9 ms·

Apollo calls AI a 'bubble' worse than even the dotcom era

116 points by zekrioca 3y ago

punkbit 3y ago
The same thing was said about housing, the internet, blockchain, etc. Meanwhile most people are sitting on the side line paying rent and hoping to be able to pay it next month…
dotcoma 3y ago
Have we already forgotten about crypto?
- huytersd 3y ago
  I didn’t use crypto 10 times a day
  - konart 3y ago
    Well, some people do. Paying with coins for EU hosting and US goods while in Russia is quite convenient these days.
    - infotainment 3y ago
      Crypto: It's good for money laundering and evading sanctions!
      - southernplaces7 3y ago
        Yes of course, because millions of non-politician/oligarch Russians who just want to participate in the rest of the world's economy and digital systems are little more than scummy, ponzi coin-using sanctions evaders for doing so through the only means of exchange that's available to them? It's a good thing that crypto exists to serve such a need for ordinary people who are doing something that's illegal only because some blanket political game classified it as such. Mechanisms for escape from certain laws and rules are in general good because not all laws and rules are automatically right simply because they exist.
- wesleywt 3y ago
  Bitcoin is at a two-year high.
  - unholythree 3y ago
    Gold is just off it's (at least) 200-year high of December last year. I bet we can attribute both in part to real or perceived/imagined inflation.
  - rainonmoon 3y ago
    As a speculative commodity, sure. But in terms of its original promises of utility? Granted, I understand the source of this thread is in terms of economic viability, so I'm not saying you're wrong in context. But I think the point GP is making is that it's fair to say that large parts of the tech industry were totally swept up in optimism and it took a while to sort out the actual facts and value. (That said, I broadly agree with most comments in this thread rather than GP that there is something more tangibly valuable here than with cryptocurrency.)
- 39 3y ago
  Apparently you have?
pinewurst 3y ago
https://web.archive.org/web/20240226200315/https://fortune.com/2024/02/26/nvidia-ai-bubble-apollo-asset-manager-dotcom-artificial-intelligence/ https://web.archive.org/web/20240226200315/https://fortune.c...
- ggm 3y ago
  https://archive.ph/GQRsG https://archive.ph/GQRsG
slily 3y ago
Agreed, every company, from non-profits to startups to corporations of every size seems desperate to capitalize on AI. It doesn't matter whether or not it makes sense to incorporate in their product, say AI and the stonk goes up, so we need to pump AI into everything. Which usually means tacking on some stupid text summarization or ChatGPT interface everywhere. There is no way there is any demand for this shit, and it's already causing problems due to hallucinations. I don't know how much valuations are inflated due to the more AI == more money insanity, but it's definitely worse than crypto, not every company in existence jumped on that train and there was always some healthy amount of skepticism around that tech.
cat_plus_plus 3y ago
How was dotcom era a bubble? Sure Webvan went out of business, but Instacart is huge. The very first company trying something out not succeeding is not a bust, it's normal risk of early movers. 3D TV seems to be a true bubble so far, I don't know if AI is. I have to think that applications like self driving cars and further automation of manufacturing are here to stay, while chatbots might be a fad, we will see.
- ks2048 3y ago
  I think the “dot com” bubble refers more specifically to stock market valuations being too high and thus later crashing. Likewise, I don’t think this report refers to “AI” being a fad as much as just AI companies being overvalued. It seems possible to believe that AI will swallow the world and also many AI companies being overvalued.
  - rapsey 3y ago
    But there are very few public AI companies. nVidia, Microsoft, Google and Meta? None of them have too crazy of a P/E ratio and all are wildly profitable. The actual silly money is all in the private space and you can't short those.
- TedDoesntTalk 3y ago
  Many dotcom companies were valued based entirely on potential market and revenue, not on fundamentals.
- swivelmaster 3y ago
  The dotcom era bubble specifically refers to Webvan-era companies, which were almost universally over-funded and over-valued based on outrageous speculation about the potential of the internet. Instacart was founded about a decade later, and its margins are pretty slim by tech company standards (net income ~$100m on $2.5bn revenue) so I think it's pretty clear that in the year 2000, there's no possible way that Webvan could have succeeded even if it had done everything right. Extrapolate this logic to AI, and the parallel is clear: The current generation of AI over-promises and under-delivers at enormous cost, and yet billions are invested under the premise that quality will go up and costs will go down enough in the next few years to build viable businesses. If those investors are correct and we're just a few years away from useful, cost-effective AI, they'll make their money back. If they're wrong and we're actually a decade away, not a single AI product that hits the market within the next few years will survive.
ChuckMcM 3y ago
The trick then is to time the selling ...
- toomuchtodo 3y ago
  You don’t have to get out at the top, just higher than your entry point. Surf the wave, don’t drown.
  - ChuckMcM 3y ago
    Exactly. The article of course is focused on nVidia which is making money (unlike the dot com businesses) but the 'bubbleness' will happen if AI startups that aren't making money go public anyway. If there isn't a way to get retail investors involved then just the rich people will get fleeced. That said, it was interesting to watch the nVidia recovery from the bitcoin miner demand dropoff. One hopes they would react quickly and effectively when the bubble bursts and demand for tensor chips drops by 16 to 20dB.
    - jdsully 3y ago
      When comparing to .com the fortunes of Cisco, Sun, and 3COM are really the comparables to Nvidia. Their hardware got commoditized and their valuations went back to reality. Cisco still has not hit their .com peak 25 years later.
  - ed_mercer 3y ago
    Arguably, higher than your entry point plus the amount lost to inflation.
    - deleted 3y ago
      [deleted]
ArtTimeInvestor 3y ago
Someone who invested their money in a Nasdaq 100 certificate on top of the "dotcom bubble" is today 4x better off than someone who held USD. Someone who invested their money in Amazon on top of the "dotcom bubble" is today 50x times better off than someone who held USD.
- mvdtnz 3y ago
  Are you making the argument that there was no dot com bubble?
- pasiaj 3y ago
  Discounted Cashflows calculation for Nvidia would require 10x growth and a 55% profit margin for 10 years to justify the current valuation. If the company achieves a 4-5X growth (15% per year) and 30% margins (instead of 55%) that would place the share price at $176 - 1/4th of what it is today.
  - ArtTimeInvestor 3y ago
    Those abstract numbers don't help us evaluate the value of a company. Let's look at the addressable market: The sum of wages in the USA alone is about $100T per year. How much is it worldwide? Let's say $400T. That is the current TAM when we expect computers to replace humans like cars replaced horses. Capturing only 1% of that TAM would mean $4T in yearly revenues. Nvidia's $2T market cap seems tame in face of the size of the opportunity. But there is another point: A new technology not just replaces an old technology. It 10xes the usage. There are way more cars on the road now than there were horses back then. The size of the market will grow beyond those $400T. We will build way more stuff when robots carry out all the work. Most of planet earth is unused at the moment. That will change.
    - kergonath 3y ago
      This does sound suspiciously like the “everything Internet” of the dotcom bubble.
fullshark 3y ago
So I guess that means the winners that emerge will be quadrillion dollar market cap companies instead of only trillion market cap like with dotcom.
boshalfoshal 3y ago
I think its a bubble but the numbers companies like nvidia are putting up right now are no lie, and from tech companies perspectives its better to invest in a potential trend than to sit on the sidelines, which is why everyone continues to buy GPUs and launch their own AI enabled products in hopes of catching this wave. However, ML/AI has always been a cornerstone of most big tech companies, but it was usually in understated products or used in ways that might not be directly b2c or b2b like ChatGPT. For example, meta/google/netflix ad/video recommendation systems are likely mostly ML based, and have been for a few years. Most of the photography on your phone is using some form of CV/ML, Amazon probably uses ML for logistics planning, AV companies have been using ML models in perception and behvaior for years, generative models have existed for a while, etc. ChatGPT just brought the idea of AI and ML to the forefront of investors and the general public as a "tangible" and fairly practical use of "AI." So I don't think AI is necessarily a "bubble" since theres potential for pretty high utility products, but I do think the market might have an overly optimistic view on the success of AI (specifically generative AI) monetization, which only a few companies have arguably successfuly done (mostly the AI "suppliers" like nvidia, OpenAI, etc). Its yet to be seen how Chatbots/generative models will actually impact the bottom line or streamline processes at businesses without necessarily "solving" AGI. ML/AI existed before this "bubble" and will continue to exist after. In my opinion it was only a matter of time before we got here, though I'm not sure if this time if its over or under priced. I disagree with the claim that AI itself is a bubble, since it has actual utility.
- VirusNewbie 3y ago
  Good comment, I agree. However, I think that if it turns out LLMs don't pay for themselves or aren't a great investment for MSFT and Google and whatnot, it's not hard to pivot some of that tech to less exciting b2b type ML ventures. Maybe everyone doesn't need an LLM assistant, but every business would love it if AI can optimize their sales pipeline 5%, reduce their manufacturing defects 3%, increase their utilization 10%, etc.
  - deleted 3y ago
    [deleted]
  - 3y ago
elzbardico 3y ago
There's a lot of shitty products with an AI label stapled on, either based on using OpenAI API without a clear articulation of value of feasibility, or by training hopelessly limp models with all the wrong assumptions, bad or insufficient data and no real validation. But that's how the game is played and everyone knows that. If only a few of those companies succeed beyond any dreams, that will be enough.
sheepscreek 3y ago
These are uncharted territories for sure. I’m not sure if it’s a bubble though. The valuations, even though gobsmacking and ridiculous, are grounded in some reality. For example, Nvidia’s PE ratio has actually improved. The stock is technically cheaper now than it was before. Assuming of course that it is able to keep performing at the same level. Something I am hugely skeptical about that. I have a working theory (unfinished and likely has faults): The automation of decision making in trading is the reason behind this. Which is also why I feel a repeat of 2000 will be unlikely as fewer humans are involved directly in the loop. Things are going to seem more plausible now, as the algorithms ensure that by looking at hundreds of signals before making buy/sell decisions. Our guts may be picking up on something uncanny that has not been accounted for in the algorithms yet. Only time will tell what that is.
- boshalfoshal 3y ago
  There aren't a lot of market makers or automated trading firms throwing around several hundred billions on a single stock. These types of strategies usually don't scale well with size. Thats usually flows from hedge funds, family funds, pensions and large banks. And more retail presence in trading is playing a part in that too. Typically most of the things I described are not automated, though there might be more data science involved nowadays than say 30 years ago. You can probably confirm this yourself by looking at nvidias largest shareholders. I don't think Citadel or 2sigma is just sitting on tons of nvidia.
alertuser 3y ago
I disagree, there is so much to build on from here. I also feel the same way about Apple Vision Pro.
ggm 3y ago
Survivorship bias is huge in all "but I made 50x" because in order to do this, you have to have not selected the 100 other AI projects which tanked, along the way. And by the time there is 1 clear leader, you can't stonks on it because the price rose for the ones who got in before you. Looking backwards saying "but this guy I know did 100x" is not informing of how people can know now, that Amazon and not Alexa by Digital is the one to pick. (note: they are just labels, alexa was not an amazon competitor. the point is digital was acquired, and died. Amazon didn't die. At the time digital was big, you would think it was a sure fire bet. It wasn't)
patcon 3y ago
A bubble for investors just means they're anticipating more returns than will be possible to recoup. But that's only matters to investors. Something could break one or two major assumptions undergirding the current form of capitalism, but if it caused the returns to evaporate, that would still look like a bubble to an investor. But capitalism would have changed, and it would still have been hugely impactful for regular people
ein0p 3y ago
Even if GPT4 progresses no further, it still would justify the investment IMO. This is the first truly useful and novel tech to come out in a long, long time. Something that delivers magic not just in rigged demos, appreciably moves the productivity needle, and makes intellectual work more bearable, at least for me. If this is a “bubble”, it’s at least a useful one.
- anonzzzies 3y ago
  Well even if it doesn’t get ‘more intelligent’, just faster so we eventually have 10000+ tokens/s (so you can have realtime inference for visual, speech and text) and with a 10m context window, we definitely have something worthwhile and useful for almost everything. Won’t be the downfall of humanity, but will help everyone everywhere optimise work and life.
- rainonmoon 3y ago
  It is useful... in some respects. The true danger here is not in economic collapse but in what you succinctly described as a perception that it "delivers magic". It doesn't, but there's certainly a lot of momentum behind the idea that it does, leading to its implementation in lots of areas where what it actually delivers are hazards. We're still a long way from understanding how to deal with the disastrous consequences of its biases (see Gemini's recent drama for an excellent, if melodramatic, example) so promises of its ability to optimise workflows and decision-making are leading to its implementation in spaces where a lack of human oversight leads to nothing short of human rights abuses. Proptech, immigration, welfare etc are areas where AI might be useful, but the research right now indicates that it's currently deeply problematic. I'm not trying to fear-monger, I think if the promises can be delivered, of course the results could be extraordinary. But even nascent analysis suggests that more care is required and that the reality is it falls very far short of "magic". And just to ward off any naysayers, I'm a GPT subscriber who finds it very useful in a variety of ways and uses it almost daily. But also anyone who's used this tech for a minute and approaches it from a viewpoint of cautious optimism rather than rose-tinted glasses knows that its limitations are quickly understood.
- asadotzler 3y ago
  I disagree. ChatGPT isn't worth the 200 billion dollars or so invested so far and it's certainly not worth the half a trillion this bubble will probably absorb before it pops, leaving us with a few improvements to existing tools from the giant players that survive, like PhotoShop and Office (including things like add and subtract objects from images, summarize, translate, and assist writing text, etc but these feature which are all probably going to be LLM based are not worth half a trillion dollars. They're just not, and only fools would believe a few features for a few 30 year old products would be worth that much.
robot 3y ago
It all depends on whether fortune 500 can improve their business processes using AI. It seems like it is able to do so, which translates to vast numbers of AI chips being sold in the next 1-5 years.
goblin89 3y ago
I get very little spam mail. So, when I recently started to get some random invitations to webinars related to “adding” AI features to products, I have shed any doubt on whether this is a bubble. (First because they call it “AI”—it’s ML, of course; second because it’s cold mass mail, there’s obviously not enough actual demand if they resort to dipping into spam databases—that speaks volumes.)
hiAndrewQuinn 3y ago
Silicon is the new gasoline and AI is the Ford Model T. Except, AI is much easier for new players to enter and manufacture than the Model T ever was. We've already seen this with the fearsome market pressure people are putting on the current market leader, OpenAI, despite their sizeable first mover advantage. In that sense, and only in that sense, do I think AI is a "bubble". Prices are going to fall very quickly as this technology weaves its way into every firm imaginable. Everyone else who finds a way to put AI to use productively moving atoms around, meanwhile, really will see their stock valuations explode.
- hnfong 3y ago
  > Except, AI is much easier for new players to enter What are you talking about? There's exactly one company that makes the machines that makes the AI chips. There's exactly one company that operates the machines that makes the AI chips. There's exactly one company (or two?) that makes the AI chips (which are feasible for training). And the most powerful governments in the world are worried about these monopolies causing geopolitical/national security problems, and they pretty much can't do anything about the situation in the short term. And to be eligible as a player you'll need hundreds of millions of dollars of funding to buy the hardware. I don't have the numbers, but I'm pretty sure opening a car manufacturing factory 100 years ago didn't involve that much upfront capital, even accounting for inflation.
mgh2 3y ago
Cathy was lucky, now salty because she sold too soon, she has to act her part for her image. During covid, she hyped loads of crap companies "pump and dump" style using social media, defrauding retail investors, now she is pretending to play hero again.
pastureofplenty 3y ago
It feels like AI is becoming a buzzword more and more divorced from its original meaning. Your car's automatic transmission would count as AI according to some of the colloquial uses I've seen.
richardjam73 3y ago
I think there is a disconnect between what Gen AI can do for businesses and what businesses think Gen AI can do for them.
deleted 3y ago
[deleted]
seydor 3y ago
AI is a bubble, or Nvidia is?
- dragontamer 3y ago
  Tech Bubble:AI Bubble::Cisco:NVidia And honestly, the 90s revolution of internet/webpages felt bigger to me than AI. A lot of the 90s hype was true and relevant, even if it was ahead of its time and overexaggerated.
  - pixl97 3y ago
    > revolution of internet/webpages felt bigger to me than AI These are part of the same revolution. At least I believe when historians look at this from a distant future they will not see these as two profoundly different things, but a continuation of the same effect.
    - asadotzler 3y ago
      The telegraph and telephone were the same thing because they both ran on copper lines? Today's historians of times a century ago disagree, so I think your argument falls down under examination. Canoes and air craft carriers are the same thing too because they both float on the ocean? Trains and cars because they both roll on land? The applications that run on top of the internet are not the same. Telnet is not the App Store. FTP is not Facebook.
Ologn 3y ago
There's the macroeconomic and the narrower view. The narrower view in the context of artificial neural networks ("AI" is more of a bubble term. Even artificial neural networks might be a bit of a bubble term, as if we have completely recreated the human nervous system in the computer). Have they made advances in recent years, will they have profitable products with some development? Probably. They're a new technology which will almost certainly be profitable, just like the technologies in 1994 that made the current Internet profitable. It is of a certain size though. Then there's the macroeconomic view. There is a lot of capital sloshing around looking for a decent return. The common sense thing in a sense would be to slowly finance "AI" and as it develops, put more and more money in. But there's few decent things to get a good return on, "AI" is obviously one of them, so a ton of money rushes in. More money than is needed at the moment, and ahead of schedule as more things are needed in the development of all of this (including more powerful Nvidia cards and Nvidia networks, more robust frameworks for Pytorch and such, more Phd's who know what neural network is needed for a problem and data engineers to move data around). Fed Chairman Greenspan talked about "irrational exuberance" in 1996, and yet the dot-com bull run (if Netscape's IPO was the sign of it really starting) had barely even started yet, and ran on until early 2000. It's true if people are handing money out left and right, carnies will show up to pull in that money. This really doesn't have much to do with the people who were developing the technology of the Internet or "AI" now. There's a ton of capital sloshing around looking for good returns, it's obvious "AI" will be a future source of profitable returns, so money comes pouring in, even if it is disruptive to a point. It's not just the carnies pulling in money, it's the situation of a massive amount of capital desperately looking for better returns then it has been getting.
karmajunkie 3y ago
i think it’s worth noting that the technological innovation driving the dot-bomb years was… the internet. (please, let’s not get into the weeds on monetary policy, bad investments, etc) yes, there were lots and lots of companies started with bad ideas, ideas way ahead of their time, and even good ideas that just didn’t get traction for whatever reason. but the thing underlying all of it was basically just the availability of this amorphous thing called the internet that had been around for a while, but not generally accessible to the average person. Now all of a sudden anybody and everybody had an email address and could get on the web and order pet food from the comfort of their own home. There was a lot of time and money spent trying to figure out what to do with all of those new possibilities. but I don’t think anyone argues that the Internet in general or the web specifically were revolutionary innovations. AI is much the same. Everyone still figuring out what to do with it how it’s going to affect the economy, jobs, the tools we use, even the kinds of entertainment we seek. Is there a bubble around it? sure, almost certainly. does that make it itself worthless or transient? Absolutely not. and just as we had some companies come out of the Internet bubble like Amazon, they are going to be some long lived companies that come out of the AI bubble. I think trying to pick exactly which ones are going to be winners and losers is a very tricky game though.
- asadotzler 3y ago
  It was the Web, not the internet. The internet was old, the Web was the innovation, the breakthrough underlying the dot com bubble and burst cycle and the Web lived on to give us many successful businesses that survived or arose from the ashes of the bust like Amazon and YouTube and Facebook, etc so the Web was highly valuable tech, the bubble was just a bad response to that good tech. But again it wasn't the internet, it was the web browser and the web server and the web protocols and HTML and soon JS and CSS, all just riding on top of the already well established internet. Crediting the internet for the dot com bubble is like crediting the city streets for the success of the taxi industry. It's a necessary condition but not the innovation that made the money fly.
  - karmajunkie 3y ago
    we can quibble about the age of different technologies and the impact they had on the dot com boom of the 90’s and 00’s, but it was more than the web. email, irc, nntp, and even early p2p were all a part of the rise of that bubble. and they all had a huge impact on what came after.
bart_spoon 3y ago
There were plenty of dotcom-era companies that went bust when the bubble popped but the economy still became entirely and permanently grounded in the internet. AI will be the same. The bubble may eventually pop and there are many "Pets.com"-esque LLM chatbot wrappers that will go under. But ML/AI is going to be just as big of a foundation of the future economy as the internet is, even after the culling.
- asadotzler 3y ago
  The internet predated the web, which caused the bubble, by decades, with killer use cases like email, and so it's not surprising its still with us. The web is the subject here, not the internet. The dot-coms were web companies, not Gopher and email companies. What's with this revisionism. Is this ancient history now that no one here can remember?
labrador 3y ago
There were a lot of people in 2000 who didn't understand the internet, much less how to make money with it. The future of the internet was much less clear. Once everyone is online, then what? This uncertainty caused people to gamble on internet stocks, because you never know... Many people don't understand AI, but it is much more clear that it is a useful tool. Companies can make money with it by replacing workers and increasing the productivity of workers who know how to use it. The future of AI is much clearer as well. We know it's going to keep getting better. There is no limit that we know of on how good it can get. Feed it a script and make full length movies? That might happen. AI companions and care-givers for the elderly? Definitely. An AGI companion that serves as your assistant? That's not far off. AI psychotherapists? We're almost there. The possibilities are endless. This is the difference as I see it.
- asadotzler 3y ago
  There were a lot of people in 1980 who didn't understand the internet until they got email in 1990 but that doesn't matter because that's not what we're talking about. We're talking about the dot-coms which were WEB companies not INTERNET companies. These two things are not the same and it most definitely the WEB and not the INTERNET that kicked off the bubble. It was web browsers and web servers and web languages and protocols powering web businesses. Not email. Not gopher. Not telnet. Not FTP. NOT THE INTERNET! THE WEB. I get it that this site is now filled with people who are too young to have lived this stuff, but are you also not the least bit curious about the history of your industry? Am I the one taking crazy pills!!
  - labrador 3y ago
    I love your delayed comment, but wish I understood it it. I'm high on nitrous oxide right now so that might be the problem.
sensanaty 3y ago
The vibe I get from talking to my CTO and other C-suites who do nothing but talk about AI incessantly is that all the other C-suite buddies of theirs are saying "This AI thing is really blowing up, we need to jump on that!!!", which then means they dedicate entire teams to making some shitty chatbot or whatever so that they can slap the "AI" label somewhere on the marketing page. No shits are given for actual usefulness or if it even makes any sense for the product at hand to have some sort of LLM functionality built into it. Why would they care? Their investors want AI, so AI we build. An absolute circus
- zamalek 3y ago
  And then end up having to pay for lies/hallucinations the chatbot makes: https://www.bbc.com/travel/article/20240222-air-canada-chatbot-misinformation-what-travellers-should-know https://www.bbc.com/travel/article/20240222-air-canada-chatb...
HeatrayEnjoyer 3y ago
Sora is real. GPT-4-base is real. Entire career groups did not stage unprecedented coordinated strikes and governments did not issue new export controls in the dotcom bubble.

116 points by zekrioca 3y ago

The same thing was said about housing, the internet, blockchain, etc. Meanwhile most people are sitting on the side line paying rent and hoping to be able to pay it next month…

dotcoma 3y ago

Have we already forgotten about crypto?

huytersd 3y ago
I didn’t use crypto 10 times a day
- konart 3y ago
  Well, some people do. Paying with coins for EU hosting and US goods while in Russia is quite convenient these days.
  - infotainment 3y ago
    Crypto: It's good for money laundering and evading sanctions!
    - southernplaces7 3y ago
      Yes of course, because millions of non-politician/oligarch Russians who just want to participate in the rest of the world's economy and digital systems are little more than scummy, ponzi coin-using sanctions evaders for doing so through the only means of exchange that's available to them? It's a good thing that crypto exists to serve such a need for ordinary people who are doing something that's illegal only because some blanket political game classified it as such. Mechanisms for escape from certain laws and rules are in general good because not all laws and rules are automatically right simply because they exist.
wesleywt 3y ago
Bitcoin is at a two-year high.
- unholythree 3y ago
  Gold is just off it's (at least) 200-year high of December last year. I bet we can attribute both in part to real or perceived/imagined inflation.
- rainonmoon 3y ago
  As a speculative commodity, sure. But in terms of its original promises of utility? Granted, I understand the source of this thread is in terms of economic viability, so I'm not saying you're wrong in context. But I think the point GP is making is that it's fair to say that large parts of the tech industry were totally swept up in optimism and it took a while to sort out the actual facts and value. (That said, I broadly agree with most comments in this thread rather than GP that there is something more tangibly valuable here than with cryptocurrency.)
39 3y ago
Apparently you have?

pinewurst 3y ago

https://web.archive.org/web/20240226200315/https://fortune.com/2024/02/26/nvidia-ai-bubble-apollo-asset-manager-dotcom-artificial-intelligence/ https://web.archive.org/web/20240226200315/https://fortune.c...

ggm 3y ago
https://archive.ph/GQRsG https://archive.ph/GQRsG

slily 3y ago

Agreed, every company, from non-profits to startups to corporations of every size seems desperate to capitalize on AI. It doesn't matter whether or not it makes sense to incorporate in their product, say AI and the stonk goes up, so we need to pump AI into everything. Which usually means tacking on some stupid text summarization or ChatGPT interface everywhere. There is no way there is any demand for this shit, and it's already causing problems due to hallucinations. I don't know how much valuations are inflated due to the more AI == more money insanity, but it's definitely worse than crypto, not every company in existence jumped on that train and there was always some healthy amount of skepticism around that tech.

cat_plus_plus 3y ago

How was dotcom era a bubble? Sure Webvan went out of business, but Instacart is huge. The very first company trying something out not succeeding is not a bust, it's normal risk of early movers. 3D TV seems to be a true bubble so far, I don't know if AI is. I have to think that applications like self driving cars and further automation of manufacturing are here to stay, while chatbots might be a fad, we will see.

ks2048 3y ago
I think the “dot com” bubble refers more specifically to stock market valuations being too high and thus later crashing. Likewise, I don’t think this report refers to “AI” being a fad as much as just AI companies being overvalued. It seems possible to believe that AI will swallow the world and also many AI companies being overvalued.
- rapsey 3y ago
  But there are very few public AI companies. nVidia, Microsoft, Google and Meta? None of them have too crazy of a P/E ratio and all are wildly profitable. The actual silly money is all in the private space and you can't short those.
TedDoesntTalk 3y ago
Many dotcom companies were valued based entirely on potential market and revenue, not on fundamentals.
swivelmaster 3y ago
The dotcom era bubble specifically refers to Webvan-era companies, which were almost universally over-funded and over-valued based on outrageous speculation about the potential of the internet. Instacart was founded about a decade later, and its margins are pretty slim by tech company standards (net income ~$100m on $2.5bn revenue) so I think it's pretty clear that in the year 2000, there's no possible way that Webvan could have succeeded even if it had done everything right. Extrapolate this logic to AI, and the parallel is clear: The current generation of AI over-promises and under-delivers at enormous cost, and yet billions are invested under the premise that quality will go up and costs will go down enough in the next few years to build viable businesses. If those investors are correct and we're just a few years away from useful, cost-effective AI, they'll make their money back. If they're wrong and we're actually a decade away, not a single AI product that hits the market within the next few years will survive.

ChuckMcM 3y ago

The trick then is to time the selling ...

toomuchtodo 3y ago
You don’t have to get out at the top, just higher than your entry point. Surf the wave, don’t drown.
- ChuckMcM 3y ago
  Exactly. The article of course is focused on nVidia which is making money (unlike the dot com businesses) but the 'bubbleness' will happen if AI startups that aren't making money go public anyway. If there isn't a way to get retail investors involved then just the rich people will get fleeced. That said, it was interesting to watch the nVidia recovery from the bitcoin miner demand dropoff. One hopes they would react quickly and effectively when the bubble bursts and demand for tensor chips drops by 16 to 20dB.
  - jdsully 3y ago
    When comparing to .com the fortunes of Cisco, Sun, and 3COM are really the comparables to Nvidia. Their hardware got commoditized and their valuations went back to reality. Cisco still has not hit their .com peak 25 years later.
- ed_mercer 3y ago
  Arguably, higher than your entry point plus the amount lost to inflation.
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ArtTimeInvestor 3y ago

Someone who invested their money in a Nasdaq 100 certificate on top of the "dotcom bubble" is today 4x better off than someone who held USD. Someone who invested their money in Amazon on top of the "dotcom bubble" is today 50x times better off than someone who held USD.

mvdtnz 3y ago
Are you making the argument that there was no dot com bubble?
pasiaj 3y ago
Discounted Cashflows calculation for Nvidia would require 10x growth and a 55% profit margin for 10 years to justify the current valuation. If the company achieves a 4-5X growth (15% per year) and 30% margins (instead of 55%) that would place the share price at $176 - 1/4th of what it is today.
- ArtTimeInvestor 3y ago
  Those abstract numbers don't help us evaluate the value of a company. Let's look at the addressable market: The sum of wages in the USA alone is about $100T per year. How much is it worldwide? Let's say $400T. That is the current TAM when we expect computers to replace humans like cars replaced horses. Capturing only 1% of that TAM would mean $4T in yearly revenues. Nvidia's $2T market cap seems tame in face of the size of the opportunity. But there is another point: A new technology not just replaces an old technology. It 10xes the usage. There are way more cars on the road now than there were horses back then. The size of the market will grow beyond those $400T. We will build way more stuff when robots carry out all the work. Most of planet earth is unused at the moment. That will change.
  - kergonath 3y ago
    This does sound suspiciously like the “everything Internet” of the dotcom bubble.

fullshark 3y ago

So I guess that means the winners that emerge will be quadrillion dollar market cap companies instead of only trillion market cap like with dotcom.

boshalfoshal 3y ago

I think its a bubble but the numbers companies like nvidia are putting up right now are no lie, and from tech companies perspectives its better to invest in a potential trend than to sit on the sidelines, which is why everyone continues to buy GPUs and launch their own AI enabled products in hopes of catching this wave. However, ML/AI has always been a cornerstone of most big tech companies, but it was usually in understated products or used in ways that might not be directly b2c or b2b like ChatGPT. For example, meta/google/netflix ad/video recommendation systems are likely mostly ML based, and have been for a few years. Most of the photography on your phone is using some form of CV/ML, Amazon probably uses ML for logistics planning, AV companies have been using ML models in perception and behvaior for years, generative models have existed for a while, etc. ChatGPT just brought the idea of AI and ML to the forefront of investors and the general public as a "tangible" and fairly practical use of "AI." So I don't think AI is necessarily a "bubble" since theres potential for pretty high utility products, but I do think the market might have an overly optimistic view on the success of AI (specifically generative AI) monetization, which only a few companies have arguably successfuly done (mostly the AI "suppliers" like nvidia, OpenAI, etc). Its yet to be seen how Chatbots/generative models will actually impact the bottom line or streamline processes at businesses without necessarily "solving" AGI. ML/AI existed before this "bubble" and will continue to exist after. In my opinion it was only a matter of time before we got here, though I'm not sure if this time if its over or under priced. I disagree with the claim that AI itself is a bubble, since it has actual utility.

VirusNewbie 3y ago
Good comment, I agree. However, I think that if it turns out LLMs don't pay for themselves or aren't a great investment for MSFT and Google and whatnot, it's not hard to pivot some of that tech to less exciting b2b type ML ventures. Maybe everyone doesn't need an LLM assistant, but every business would love it if AI can optimize their sales pipeline 5%, reduce their manufacturing defects 3%, increase their utilization 10%, etc.
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elzbardico 3y ago

There's a lot of shitty products with an AI label stapled on, either based on using OpenAI API without a clear articulation of value of feasibility, or by training hopelessly limp models with all the wrong assumptions, bad or insufficient data and no real validation. But that's how the game is played and everyone knows that. If only a few of those companies succeed beyond any dreams, that will be enough.

sheepscreek 3y ago

These are uncharted territories for sure. I’m not sure if it’s a bubble though. The valuations, even though gobsmacking and ridiculous, are grounded in some reality. For example, Nvidia’s PE ratio has actually improved. The stock is technically cheaper now than it was before. Assuming of course that it is able to keep performing at the same level. Something I am hugely skeptical about that. I have a working theory (unfinished and likely has faults): The automation of decision making in trading is the reason behind this. Which is also why I feel a repeat of 2000 will be unlikely as fewer humans are involved directly in the loop. Things are going to seem more plausible now, as the algorithms ensure that by looking at hundreds of signals before making buy/sell decisions. Our guts may be picking up on something uncanny that has not been accounted for in the algorithms yet. Only time will tell what that is.

boshalfoshal 3y ago
There aren't a lot of market makers or automated trading firms throwing around several hundred billions on a single stock. These types of strategies usually don't scale well with size. Thats usually flows from hedge funds, family funds, pensions and large banks. And more retail presence in trading is playing a part in that too. Typically most of the things I described are not automated, though there might be more data science involved nowadays than say 30 years ago. You can probably confirm this yourself by looking at nvidias largest shareholders. I don't think Citadel or 2sigma is just sitting on tons of nvidia.

alertuser 3y ago

I disagree, there is so much to build on from here. I also feel the same way about Apple Vision Pro.

ggm 3y ago

Survivorship bias is huge in all "but I made 50x" because in order to do this, you have to have not selected the 100 other AI projects which tanked, along the way. And by the time there is 1 clear leader, you can't stonks on it because the price rose for the ones who got in before you. Looking backwards saying "but this guy I know did 100x" is not informing of how people can know now, that Amazon and not Alexa by Digital is the one to pick. (note: they are just labels, alexa was not an amazon competitor. the point is digital was acquired, and died. Amazon didn't die. At the time digital was big, you would think it was a sure fire bet. It wasn't)

patcon 3y ago

A bubble for investors just means they're anticipating more returns than will be possible to recoup. But that's only matters to investors. Something could break one or two major assumptions undergirding the current form of capitalism, but if it caused the returns to evaporate, that would still look like a bubble to an investor. But capitalism would have changed, and it would still have been hugely impactful for regular people

ein0p 3y ago

Even if GPT4 progresses no further, it still would justify the investment IMO. This is the first truly useful and novel tech to come out in a long, long time. Something that delivers magic not just in rigged demos, appreciably moves the productivity needle, and makes intellectual work more bearable, at least for me. If this is a “bubble”, it’s at least a useful one.

anonzzzies 3y ago
Well even if it doesn’t get ‘more intelligent’, just faster so we eventually have 10000+ tokens/s (so you can have realtime inference for visual, speech and text) and with a 10m context window, we definitely have something worthwhile and useful for almost everything. Won’t be the downfall of humanity, but will help everyone everywhere optimise work and life.
rainonmoon 3y ago
It is useful... in some respects. The true danger here is not in economic collapse but in what you succinctly described as a perception that it "delivers magic". It doesn't, but there's certainly a lot of momentum behind the idea that it does, leading to its implementation in lots of areas where what it actually delivers are hazards. We're still a long way from understanding how to deal with the disastrous consequences of its biases (see Gemini's recent drama for an excellent, if melodramatic, example) so promises of its ability to optimise workflows and decision-making are leading to its implementation in spaces where a lack of human oversight leads to nothing short of human rights abuses. Proptech, immigration, welfare etc are areas where AI might be useful, but the research right now indicates that it's currently deeply problematic. I'm not trying to fear-monger, I think if the promises can be delivered, of course the results could be extraordinary. But even nascent analysis suggests that more care is required and that the reality is it falls very far short of "magic". And just to ward off any naysayers, I'm a GPT subscriber who finds it very useful in a variety of ways and uses it almost daily. But also anyone who's used this tech for a minute and approaches it from a viewpoint of cautious optimism rather than rose-tinted glasses knows that its limitations are quickly understood.
asadotzler 3y ago
I disagree. ChatGPT isn't worth the 200 billion dollars or so invested so far and it's certainly not worth the half a trillion this bubble will probably absorb before it pops, leaving us with a few improvements to existing tools from the giant players that survive, like PhotoShop and Office (including things like add and subtract objects from images, summarize, translate, and assist writing text, etc but these feature which are all probably going to be LLM based are not worth half a trillion dollars. They're just not, and only fools would believe a few features for a few 30 year old products would be worth that much.

robot 3y ago

It all depends on whether fortune 500 can improve their business processes using AI. It seems like it is able to do so, which translates to vast numbers of AI chips being sold in the next 1-5 years.

goblin89 3y ago

I get very little spam mail. So, when I recently started to get some random invitations to webinars related to “adding” AI features to products, I have shed any doubt on whether this is a bubble. (First because they call it “AI”—it’s ML, of course; second because it’s cold mass mail, there’s obviously not enough actual demand if they resort to dipping into spam databases—that speaks volumes.)

hiAndrewQuinn 3y ago

Silicon is the new gasoline and AI is the Ford Model T. Except, AI is much easier for new players to enter and manufacture than the Model T ever was. We've already seen this with the fearsome market pressure people are putting on the current market leader, OpenAI, despite their sizeable first mover advantage. In that sense, and only in that sense, do I think AI is a "bubble". Prices are going to fall very quickly as this technology weaves its way into every firm imaginable. Everyone else who finds a way to put AI to use productively moving atoms around, meanwhile, really will see their stock valuations explode.

hnfong 3y ago
> Except, AI is much easier for new players to enter What are you talking about? There's exactly one company that makes the machines that makes the AI chips. There's exactly one company that operates the machines that makes the AI chips. There's exactly one company (or two?) that makes the AI chips (which are feasible for training). And the most powerful governments in the world are worried about these monopolies causing geopolitical/national security problems, and they pretty much can't do anything about the situation in the short term. And to be eligible as a player you'll need hundreds of millions of dollars of funding to buy the hardware. I don't have the numbers, but I'm pretty sure opening a car manufacturing factory 100 years ago didn't involve that much upfront capital, even accounting for inflation.

mgh2 3y ago

Cathy was lucky, now salty because she sold too soon, she has to act her part for her image. During covid, she hyped loads of crap companies "pump and dump" style using social media, defrauding retail investors, now she is pretending to play hero again.

pastureofplenty 3y ago

It feels like AI is becoming a buzzword more and more divorced from its original meaning. Your car's automatic transmission would count as AI according to some of the colloquial uses I've seen.

richardjam73 3y ago

I think there is a disconnect between what Gen AI can do for businesses and what businesses think Gen AI can do for them.

deleted 3y ago

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seydor 3y ago

AI is a bubble, or Nvidia is?

dragontamer 3y ago
Tech Bubble:AI Bubble::Cisco:NVidia And honestly, the 90s revolution of internet/webpages felt bigger to me than AI. A lot of the 90s hype was true and relevant, even if it was ahead of its time and overexaggerated.
- pixl97 3y ago
  > revolution of internet/webpages felt bigger to me than AI These are part of the same revolution. At least I believe when historians look at this from a distant future they will not see these as two profoundly different things, but a continuation of the same effect.
  - asadotzler 3y ago
    The telegraph and telephone were the same thing because they both ran on copper lines? Today's historians of times a century ago disagree, so I think your argument falls down under examination. Canoes and air craft carriers are the same thing too because they both float on the ocean? Trains and cars because they both roll on land? The applications that run on top of the internet are not the same. Telnet is not the App Store. FTP is not Facebook.

Ologn 3y ago

There's the macroeconomic and the narrower view. The narrower view in the context of artificial neural networks ("AI" is more of a bubble term. Even artificial neural networks might be a bit of a bubble term, as if we have completely recreated the human nervous system in the computer). Have they made advances in recent years, will they have profitable products with some development? Probably. They're a new technology which will almost certainly be profitable, just like the technologies in 1994 that made the current Internet profitable. It is of a certain size though. Then there's the macroeconomic view. There is a lot of capital sloshing around looking for a decent return. The common sense thing in a sense would be to slowly finance "AI" and as it develops, put more and more money in. But there's few decent things to get a good return on, "AI" is obviously one of them, so a ton of money rushes in. More money than is needed at the moment, and ahead of schedule as more things are needed in the development of all of this (including more powerful Nvidia cards and Nvidia networks, more robust frameworks for Pytorch and such, more Phd's who know what neural network is needed for a problem and data engineers to move data around). Fed Chairman Greenspan talked about "irrational exuberance" in 1996, and yet the dot-com bull run (if Netscape's IPO was the sign of it really starting) had barely even started yet, and ran on until early 2000. It's true if people are handing money out left and right, carnies will show up to pull in that money. This really doesn't have much to do with the people who were developing the technology of the Internet or "AI" now. There's a ton of capital sloshing around looking for good returns, it's obvious "AI" will be a future source of profitable returns, so money comes pouring in, even if it is disruptive to a point. It's not just the carnies pulling in money, it's the situation of a massive amount of capital desperately looking for better returns then it has been getting.

karmajunkie 3y ago

i think it’s worth noting that the technological innovation driving the dot-bomb years was… the internet. (please, let’s not get into the weeds on monetary policy, bad investments, etc) yes, there were lots and lots of companies started with bad ideas, ideas way ahead of their time, and even good ideas that just didn’t get traction for whatever reason. but the thing underlying all of it was basically just the availability of this amorphous thing called the internet that had been around for a while, but not generally accessible to the average person. Now all of a sudden anybody and everybody had an email address and could get on the web and order pet food from the comfort of their own home. There was a lot of time and money spent trying to figure out what to do with all of those new possibilities. but I don’t think anyone argues that the Internet in general or the web specifically were revolutionary innovations. AI is much the same. Everyone still figuring out what to do with it how it’s going to affect the economy, jobs, the tools we use, even the kinds of entertainment we seek. Is there a bubble around it? sure, almost certainly. does that make it itself worthless or transient? Absolutely not. and just as we had some companies come out of the Internet bubble like Amazon, they are going to be some long lived companies that come out of the AI bubble. I think trying to pick exactly which ones are going to be winners and losers is a very tricky game though.

asadotzler 3y ago
It was the Web, not the internet. The internet was old, the Web was the innovation, the breakthrough underlying the dot com bubble and burst cycle and the Web lived on to give us many successful businesses that survived or arose from the ashes of the bust like Amazon and YouTube and Facebook, etc so the Web was highly valuable tech, the bubble was just a bad response to that good tech. But again it wasn't the internet, it was the web browser and the web server and the web protocols and HTML and soon JS and CSS, all just riding on top of the already well established internet. Crediting the internet for the dot com bubble is like crediting the city streets for the success of the taxi industry. It's a necessary condition but not the innovation that made the money fly.
- karmajunkie 3y ago
  we can quibble about the age of different technologies and the impact they had on the dot com boom of the 90’s and 00’s, but it was more than the web. email, irc, nntp, and even early p2p were all a part of the rise of that bubble. and they all had a huge impact on what came after.

bart_spoon 3y ago

There were plenty of dotcom-era companies that went bust when the bubble popped but the economy still became entirely and permanently grounded in the internet. AI will be the same. The bubble may eventually pop and there are many "Pets.com"-esque LLM chatbot wrappers that will go under. But ML/AI is going to be just as big of a foundation of the future economy as the internet is, even after the culling.

asadotzler 3y ago
The internet predated the web, which caused the bubble, by decades, with killer use cases like email, and so it's not surprising its still with us. The web is the subject here, not the internet. The dot-coms were web companies, not Gopher and email companies. What's with this revisionism. Is this ancient history now that no one here can remember?

labrador 3y ago

There were a lot of people in 2000 who didn't understand the internet, much less how to make money with it. The future of the internet was much less clear. Once everyone is online, then what? This uncertainty caused people to gamble on internet stocks, because you never know... Many people don't understand AI, but it is much more clear that it is a useful tool. Companies can make money with it by replacing workers and increasing the productivity of workers who know how to use it. The future of AI is much clearer as well. We know it's going to keep getting better. There is no limit that we know of on how good it can get. Feed it a script and make full length movies? That might happen. AI companions and care-givers for the elderly? Definitely. An AGI companion that serves as your assistant? That's not far off. AI psychotherapists? We're almost there. The possibilities are endless. This is the difference as I see it.

asadotzler 3y ago
There were a lot of people in 1980 who didn't understand the internet until they got email in 1990 but that doesn't matter because that's not what we're talking about. We're talking about the dot-coms which were WEB companies not INTERNET companies. These two things are not the same and it most definitely the WEB and not the INTERNET that kicked off the bubble. It was web browsers and web servers and web languages and protocols powering web businesses. Not email. Not gopher. Not telnet. Not FTP. NOT THE INTERNET! THE WEB. I get it that this site is now filled with people who are too young to have lived this stuff, but are you also not the least bit curious about the history of your industry? Am I the one taking crazy pills!!
- labrador 3y ago
  I love your delayed comment, but wish I understood it it. I'm high on nitrous oxide right now so that might be the problem.

sensanaty 3y ago

The vibe I get from talking to my CTO and other C-suites who do nothing but talk about AI incessantly is that all the other C-suite buddies of theirs are saying "This AI thing is really blowing up, we need to jump on that!!!", which then means they dedicate entire teams to making some shitty chatbot or whatever so that they can slap the "AI" label somewhere on the marketing page. No shits are given for actual usefulness or if it even makes any sense for the product at hand to have some sort of LLM functionality built into it. Why would they care? Their investors want AI, so AI we build. An absolute circus

zamalek 3y ago
And then end up having to pay for lies/hallucinations the chatbot makes: https://www.bbc.com/travel/article/20240222-air-canada-chatbot-misinformation-what-travellers-should-know https://www.bbc.com/travel/article/20240222-air-canada-chatb...

HeatrayEnjoyer 3y ago

Sora is real. GPT-4-base is real. Entire career groups did not stage unprecedented coordinated strikes and governments did not issue new export controls in the dotcom bubble.