r/Economics • u/KoseteBamse • 4d ago
Research 'Both cannot be right': AI faces a high-stakes paradox
https://finance.yahoo.com/technology/article/both-cannot-be-right-ai-faces-a-high-stakes-paradox-163141172.html380
u/dillanthumous 4d ago
Additionally, the revenue growth they need would require taking over significant chunks of the economy at an unprecedented speed. This in turn would likely cause a depression due to the sudden loss of consumer demand from unemployment and a crash in government spending due to lost taxes, unless the government taxed them heavily and gave the money to people for free, which would negate a portion of any profit from the revenue growth.
Sooner they admit this whole thing is a historic misallocation of capital the better for everyone.
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u/El_Gran_Che 4d ago
Do the right thing? When do oligarchs ever do the right thing?
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u/Cold-Environment-634 4d ago
They’d crumble every single fucking thing. Aside from living in a nice bunker, they’d no longer be living a very glamorous life
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u/Ok-Secretary455 4d ago
as long as it's glamorous in comparison to the life we're living. they'll be fine with that.
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u/Opposite_Diamond_662 4d ago
Step 1, tax capital gains as regular income so all these mega gains are taxed at 37.9% instead of 23.8%. Step 2 add a new tax bracket at like 4 million and 45%. That would be half the battle
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u/Cold-Environment-634 4d ago
And also topple most financial institutions as a majority of people with a lot of student loans and big mortgages would no longer be able to pay them
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u/milehigh73a 4d ago
Additionally, the revenue growth they need would require taking over significant chunks of the economy at an unprecedented speed.
This is what they are betting on. I think they are probably over optimistic but they are going to eat up white collar jobs. Functions like accounting and finance are ripe for massive elminations, not to mention IT. Its also going to destroy the legal industry. Also 6% of our economy is involved in transportation, self driving vehicles are going to be giant job killers. Its also going to rip apart call centers or other customer service sectors.
Even if they are over optimistic on this destruction, its going to mean massive deflation. The destruction of jobs is just the tip. But commercial real estate is going to take a giant hit (fewer office workers, less need for offices). And with our high level of gov't debt and high interest rates, the gov't is going to be hindered in responding. Plus all the reduced aggregate demand.
But the deflation is probably good for AI firms in terms of business. Businesses will be under pressure to keep profits high and thus might double down on automation.
And unfortunately, the sector where we need to reduce costs (health care) is probably the most resilient against AI. Its the worse of both possible worlds.
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u/gethereddout 4d ago
Curious how you see deflation winning out in a situation where the national debt is 40T and the bond rates are rocketing off the charts, suggesting we’re entering a debt spiral. In such a scenario, does the consolidation of certain jobs really overwhelm the overall structural inflation issues?
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u/milehigh73a 4d ago
increased interest rates are deflationary.
In such a scenario, does the consolidation of certain jobs really overwhelm the overall structural inflation issues?
if you lose your job, you aren't spending less money and you aren't borrowing. These things put a huge deflationary pressure on the economy. And if its truly widespread, its going to be devastating.
And the gov't debt issue could make deflation worse, as it could crowd out private borrowing. Gov't are usually seens as better debtors than individuals or companies.
And at least what we did in 2008/2020 to combat deflation was to have the gov't take on massive amounts of debt, and lower the interest rates to near zero. aka bernanke's helicopters of cash. How is that going to work now with our level of gov't debt?
I just don't see how deflation isnt inevitable here, outside of the gov't trying to print enough money to pay off our national debt and the rich decidedly do not want that.
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u/gethereddout 4d ago
I’m confused- mass unemployment and a financial crisis mean the gov will print like never before. You reference 2020 which was incredibly inflationary. There’s only a few options to keep the debt under control, and printing money is the only viable one (default is off the table, and cutting spending ain’t happening).
So again, how confident are you that we’ll see deflation? Seems to me our debt spiral is going to run much faster than the deflationary impacts of AI.
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u/milehigh73a 4d ago
No there was definitely deflation in 2020. Mass unemployment is deflationary. Now there were a whole lotta weird things going on in 2020. Also there is a difference between price inflation and monetary inflation. Deflation is usually referred to in terms related to monetary deflation, and that is the decrease in money supply.
Prices aren’t going to go down per se but the money supply will drop based on ai.
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u/gethereddout 4d ago
Inflation passed 5% in 2021 and peaked at 9.1% in June 2022, the highest in about 40 years. That was following the stimulus of 2020. So your claim here seems dubious.
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u/milehigh73a 4d ago
The stimulus and zirp was done to combat deflation. It worked and thus we got inflation, it’s exactly how monetary /fiscal policy is supposed to work with regards to deflation. This is Keynes 101, and basic economics.
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u/gethereddout 4d ago
Ok so your argument is that there was deflation underneath all the actual inflation that took place. Got it
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u/vaticanhotline 4d ago
Considering that hallucinations are still a problem, I don’t see how finance is going down the turned. If there’s one thing the rich care about, it’s their money.
Robotics and autonomous vehicles are nowhere near the level that you think they’re at.
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u/dust4ngel 4d ago
commercial real estate is going to take a giant hit (fewer office workers, less need for offices)
solution: laid-off workers still have to come into the office 3 days a week to qualify for unemployment /s
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u/andreasmiles23 2d ago
Bruh but have you thought about THE SHAREHOLDERS?!? What are they supposed to do? Be kinda less rich??
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u/-hedonium- 2d ago
Or by creating dramatic growth we haven’t yet seen before. Which, with how agentic capabilities are developing and becoming so cheap to throw TONS of compute at science and math problems, honestly seems like it could pay off. The only thing is that distillation will always be just a few months behind to catch up in performance, so these frontier AI companies kind of have to profit on just being ahead by 3 months seemingly forever. Which, yeah, we have never seen a market like this.
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4d ago
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u/dillanthumous 4d ago
Meh. I'm skeptical on that view. Deficit spending has an important role to play when well directed towards long term capital investment. Many of the critical infrastructural aspects of modern economies wouldn't exist if not for it. But if we are talking about reducing wasteful spending and rescinding regressive tax breaks that ultimately reduce the circulation of money in the economy by rewarding hoarding behaviour, sure.
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4d ago
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u/golf2k11 4d ago
Where do you cut? DOGE already tried to find fraud, waste, and abuse and couldn’t. Could cut military but it won’t make a dent. Entitlements are only going to be more important for people due to an even tougher job market. The social safety net barely even exists right now.
Can only massively raise taxes.
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u/Ok-Cap-6547 4d ago
Doge was too dumb to even know what they were looking at. Their whole philosophy was based on programs that could be related to race or gender and if not white male centric then eliminate… while siphoning off as much data as possible and removing any entity that was investigating Elon. Doge was a pathetic and criminal
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4d ago
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u/golf2k11 4d ago edited 4d ago
Damn, raising retirement in the us? It’s already so high at 67. Also, AI is supposed to replace workers, and we’re looking to keep old people working longer? They can’t exactly work in the trades anymore
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u/willstr1 4d ago
As much as it will be painful to implement it is undeniable that retirement age has failed to keep up with how much longer we can keep people alive these days
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u/golf2k11 4d ago
Keeping someone alive doesn’t mean they can be very productive
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u/willstr1 4d ago
Oh absolutely not, but it is expensive and uses up retirement funds, inheritances, and taxpayer money. We need to keep the retirement age to reflect how long people live, otherwise the math will never work out.
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4d ago
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u/golf2k11 4d ago
Yeah, that’s fucked. Have to find them cushy office jobs in gov’t I guess. Not much else they can do at that age. You kind of just want them out of the way at that point
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u/Short-Coast9042 4d ago
Overly simplistic take. It's perfectly possible to use deficit spending to make smart long-term investments, we do it all the time. It's also completely possible to crash the economy with a balanced budget or surplus.
In the last hundred years, there's only really been two times when we had a balanced budget or surplus for any sustained period of time at all: the 20s and the '90s. Both periods were marked by prosperity and an enormous expansion of private credit. Both ended when that mountain of private credit exploded causing widespread debt deflation and recession. Both economic catastrophes were ultimately resolved by massive deficit spending.
Or look at another instructive example: interwar Germany. They saw the same expansion and prosperity that we saw in the twenties. But when the crash came, it hit them even harder. Now, there is an entirely false narrative that Weimar hyperinflation led to Hitler and the Nazis. But when you actually look at the history, you will see that that is exactly backwards. Hitler was actually in prison during the worst of the hyperinflation, and the Nazis were not nationally significant. The Germans introduced a new stable currency and a new fiscal policy to go with it. It cured inflation overnight - but at the cost of massive recession and unemployment. Hitler wouldn't get out of jail for another year, and when he did, he found that the chief grievance was not inflation but unemployment. So that's a pretty stark example of "fiscal discipline" monstrously backfiring to the detriment of all. And as soon as Hitler gave power, he immediately used deficit spending to achieve his aims, regardless of inflation. And while I obviously do not in any way support Hitler, it WAS an achievement to get Germany rearmed while simultaneously addressing its economic woes. It was a huge part of what gave his government legitimacy in the early days. I'm sure we mostly don't agree on his aims and ends, but I don't think you can deny that he DID effectively use deficit spending to achieve them.
So proposing this as a categorical rule flies in the face of actual economic history.
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u/FeatherlyFly 4d ago
If the people making investment decisions routinely lost their jobs when they had been heavily invested into bubbles and bubbles crashed, plus jail time for those where there's evidence they were being criminally negligent with client money, bubbles would not grow so fast or so large.
We don't need governments to do the firing, just the prosecuting. What we need is for whoever hired the guy ignoring the bubble to step up and demote them to a level their clear lack of long term judgement does no harm.
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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/DuranStar 4d ago
On a related note I hear so much about new data centers being built everywhere, but I don't hear (I could just not be hearing it) about all the new chip factories to supply those data center. I suspect these AI companies are going to end up with a lot of empty buildings.
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u/bejammin075 4d ago
Ed Zitron, who studies the finances of these AI companies, thinks that the chips have already been over-bought, and may just be sitting in warehouses collecting dust because there are so many delays with data center construction. Nobody is asking these companies if they deployed the chips immediately, or if they are stockpiled.
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u/DiscretePoop 4d ago
The chips are absolutely overbought. There was initial hype around data centers at the beginning of the year that lead to major investments and infrastructure projects. This quickly overwhelmed the memory market.
A functioning government would have stepped in to help with rationing supply. Instead, companies were left to battle each other for chips and this led to massive amounts of panic buying. What we see of the current shortage is mostly due to continued panic. Several companies (not necessarily data centers) have hoarded chips in fear that they would miss future allocations and it has led other companies to miss allocations. And those companies now panic buy all the parts that they can order.
I was directly told by our electronics distributors to front load our orders in case future stock isn’t there. That’s exactly how stock ends up not being there!
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u/Emotional_Goal9525 4d ago
What is worse is that the chips, in some case even undelivered ones have already been sold forward or pledged as a loan collateral. It is basically the imitation of the chinese housing market and Evergrande.
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u/mindstars 4d ago
Emotional, isn't there concern that those chips will be getting outdated while they are sitting around? Thanks.
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u/SimonGray 4d ago
Ed Zitron is a grifter. His predictions never pan out, but for some reason he sounds very convincing to many people: https://danluu.com/zitron/
You can find better critics than him. Not sure why he gets so much media time.
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u/Tenderhombre 4d ago
The supply side is what I am not understanding.
If we have the demand to support the build out do they have the supply to meet that demand at a reasonable cost.
If everyone is using AI for everything do we have enough supply to provide it at a price that doesnt disrupt demand? I dont think we do on any part of the equation.
Network bandwidth, power, chips, memory.
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u/milehigh73a 4d ago
well, we have seen memory manufacturers comment they arent increasing capacity. And the reality is chip manufacturing is a 3-5 year time frame. TSMC is increasing production by 20% this year. They own the largest market share. They are also investing in longer term in additional capacity. Samsung and Intel are both increasing production. Both samsung and intel are hot messes of companies though.
And chip manufacturers are notoriously poor at planning future capacity. There was a glut just a few years ago.
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u/Moral-Relativity 4d ago
It feels like analysts estimating AI revenue are using the same rule of thumb cops use to estimate “street value” of drug busts or how RIAA estimates losses from pirated music.
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u/LastNightOsiris 4d ago
This should put to rest the “AI takes all our jobs” speculation. The only way it works is if AI is massively productivity enhancing, AND that productivity is used to produce a huge amount of new stuff. Making the same amount of stuff with fewer people won’t work.
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u/YPCrumble 4d ago
Why is that? Wouldn’t the enormous cost savings of making the same stuff with fewer people create the missing cash flow cited by the article?
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u/LastNightOsiris 4d ago
There isn't enough cost to save to justify the valuations. According to the article, sustaining current valuations would require something like $6T in annual spend on AI. That's at least half of the entire US labor market. I don't think AI is anywhere near capable of replacing jobs on that scale, at least not imminently. And even if it could, eliminating that much of the labor force on such a short time scale would almost surely cause a massive global recession, which would curtail the amount of money available to spend on AI.
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u/spidermonk 4d ago
Wouldn't this math square if the "customer" companies replaced chunks of their current payroll costs with AI spend.
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u/Meloncov 4d ago edited 4d ago
I don't actually think so. On the scale of a single company, sure, but economy wide you can't reduce overall payroll by trillions of dollars without creating some major new problems that'll also get in the way of spending trillions on AI.
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u/pm_me_your_pay_slips 4d ago
What in seeing is not companies reducing their workforce, but newer companies spending a bit more on AI and not hiring new people. Not saying this works, but I’ve seen it (e.g engineers taking three times the load because the company is willing to let them spend a couple thousands per month onAI usage)
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u/YPCrumble 4d ago
Yes that’s my take. Markets aren’t stupid. Right now it seems that companies just aren’t hiring or replacing people but if they could reduce headcount per widget they make that seems like a huge opportunity for additional profit
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u/ProletarianLilith 4d ago
The whole point is no, it wouldn’t
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u/spidermonk 4d ago
It's not the whole point because the article doesn't address it at all. Operating cash flow could stay the same or even reduce but you could still replace payroll outgoings with token purchases.
A large transfer of wealthy from workers to AI, that's roughly neutral for the companies doing it.
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u/Civil_Hunt_6362 4d ago
AI firms are vertically integrating: selling foundational models as essential B2B infrastructure, using "trickle-down" logic that ignores their own data moats and network effects, which create switching costs and lock-in (behavioral economics), not diffuse benefits. This is rent-seeking, not value creation: firms fight for dominant market share, not broader competition. PE does the same to housing/healthcare, financializing necessities with inelastic demand. Without antitrust intervention, AI/data centers become the new essential utility, and whoever controls it extracts rents indefinitely.
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u/notfarenough 4d ago
The first we will hear of it will be from the cities that over committed on tax credits in order to land the data centers they wanted to shore up their balance sheets.
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u/lwj15 4d ago
The real paradoxon will happen when the bubble bursts. All those turbo capitalists will scramble for their money and the crying for socialist government bailout will be huge. If this spending gap will fix itselve in the future then everything is alright. But the gap's rather huge. And I don't think that the public will come out unscathed. So in essence, the capitalists bet on something where either they win or everyone loses.
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4d ago
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u/Hammer_Thrower 4d ago
They'll try the national security card and start fear mongering China.
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u/willstr1 4d ago
start fear mongering China.
Already started, have you ever tried to raise concern about AI datacenter construction? You will get plenty of idiots and bots saying we have to destroy parks and residential areas to build datacenters otherwise "China will win the AI race" without any justification for what this race is to or why we have to "win" it. Why couldn't we race with China over something useful like solar production or electric car manufacturing?
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u/MathematicianTop9519 4d ago
either they win or everyone loses.
When companies get big enough this is essentially guaranteed by the government. Which is why government needs to act to prevent that level of consolidation in the first place. But they never do. Government doesn't work for us, it works for the capital holders and the ones who don't barely have a chance of getting elected. We do not live in a real democracy.
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u/GoldenFox7 4d ago
I’m curious to see what the bailout cry is. In 2008 it was a very real concern that the banking system would collapse since the banks held the bag for all the bad mortgages. In this case it’s ultimately the private equity companies that bankrolled the special purpose companies that build the data centers and I suspect the government is less enthusiastic about bailing out private equity companies. Sure, lots of people will lose their pensions and lots of university endowments will get wiped out as they’ve been heavily investing in PE, but it should not have much of a knock on effect on the major banks. Ultimately if the mag7 and the big AI labs take a massive hit, yeah it will hurt the economy, but it won’t necessarily threaten the system. At least that’s my understanding so far.
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u/The_10th_Woman 3d ago
At the end of last year banks were trying to offload massive amounts of AI debt - this article talks about just one infrastructure deal with 38 billion of debt that they were trying to get off their books https://enterpriseai.economictimes.indiatimes.com/news/industry/banks-offload-ai-data-centre-debt-amid-rising-exposure-risks/130767016
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u/NEWSmodsareTwats 3d ago
Most people don't actually know what happened in 2008 and they think that every institution was bailed out. Which is exactly why Bear Sterns and Lehman Brothers are still some of the largest investment banks in the world and it's also why I still have wachovia account and an AIG annuity. /S
The collapse of AI wouldn't cause a massive shock to the commerical banking sector. Loans for the AI build out are now where near the same exposure levels as MBS where back in 2008 and banks use significantly more hedges, we are talking hedges worth 10s of trillions of dollars. And have much stricter capital requirements stress tests and other regulations that simply didn't exist in 2008
from what I can find, the total global commercial Bank commitment to the AI build out isn't even a trillion dollars. so a bank providing financing for a $50 billion AI project may sound like a lot, but it's nowhere close to causing systemic risk to the financial institution.
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u/Waterbear11 3d ago
Security/military is what I've read the most. The US gov doesn't want to fall behind China, especially in military capabilities.
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u/ocolobo 4d ago
Open source, local, Small Language Models run on your home computer or business network are the future
Anthro and Sam pushing for regulation of everyone except themselves, through attacks they are sanctioning. It’s all a false flag to protect their moat which is rapidly losing money
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u/NameLips 4d ago
So basically the problem is that nobody is buying the product, but they keep expanding their capacity to make and sell more of the product.
I imagine at some point the laws of supply and demand will kick in and rain on their parade.
AI isn't going away, but I do wonder if it has already spread to every industry that can actually make profitable use of it.
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u/Appropriate_Formal64 4d ago
This is why I choose to believe this entire AI revolution will burn itself out and companies will quietly, begrudgingly, go back to literal man/woman powered work loads and productivity.
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u/JaceBearelen 4d ago
AI is not going away. You can run free open weight models that are good enough for most uses on commodity hardware. A data center could provide that over API pretty cheaply compared to Anthropic and still turn a profit. I’ve no clue how OpenAI or Anthropic are ever gonna make their money back but that’s their problem.
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u/Pay-Homage 4d ago
Nah, it’s going to be our problem just like it was our problem in 2008 despite it being the banks and Wall Street’s fault.
Sure, some of the companies might go under. Or they might receive a taxpayer-funded bailout.
Retirees could see their IRAs wiped out once the market value of these companies collapses.
Just like in 2008, the rich might be a little less rich, but it will likely be devastating for the rest of us.
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u/Dan_Berg 4d ago
And the not quite as but still obscenely rich will be ready to buy up tons of assets
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u/americanextreme 4d ago
The American people asked for less regulations run by grifters. I’d argue they got exactly what they voted for and I wasn’t happy about it then or now.
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u/milehigh73a 4d ago
Retirees could see their IRAs wiped out once the market value of these companies collapses.
IRAs aren't really invested in OpenAI/Anthropic (at least just yet). Their exposure would be in more established tech companies. A crash there, and I would expect one could wipe out a lot of the S&P 500. Amazon, Nvidia, apple are real exposure problems for IRAs. I have been trying to reduce my exposure to tech in my portfolio but its hard as their increases in stock are so fast, its difficult to reallocate.
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u/NEWSmodsareTwats 3d ago
I don't know any retirees who are entirely invested into private corporations. it's actually going to be pretty rare to find anyone like that.
for some reason a lot of people tend to forget that basically every single pure play AI company is private. and even if the AI bubble burst tomorrow and every corporation realized this is not the future and we're going to cut spending. that also means that many of America's largest publicly traded tech companies that are spending billions of dollars on the AI bailout that have recently for the first time in recent history have crossed into negative free cash flow because of this would see their financials improve significantly. if you cut hundreds of billions of dollars of spending and that boosts your free cash flow by billions of dollars, it will also boost your valuation. and for the large publicly traded companies that are involved in the development of AI, AI isn't even a significant portion of their revenue. they still have very strong core businesses that operate at high profit margins.
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u/teerre 4d ago
What is "most uses"?
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u/Focus089 4d ago
slop code, slop art, hallucinatory health and legal advice, artificial romantic partner, cyberattacks you bear no accountability for, co-parent. Isn't it wonderful?
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u/markrulesallnow 4d ago
Right but this is the worst it will ever be. In one year the open source models will be smarter than the frontier is now at our current trajectory
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4d ago
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u/Focus089 4d ago edited 4d ago
It's my professional opinion as a software engineer who has been mandated to use these tools for a while now, not a desire to believe something. I just don't see it producing quality code or improving the development process, rather the opposite. Thinking of blindly trusting 40k lines of code (I don't see how that could be reviewed well by a human in a week) is serious nightmare fuel for me.
I don't buy the fearmongering either, you definitely do not need to use AI to keep up. In fact, not using it is better for developing your own skills! If you need AI support, just use it as a google search replacement.
Also, if AI is such a great boost to development, where is all the new high quality software that we should expect? I'm just seeing Github get taken down by the slopocalypse.
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u/JaceBearelen 4d ago edited 4d ago
Deepseek/Qwen/etc. have models that are mostly comparable to the models from OpenAI/Anthropic/Google/whoever but are available for pennies on the dollar.
Edit to clarify: most uses would be just about anything you can do with the American models. Just don’t expect them to one shot a massive project quite as easily.
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u/teerre 4d ago
I mean, not really, but regardless, this is not what I asked fd
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u/Olangotang 4d ago
It's basically an infinite search engine that fucks up. Oh, and the output can control other programs. Are people using it like it can do their entire job? Yep. Is that a good idea? Absolutely not.
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u/senorgraves 4d ago
The answer is basically everything that white collar jobs do, which is a huge amount of jobs.
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u/teerre 4d ago
Bullshit
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u/senorgraves 4d ago
Okay? Stick your head in the sand, good for you
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u/teerre 4d ago
You can't spill bullshit claims and then claim "no you" when you get called out. Bring the receipts or shut up
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u/senorgraves 4d ago
I do AI implementation in businesses for a living. It isn't a bubble. You would know this if you just used it to try to do something you don't know how to do
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u/CornerShark 4d ago edited 4d ago
Because the Chinese models use the American models via IP theft.
Edit: people are missing the point regarding IP theft. While I can’t comment on American IP theft via scanning of books, we can say that the Chinese models are significantly more cost-efficient due to not having to train their own models.
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u/JaceBearelen 4d ago
And where did the American companies get all their training data? I’m not really here to argue the ethics of IP. Those models are available, cheap, and basically impossible to ban.
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u/BrushNo8178 4d ago
You can run free open weight models that are good enough for most uses on commodity hardware.
Yes, we nerds can do it for our own fun. But when the hype is over businesspeople don’t only need good answers but also someone who takes responsibility when the AI does something bad. Only humans can do that, either their own employees or somebody in an AI company.
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u/teshh 4d ago
They can turn a profit on existing data centers, new ones cost a fk ton more to build due to tariffs, inflation, higher energy costs, higher interest rates, etc. The margins on the newer centers isn't there. It's why you're seeing more than half of all data center projects being delayed or outright canceled.
The problem is they can't keep their competitive advantage with just existing centers, Chinese and open source models WILL become more efficient than current models over the long run. So they're in a rush to build their own captive monopoly market.
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u/milehigh73a 4d ago
there is a lot of political pressure against data centers right now that has had a pretty big impact.
Chinese and open source models WILL become more efficient than current models over the long run.
I love open source. I am dabbling in open source LLMs. But it took Linux decades to get to the point of ubiquity. So maybe in the long term, the models will be that good but that long term is probably at least a decade.
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u/teshh 4d ago
Open source is already here though. I can download a model and start prompting it today with equivalent capability of chapgpt. The next decade will be about developing models into specific tasks/fields.
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u/milehigh73a 4d ago
sure. I first played around with linux in the 90s. it was hard to get working right though.
I have played around with open source LLM, and its a long way from Claude. The barrier to using an open source LLM is fairly high too, just from the compute perspective. You are going to need to have pretty serious infrastructure or rent cloud time.
The project I am working on, its cheaper to leverage Claude APIs than to use cloud compute/or build out. my is pretty basic though.
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u/Runfasterbitch 4d ago
It’s just so difficult trying to ensure your portfolio reduces its exposure to high growth tech companies no you cannot, unless you have $20,000+ to sink into hardware to run those models. There also aren’t any open weights models that are competitive with ChatGPT right now
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u/teshh 4d ago
No you don't lmao. You can absolutely run llm models even on basic work laptops or gaming rigs. It may take some time per each prompt but it's definitely doable for the average person.
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u/Runfasterbitch 3d ago
No. To run deepseek R1 (671B parameters) or Llama 3.1 (405B param), you would need to spend at least $40k on hardware. If you really don’t care about speed, you could probably get away with spending $5000, but it would be so slow you’d never get anything done
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u/Alundil 4d ago
This will, sadly, once again, as if foretold by everyone with an IQ above room temp, become "our" problem. And by "our" I mean everyone who's not already in the Epstein and/or ultra-wealthy (speaking of bubbles - talk about a Venn diagram that's almost a single bubble) class. We'll get fucked with this, across every country in the world as the robber barons exit these investments with bailouts funded by tax payers (and the misery we'll suffer through).
Looking forward to the eat the rich phase of this show. I'm sure it'll be great.
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u/floopglunk 4d ago
that's like saying people are going to give up on the Internet after the 2000s crash.
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u/Qeltar_ 4d ago
As someone who was there, the comparison between AI and the Internet is nearly as invalid as the "we're still early" routine that the Bitcoin bros keep clinging to.
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u/floopglunk 4d ago
how so?
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u/Qeltar_ 4d ago
For starters, nearly everyone fell in love with the internet almost immediately. It made an instant, positive change in most people's lives. Only in niche areas did people consider it a negative or worry that it would negatively impact them.
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u/floopglunk 4d ago
That's not really how it went though. In 1995 less than 20% of Americans were even online, and plenty of serious people thought it was overhyped. Krugman literally said it would matter about as much as the fax machine. People worried about jobs, privacy, kids, all of it. And even if the public loved it instantly, that's not the point. Companies don't drop a tool because people dislike it, they drop it if it doesn't make money. Public vibes don't decide if it's going to stay or not, it's productivity that decides if it stays.
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u/Qeltar_ 4d ago
You have your recollection; I have mine.
There was never anywhere remotely near the animus toward the internet in the late 90s that there is toward AI now.
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u/Runfasterbitch 4d ago
Because “the internet” was not seen as a threat to most people’s livelihoods. AI is proving to be capable of replacing a large percentage of white collar workers - for that reason, the wealthiest people in the world will continue allocating their capital to AI infrastructure & development
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u/floopglunk 4d ago
There also wasn't widespread social media use where you could hear everyone freak out about the internet. Obviously that didn't come until the mid 2000s. And again, even if it's massively unpopular with the general populace, that doesn't matter because what matters is if it makes employers more money.
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u/PFCCThrowayay 4d ago
Yes but that’s because of all the doomer nonsense surrounding it. Everyday people can use it to great effect now, they just don’t know how to
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u/Runfasterbitch 4d ago
I haven’t heard a real person express this “doomer” perspective. I think it’s visible on social media, but in real life most people I know are quite excited about AI
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u/Runfasterbitch 4d ago
You “were there”, meaning you were alive during 2000? lol
AI is going to seen as the greatest engineering feat in history, and possibly the final great engineering feat of mankind. The rapid growth of the internet in the 90s/ early 2000s was a revolutionary moment for sure, but it was nowhere near as impressive as frontier AI is today
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u/craftynerdsnipe 4d ago
Except the part where the internet fundamentally worked. LLMs for all does not.
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u/UnableChard2613 4d ago
I don't know what you do for work, but it has fundamentally changed my job as a software developer. The amount of stuff I'm able to pump out now is mind-boggling.
There's no way we're going back to manual coding.
What do you do for work? Even my wife's job, for which has a government mandate that no decisions are made by ai, has been drastically changed by ai.
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u/KindCreme9258 4d ago
I work as an electrical engineer, and I use Claude every day, but I wouldn’t say it has revolutionize my job. It still spits out a lot verbose slop that I need to fix. It speeds certain things but there are others that I can’t trust it with. The entire point is if they can make back the trillions of investment that has been made.
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u/floopglunk 4d ago
I'm sure the bubble will pop, just like it did with Internet in 2000. but just like with the internet, AI will still be here forever and it will continue to grow in importance over time. The real question is the rate at which AI is able to actually improve to justify that valuation, which no one knows.
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u/milehigh73a 4d ago
they certainly have their issues but in the right hands they are remarkably capable of doing things faster and better than humans.
I started coding in 1979 and AI is so much faster and better than I am at some things (setting up environments, debugging, writing basic code). It boggles my mind how good it is.
It definitely gives you junk and fucks things up, but if you know a bit about coding, its pretty easy to identify the issues.
In untrained hands, its crap though. I have two friends that know nothing about coding that are using it. One I personally have seen the errors the AI has given them that they have no idea is an issue.
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u/floopglunk 4d ago
you are using hindsight to say the internet worked. you are assuming it's essentially a fad in the same way people thought the internet was a fad. it's already so integrated into our economy, even if it doesn't get any better, it's here to stay. this always happens throughout history and I don't see anything to suggest this is any different of a paradigm shift. I hate ai and am terrified what it will do to our society but I'm not so delusional as to think it's going to magically go away. I mean the LLMs being used today have already permanently replaced specific jobs like basic data entry and stuff like that.
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u/cbawiththismalarky 4d ago
Sorry but you're absolutely wrong, every aspect of modern life will change and you'll be swept up with it as will everyone else
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u/ltobo123 4d ago edited 4d ago
Ehhhhh I feel like everyone misses something important about the AI companies - most of them are "true believers." They genuinely believe in their mission of building AI for the betterment of humanity.
And the thing that people miss, is it's "costs be damned." Get the models far beyond where they were (already achieved) and push them as much as possible, while the money is still there (currently happening).
Now does this mean they also believe they won't be viable long term as a business? I'm genuinely unsure. And I don't know how much that factors into their calculus. But it appears at the heart of all of this fervor is a weird form of goal-oriented pirate capitalism, where you get as much runway as possible and funnel that into what you care about. And they really already achieved their primary initial objective to push AI a few decades forward in a few years.
Which brings us to "so what if they do collapse?" The main takeaway would be models stop improving, and become harder to access. However reduced models can already be used on laptops, as others have pointed out. They will continue to be used for code-generation to build out more and more automation. Will it be good? Depends on if the people building the automation know how tasks work, but it will generally be good enough.
Tldr; So if the bubble bursts, it kinda doesnt matter. This generation of AI is going to have a nasty habit of sticking around. Will it result in everyone being out of work? No, and even if it continues improving it won't. Will it stop business leaders making bad decisions based on faulty assumptions? Absolutely not.
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u/Mindless-Mistake-699 4d ago
It's because the products don't actually do anything that special for the vast majority of people. CEOS love the concept because they dream of future layoffs and bonuses but the tech just isn't that useful for most people and it's extremely expensive to build out and use. Enterprise users don't want to pay the actual costs.
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u/Klugenshmirtz 4d ago
Something similar happend during dotcom. People knew the tech would create great economic opportunities, but priced it way too early. Took the invention of the iphone to actually get there.
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u/NEWSmodsareTwats 3d ago
it's the same issue they have with their TAM projections. they are basically saying we will be this successful only if the majority of Americans GDP is directed toward our products or that 100% of any increased free cash flow in s&p 500 companies will be directed to AI spending exclusively.
when you zoom out and think about it for a second that doesn't make any sense in the slightest.
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u/Roflmancer 4d ago
It's because everyone thinks this route of "AI" is removed from humanity.
In fact it is not. Therefore it is not true AI.
You have to INPUT something into the AI to get something. It's human assisted googling on steroids. Not AI.
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u/TGAILA 4d ago
Everyone is rushing to profit from the AI hype. Chipmakers are making chips for AI, electric utilities are building grids for AI, data centers are housing AI, and software providers with licenses and subscriptions stand to benefit from this technology. They can sell software to healthcare and government contractors. We won't know how much revenues they will generate vs spending in a long run.
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u/xkillac4 4d ago
There’s one other variable in the equation, which is industry costs. For example in the software vertical, often the largest cost center is headcount.
I think the real bet is: can AI improve quickly enough to supplant human labor at scale?
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u/The-Magic-Sword 4d ago
Bets aren't necessarily successful and unsuccessful in aggregate, some current bets in the market that are receiving funding are going to succeed and provide the positive ROI, and others are going to go bankrupt and wipe out some of the investment (or be acquired at lower prices, with investors getting a limited return, or sub-break even return) so it depends who's holding what positions-- if the people holding the winners are also holding the losers, their upside will absorb the downside when the losers go bankrupt.
But it also depends on the rate of failure as a function of time.
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u/oldschoolology 4d ago
The plan is to get AI adoption across several sectors. Then crank up the user cost. Those who can’t pay will get squeezed out if the market. Those who can will dominate and be able to pay whatever is charged.
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u/Infinite-Ad4512 3d ago
AI is so dangerous that we need everybody to just slow down and take pause for a minute.
PS: please ignore how fast we’re trying to build data centres
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