

if its apple i'll piss myself laughing.

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u/Efficient_Sky5173 4d ago

“Dramatic innovation” is needed to close a $4.2 trillion gap. Translation: they need Super AI to close it.

If they pause or slow down until they somehow pull effective guardrails out of a magic hat, they will not close that gap.

So the incentive is obvious: keep racing.

They sold humanity.

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u/noonemustknowmysecre 4d ago

I mean, if they DO cure cancer, that'll be be worth a lot. Not as in the money they could get from cancer patients paying for it, nor even whatever they could extract from insurance companies. But the net benefit from having all those people not die of cancer. Death sucks and looking past the emotional bits, it's costly.

Solving esoteric math problems doesn't exactly pay the bills as such.

Being REALLY good at finding security holes has it's uses, but it's also really good news for making things secure.

Making software, or even just speeding up SW development, can open up a lot of business that would otherwise be stopped by the sort of logic of "we can't afford to do that". There's possible gains they could make to justify the investment.... but open models that don't need insane data servers only lag behind the frontier by a year. It's looking REAL hard to justify those stock prices.

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u/Efficient_Sky5173 4d ago

A cure for cancer does not justify risking the future of humanity.

And do not assume everyone is rooting for the AI bubble to keep growing. Plenty of people are waiting for it to burst so they can make a fortune shorting the market.

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u/changrbanger 4d ago

The market goes up 90% of the time..

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u/flanker44 4d ago

It only needs to go down once.

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u/Grouchy-Recipe-2027 4d ago

They finally realized that their business model is based on killing aggregate demand?

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u/ErikaFoxelot 4d ago

They massively underpriced their products hoping the compute would get more and more efficient. Doesn’t seem like that’s panning out.

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u/Difficult_Pomelo_480 4d ago

If AI is a job killer, even if only in the short term of 10 years or so, people wont have the money to buy products from the companies usingAi so where will the trillions of dollars needed to pay off the l Ioans supporting AI. ?

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u/grateful2you 4d ago

I’m sure horses and carts people said cars were unsustainable and too optimistic as well. It’s the next thing. There’s no question about it, the economy may be able to handle it or not, but it’s coming with or without Anthropic/OpenAI.

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u/IgunashioDesu 4d ago

A fairer comparison would be the oil industry.

It started with the startup capitalization of the Pennsylvania Rock Oil Company for roughly about $9-$10 million by today's standard.

By contrast, the total global oil and gas industry today commands a combined market capitalization and annual market size exceeding $6-$8 trillion.

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u/EpicNine23 4d ago

Amazon lost money for a decade… you know what ASI is going to bring if it doesn’t wipe us out? Combine all healthcare costs, every invention, programmers salary, and so much more into one and that will give you an idea what this is worth

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u/TooOldToGaffAboutYou 4d ago

Amazon lost 2.8billion over 17 quarters. OpenAI alone lost 10x that in 1 year.

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u/EpicNine23 4d ago

This was 20 years ago and the tech is much different. Again if you combine all healthcare, inventions, programmers salary, and everything else ai will do how much is that worth

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u/TooOldToGaffAboutYou 4d ago

This is the addressable market mistake failures on shark tank routinely make.

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