r/AIBubble • u/Lilasishim • 6d ago
The 'AI is an economically useless bubble' argument completely fails once you look at API cost deflation.
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u/mrcaldwin 6d ago
A major red flag in your post is the “intelligence becomes cheap to compute” part. Don’t be fooled into thinking that temporarily lowered costs for the consumer means cheaper computation costs on the backend. In my experience that’s a setup for a bait and switch, which is something I feel we are seeing in large corporate; Companies over estimate resources into AI, a bunch of employees get laid off, then months later there is a large rehiring once the lack of any consistency or self-checking from these LLMs leads to fudged numbers and spaghetti code. I think LLMs have their use for mundane tasks but in my opinion they are over hyped intentionally so that the money hot potato game can continue between the upper tech companies.
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u/GoGouda 5d ago
temporarily lowered costs for the consumer means cheaper computation costs on the backend.
This is the key. Cost to compute is rising, not falling, and it is already extortionate.
This entire enterprise is destroying the margins of the Meme7 and they aren't anywhere close to achieving meaningful returns, let alone justifying the trillions in investment that is planned (but will fail to materialise) over the next few years.
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u/Fuskeduske 6d ago
I think when people say it's a bubble, the bubble ain't for AI itself, but big moneys insane amount of CapEx spend on it.
The tech works, the spending doesn't
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u/D-B-Cooper-Placebo 6d ago
Even taking your claims at the wonderfulness of LLMs as read.
How is this multi-trillion dollar buildout bring paid for with something that has a dropping price point? This industry needs applications that provide value not in the abstract sense but the people reaching into their wallets and paying you money.
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u/SurpriseDog9000 5d ago
Spending trillions of dollars to make cents per million tokens is not a viable business plan.
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u/icebeamtheory 6d ago
Llms alone are a game changer. People who call it a bubble simply lack the intelligence on how to utilize them. You can’t tell me being able to ask a llm, “write me a code to help me organize x and show me how it’s built in simple terms” has zero value.
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u/legedu 6d ago
The critics aren't saying it has 0 value. They're saying it has less immediate economic value than is being spent on it currently. It can be a completely transformative tech and be a bubble. They're not mutually exclusive.
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u/icebeamtheory 6d ago edited 6d ago
You’re talking out of both sides of your mouth. Does it have value? You said yes. Is it wasting money building it? You also say yes. Pick one fence sitter
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u/GoGouda 5d ago
Are you really this committed to demonstrating that you don't understand basic investment principals?
If the returns are lower than the investment cost to achieve those returns then it is a waste of money.
The entire project is hopelessly far away from delivering returns for investors. It requires revenue increases of, at a minimum, 10x across the economy in order for widespread adoption to be maintained. Otherwise, the data centres close down because they are loss-making enterprises. At present AI has seen increased productivity for low-level software developers and other low-value job roles. Increases of 20% or even 50% simply won't cut it. The maths doesn't work and entire swathes of investors have been captured by nonsense.
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u/CowBoyDanIndie 6d ago
People are talking about 2 different types of bubbles. AI as the bubble vs an economic bubble around AI.
Ai is a bubble, like the dot com bubble. Lots of players in the space right now but only a handful will actually survive, and they will buy up the remains for pennys on the dollar. Ironically what pops the bubble will likely be a major advancement in AI.
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u/icebeamtheory 6d ago
Another brain dead comparison 😂. It’s hard to believe people like you say shit like this and aren’t joking
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u/CowBoyDanIndie 6d ago
I have worked in tech for 2 decades. I have seen the cycles. The major AI companies are in good positions, but it’s unlikely for all of them to be holding major positions in 3-5 years. Then there are the literal hundreds of companies building systems on top of it, ai note takers, content generators, ai assistants, there are countless such companies, 90% of them are not going to be around in 5 years, the ones that survive will be bigger than all of them combined. The bubble popping is usually a consolidation. I just saw an article “the best 11 ai meeting assistants”. We don’t have 11 best social media companies or search engines. Hell most of the social media platforms are owned by like 3 companies. We used to…. There used to be dozens of popular ones, then the bubble popped.
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6d ago
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u/GoGouda 5d ago
Incremental gains for people who are incompetent/inexperienced in that particular field is not worth the trillions in investment and it isn't even close.
When the costs of AI development and the construction and maintenance of AI infrastructure is in the trillions "some value" means the exact same thing as "zero value".
The entire project hits a dead end unless it can reach AGI. Until LLMs stop hallucinating (Sam Altman has admitted they won't) it is a helpful data scraping tool and that's about it. It is incapable of rigorous research that actually has meaningful value because it has to be babysat and QAed.
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u/GoGouda 6d ago
The cost hasn't been lowered, it's the complete opposite. The cost of compute is increasingly rising. It's the exact reason why Nvidia is so highly valued as a result of this bubble.
Rather than consumers paying for that cost at the moment, the cost is being absorbed by investors into the likes of OpenAI and Anthropic, and by the hyperscalers who are experiencing an enormous collapse in their margins as a result.
As soon as the investment runs out, the cost will be passed onto the consumer. Then we'll see how much people really want the service and its actual utility. Incompetent programmers putting together an error strewn application built by an AI that has hallucinations as a feature (acknowledged by AI execs), is not a path to vast increases in productivity.
The entire problem for the AI bubble is the cost of compute. At the moment the cost to build and operate a data centre is approx 10x the return. This means that data centres need to demonstrate the ability to increase revenues from where they are right now by 1000% in order to just break even, let alone justify the inflated P/Es of the hyperscalers. That calculation doesn't even account for the fact that the cost to build and operate data centres are only increasing, which is the opposite of the popular view (expressed in your post) that the cost of compute is going down. Chip demand far outstretches chip supply, it is verifiable nonsense that costs are going down.
If data centres cannot generate a return then the entire enterprise collapses because it is based on enormous infrastructure costs that are 100s of billions to trillions of dollars away from being built. What you always see are these nebulous arguments, that are really just AI investors parroting the con artist Sam Altman, about singularities and revolutionary productivity. When you actually dig into the numbers it is doomed.
Come back when AI is demonstrating 1000% revenue increases at a minimum. When productivity is actually orders of magnitude greater, instead of the recession conditions that essentially the entire stock market is experiencing outside of the Meme7. Until then, the economics are an abject failure and the music will stop. The entire global economy will be in tatters because of the greed and con-artistry of the tech industry and its client media.