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I don’t think it’s a bubble yet. I think it’s very real and very early. Yes, most AI startups will fail and have little to no revenue just like how most softwar

I don’t think it’s a bubble yet. I think it’s very real and very early. Yes, most AI startups will fail and have little to no revenue just like how most software startups were prior to the AI boom. That hasn’t changed. But we are so early in the LLM era. Hell, Slack hasn’t even added an LLM for chat histories, which is something I desperately want. AI agents are just starting. Scaling law hasn’t stopped. There are a ton of use cases where I think LLMs are extremely helpful but we are bottlenecked by inference speeds and context size. Both of which are rapidly improving. There will come a break point where models are cheap, capable, and fast. We are not there yet. It’s really freaking early. Expecting AI companies to generate massive amounts of revenue now is silly. Most of them will fail. But some of them will be absolutely gigantic.

freeone3000 2y ago
But is this pattern of small, cheap, and fast models profitable for the companies making them? Open-source models capable enough to solve user needs and small enough to run on-device: they’re great for users, but it means there’s no one company to take profit. Everybody and every product becomes more valuable and more capable, which is hard to extract differential profit from.
- aurareturn 2y ago
  Yes I do. I expect chip makers such as TSMC and Nvidia to massively profit from them because people will need a lot more chips now and in the future. I expect companies who integrate well with them to increase their value. For example, companies with proprietary data to integrate an LLM with. Another example could be a company that develops very capable agents. Wallstreet cares about stocks. If models reach a point where it’s cheap, capable, and fast, why wouldn’t the S&P500 take off because of the huge boost to productivity? And some companies will take off more. That’s normal.
  - photonbeam 2y ago
    It may be a ‘sell shovels’ time, where the hardware providers profit
    - aurareturn 2y ago
      Sure, Cisco benefited a lot during the boom - as did ISPs who laid down internet infrastructure. Those were the shovel makers. Eventually, the people who bought the shovels significantly outclassed the shovel makers. Google and Amazon are both 10x larger than Cisco in 2024. Meta is 10x. Microsoft is 15x. Hell, Uber was bigger than Cisco for most of the last decade. These shovel maker comments get tossed around a lot in any AI "bubble" talk. Yet, the shovel makers did not even come close to being the most profitable from the dotcom boom.
      - photonbeam 2y ago
        Picking the right shovel-user is much more difficult though without a time-machine
- kaveh_h 2y ago
  Demos Habassis from DeepMind have already spun off a drug discovery company based on AlphaFold v3 which is proprietary. Others have developed Deep Learning based weather forecast models which much cheaper (orders of magnitude less compute), faster and more accurate than conventional physics simulation based models which costs billions of dollar to run. There might exists companies which have already enough private, unique and valuable data that if used to develop models that can bring huge benefits.
jodleif 2y ago
when models are cheap- where is the money? I don’t want some third party having access to my data- I want to self host (on-prem or in cloud)
- monooso 2y ago
  You are one of a tiny monitory in that regard.
- aurareturn 2y ago
  That’s like asking, when electricity is so cheap, where is the money? The money is in the applications and inventions that build on top of models.
  - JTyQZSnP3cQGa8B 2y ago
    And I have yet to see a useful application that I can use and that is not a glorified JavaScript code completion plugin.
  - jodleif 2y ago
    No it’s not. If electricity is cheap margins is lower. We’ve had expensive electricity lately and power companies are earning a lot (compared to normal) also you missed my main point. If it’s cheap - I can self host - and build my own thing, rather than relying on big/overvalued AI
maximinus_thrax 2y ago
> I don’t think it’s a bubble. > I think we are no where close to peak bubble. That said, you're in agreement with the analysts: “Despite its expensive price tag, the technology is nowhere near where it needs to be in order to be useful,” Anyway, the issue (I see) is that the value added by these features is marginal and does not make up for the huge amount of investment. Please, as a thought experiment, how exactly is adding LLMs to the chat history would make up for Slack's investments in LLMs? Would it enable it to gain so much more market share that investors would get a good return? What if models become so cheap and capable that everyone has LLMs for their chat history? What then? Where will the return of investment come from?
- thomashop 2y ago
  The added value has not been marginal in my life. I'm paying for a few subscriptions to AI services. They make me significantly more productive in various ways. It is possible to quantify.
  - maximinus_thrax 2y ago
    Your bio shows you have skin in the game, so I wouldn't be surprised to see you try propping up the hype. But we're talking about different things here. I'm referring to the business value of a company investing in AI features and their return on investment. The end-user is a different story, but anecdotally, I also pay for a few subscriptions to AI services and so far I'm not seeing significant productivity gains after the novelty wore off. For me it's at the point of being just a better search that I need to cross-reference to make sure it didn't go off the rails. I will stop paying soon.
  - Jensson 2y ago
    > They make me significantly more productive in various ways. It is possible to quantify. So quantify it, how many dollars richer did you get thanks to AI? Did you get a massive raise? Did you create a new product that made you tons of money? Since you say it is possible to quantify please tell us! Edit: Ah, you are selling AI products, that doesn't count. That is saying a shovel is great value since you can sell it.
caesil 2y ago
The dot-com bubble was still very much a bubble even though the value creation potential of the internet was incomprehensibly immense
- metacritic12 2y ago
  Disagree. There is a question of what is even a bubble. John Cochrane did a study that showed that the value of Amazon alone justified tech stock index valuation even in 1999. What is a "bubble" even? For me it would be self-driven cycle of upward valuation whose fundamental value never justifies the market cap in it. An industry that rises in price just a few years later to meet and then far exceed the previous valuation does not need to be a bubble. A bubble is not just a high valuation that decreases in price sometime in the future.
  - drawnwren 2y ago
    I think one of the core features of a bubble is that the median market participant loses money. I think that definitely occurred in 1999. I don't think it has occurred in 2024. I'm not convinced it will happen either. Venture Capital operates on a business model that is really hard for human intuition to deal with. 1/1000 success rates require so few break out successes that, yes -- they can fund an entire sector that will, with extremely high probability, fail and still be profitable.
  - bdjsiqoocwk 2y ago
    That is a definition of a bubble, one that I have never heard anyone use ever. For each Amazon that was undervalued there were 100s of companies with stupid ideas and no revenue. You're free to redefine words, but then a lot of people will disagree with you.
  - TeaBrain 2y ago
    There have been plenty of these retroactive reviews of the 1990s tech boom that have questioned whether it was a bubble, by changing the definitions that everyone else uses to define valuation ratios and bubbles. I've heard it argued that the dotcom bubble wasn't a bubble, because the valuations were justified in the moment due to future expectations, until they weren't, which just sounds like the definition many others use to define a bubble. As to Cochrane, even if the value of Amazon is argued to have justified the tech sector valuation, the fact was that the tech sector valuation was not all, or even mostly, concentrated in amazon, which is why it was a bubble.
lolinder 2y ago
The bubble is in the very concept of an "AI company". Even OpenAI is not obviously on a path to profit [0]. I don't see any hope for the many companies whose business plan is "wrap OpenAI and use it to solve all the problems for sector Y!" Where we will see returns on LLMs and where we will see useful applications aren't in AI companies, they will be in established players integrating these tools into their existing platforms. This isn't like past tech advances that have led to widespread disruption as established players failed to keep up. For one thing, the established players are quite obviously determined to keep up this time and are jumping on LLMs if anything faster than it's worth. For another, it's not obvious to me that AI by itself can be a product. AI solutions need data to be useful, and the only people who have the data needed to solve the problems that exist that exist in sector Y is the established players. So yes, I think there's a bubble, and it's going to pop. But that doesn't mean we won't see advances in the tools. [0] https://news.ycombinator.com/item?id=41058616 https://news.ycombinator.com/item?id=41058616
- soared 2y ago
  IMo that’s kind of like saying cloud servers aren’t a product. Tons of companies need servers, but nobody wants to manage that. AI is similar in my mind, many companies will want (insert some use case for llms) but don’t want to manage it.
  - lolinder 2y ago
    I'm not saying every random company is going to manage its own LLMs. I'm saying that the existing software solutions for any given industry are going to adapt and implement LLMs in their existing solutions. Github with copilot is a good example of what I'm talking about—new companies trying to be the software development LLM company don't really stand a chance of beating out GitHub. The same dynamic is playing out in every industry right now, and companies that are founded to be the AI solution for a given industry will not unseat the established players.
    - zooq_ai 2y ago
      It could be both. There will be existing companies using AI to enhance UX (like Github) and there will be new companies whose UX you can't even imagine now
up2isomorphism 2y ago
The problem is: None of the “nice” features you mentioned worth $10TB which is this bubble gets valued now.
SoftTalker 2y ago
I agree with most of what you say but I think it might be a bubble. Compare to the internet in 1999. Everyone could see that it wasn't going away, and had immense potential. Money was pouring in to ideas that had no paying customers and would not really be workable at scale for another decade or more. Most of it was lost because the vision was too far ahead of the technical and practical reality at the time. We're in dial-up days of AI but investors are ignoring the reality that it's still way too early to know what it will ultimately look like and what customers will want to pay for. But FOMO rules.
- meristohm 2y ago
  What's the relative energy cost of operating LLMs compared with dialup? On a finite planet, given some level of biological diversity is important to our survival, I find it increasingly difficult to justify development of these novel luxuries.
  - airstrike 2y ago
    Humans in general don't think in collective terms beyond a handful of people at most. Expecting that to change overnight is a foolish cause.
  - SoftTalker 2y ago
    I don't know but the Sun, HP, and Compaq servers that powered the internet in 1999 were not power-efficient at all compared to today's machines.
    - paulmd 2y ago
      Jevon’s paradox in action - improvements in the efficiency have caused our usage of these resources to soar. If you think AI uses a lot of energy now, just wait until there’s commercially successful use-cases. On the other hand it’s also no different from any other production process in our economy. Just newer. Why improve steel production if that’s just going to lead to more steel consumption? If you didn’t want to maximize paperclips maybe it was/is a mistake to build our economy around paperclip maximizers.
pants2 2y ago
Slack AI (to ask questions of your chat history) is very much a thing, you just have to talk to your Salesforce rep and buy a license for your whole org. We bought it, were all very excited about it, but in reality it's complete garbage. Their LLM is slow, hallucinates stuff, and never seems to find the answers you're looking for. It's like they take the top two search results and pipe them with no context into GPT-3. It's a shame because my home-brew email Q&A bot is extremely useful. I could integrate Slack but unfortunately you can't access DMs through the API which hampers it a bit
- aurareturn 2y ago
  I didn’t know that. I expect it to suck. No one knows how to build great RAG based apps yet. I’m guessing that Slack AI will rapidly improve and that it was more of a prototype. Small models are really good now. Mistral Large Enough 123 billion parameter model is competitive against GPT4, which is rumored to be 1.7 trillion parameters. Context sizes are also rapidly improving, as is inference hardware. There will be a convergence of model intelligence, context size, inference hardware, and developer experience at some point. One of these days, Slack AI will be good.
- Gormo 2y ago
  > Their LLM is slow, hallucinates stuff, and never seems to find the answers you're looking for. In other words, it's an LLM.
chamomeal 2y ago
Yeah most of my friends think that AI = chatbots. IMO the best of uses of AI will be smart RAG-ish stuff integrated into existing products. Like your slack example: imagine the fact-checking possibilities! Imagine a snarky message from a manager saying “you said this would be finished by Friday”. All you have to do is ask slack “is this message true?” And it’ll go and find the 15 messages where you made it very clear the feature would not be finished by Friday. I’m also really excited for more AI docs. Prisma (a typescript ORM) has an incredibly useful AI on their docs page. You can ask it anything about prisma, and it’ll provide a pretty thorough, hallucination-free answer, with links to all of the relevant doc pages and GitHub issues. Imagine if google’s most black-box API’s could be explained and navigated for you by an AI. A dream come true

freeone3000 2y ago

But is this pattern of small, cheap, and fast models profitable for the companies making them? Open-source models capable enough to solve user needs and small enough to run on-device: they’re great for users, but it means there’s no one company to take profit. Everybody and every product becomes more valuable and more capable, which is hard to extract differential profit from.

aurareturn 2y ago
Yes I do. I expect chip makers such as TSMC and Nvidia to massively profit from them because people will need a lot more chips now and in the future. I expect companies who integrate well with them to increase their value. For example, companies with proprietary data to integrate an LLM with. Another example could be a company that develops very capable agents. Wallstreet cares about stocks. If models reach a point where it’s cheap, capable, and fast, why wouldn’t the S&P500 take off because of the huge boost to productivity? And some companies will take off more. That’s normal.
- photonbeam 2y ago
  It may be a ‘sell shovels’ time, where the hardware providers profit
  - aurareturn 2y ago
    Sure, Cisco benefited a lot during the boom - as did ISPs who laid down internet infrastructure. Those were the shovel makers. Eventually, the people who bought the shovels significantly outclassed the shovel makers. Google and Amazon are both 10x larger than Cisco in 2024. Meta is 10x. Microsoft is 15x. Hell, Uber was bigger than Cisco for most of the last decade. These shovel maker comments get tossed around a lot in any AI "bubble" talk. Yet, the shovel makers did not even come close to being the most profitable from the dotcom boom.
    - photonbeam 2y ago
      Picking the right shovel-user is much more difficult though without a time-machine
kaveh_h 2y ago
Demos Habassis from DeepMind have already spun off a drug discovery company based on AlphaFold v3 which is proprietary. Others have developed Deep Learning based weather forecast models which much cheaper (orders of magnitude less compute), faster and more accurate than conventional physics simulation based models which costs billions of dollar to run. There might exists companies which have already enough private, unique and valuable data that if used to develop models that can bring huge benefits.

jodleif 2y ago

when models are cheap- where is the money? I don’t want some third party having access to my data- I want to self host (on-prem or in cloud)

monooso 2y ago
You are one of a tiny monitory in that regard.
aurareturn 2y ago
That’s like asking, when electricity is so cheap, where is the money? The money is in the applications and inventions that build on top of models.
- JTyQZSnP3cQGa8B 2y ago
  And I have yet to see a useful application that I can use and that is not a glorified JavaScript code completion plugin.
- jodleif 2y ago
  No it’s not. If electricity is cheap margins is lower. We’ve had expensive electricity lately and power companies are earning a lot (compared to normal) also you missed my main point. If it’s cheap - I can self host - and build my own thing, rather than relying on big/overvalued AI

maximinus_thrax 2y ago

> I don’t think it’s a bubble. > I think we are no where close to peak bubble. That said, you're in agreement with the analysts: “Despite its expensive price tag, the technology is nowhere near where it needs to be in order to be useful,” Anyway, the issue (I see) is that the value added by these features is marginal and does not make up for the huge amount of investment. Please, as a thought experiment, how exactly is adding LLMs to the chat history would make up for Slack's investments in LLMs? Would it enable it to gain so much more market share that investors would get a good return? What if models become so cheap and capable that everyone has LLMs for their chat history? What then? Where will the return of investment come from?

thomashop 2y ago
The added value has not been marginal in my life. I'm paying for a few subscriptions to AI services. They make me significantly more productive in various ways. It is possible to quantify.
- maximinus_thrax 2y ago
  Your bio shows you have skin in the game, so I wouldn't be surprised to see you try propping up the hype. But we're talking about different things here. I'm referring to the business value of a company investing in AI features and their return on investment. The end-user is a different story, but anecdotally, I also pay for a few subscriptions to AI services and so far I'm not seeing significant productivity gains after the novelty wore off. For me it's at the point of being just a better search that I need to cross-reference to make sure it didn't go off the rails. I will stop paying soon.
- Jensson 2y ago
  > They make me significantly more productive in various ways. It is possible to quantify. So quantify it, how many dollars richer did you get thanks to AI? Did you get a massive raise? Did you create a new product that made you tons of money? Since you say it is possible to quantify please tell us! Edit: Ah, you are selling AI products, that doesn't count. That is saying a shovel is great value since you can sell it.

caesil 2y ago

The dot-com bubble was still very much a bubble even though the value creation potential of the internet was incomprehensibly immense

metacritic12 2y ago
Disagree. There is a question of what is even a bubble. John Cochrane did a study that showed that the value of Amazon alone justified tech stock index valuation even in 1999. What is a "bubble" even? For me it would be self-driven cycle of upward valuation whose fundamental value never justifies the market cap in it. An industry that rises in price just a few years later to meet and then far exceed the previous valuation does not need to be a bubble. A bubble is not just a high valuation that decreases in price sometime in the future.
- drawnwren 2y ago
  I think one of the core features of a bubble is that the median market participant loses money. I think that definitely occurred in 1999. I don't think it has occurred in 2024. I'm not convinced it will happen either. Venture Capital operates on a business model that is really hard for human intuition to deal with. 1/1000 success rates require so few break out successes that, yes -- they can fund an entire sector that will, with extremely high probability, fail and still be profitable.
- bdjsiqoocwk 2y ago
  That is a definition of a bubble, one that I have never heard anyone use ever. For each Amazon that was undervalued there were 100s of companies with stupid ideas and no revenue. You're free to redefine words, but then a lot of people will disagree with you.
- TeaBrain 2y ago
  There have been plenty of these retroactive reviews of the 1990s tech boom that have questioned whether it was a bubble, by changing the definitions that everyone else uses to define valuation ratios and bubbles. I've heard it argued that the dotcom bubble wasn't a bubble, because the valuations were justified in the moment due to future expectations, until they weren't, which just sounds like the definition many others use to define a bubble. As to Cochrane, even if the value of Amazon is argued to have justified the tech sector valuation, the fact was that the tech sector valuation was not all, or even mostly, concentrated in amazon, which is why it was a bubble.

lolinder 2y ago

The bubble is in the very concept of an "AI company". Even OpenAI is not obviously on a path to profit [0]. I don't see any hope for the many companies whose business plan is "wrap OpenAI and use it to solve all the problems for sector Y!" Where we will see returns on LLMs and where we will see useful applications aren't in AI companies, they will be in established players integrating these tools into their existing platforms. This isn't like past tech advances that have led to widespread disruption as established players failed to keep up. For one thing, the established players are quite obviously determined to keep up this time and are jumping on LLMs if anything faster than it's worth. For another, it's not obvious to me that AI by itself can be a product. AI solutions need data to be useful, and the only people who have the data needed to solve the problems that exist that exist in sector Y is the established players. So yes, I think there's a bubble, and it's going to pop. But that doesn't mean we won't see advances in the tools. [0] https://news.ycombinator.com/item?id=41058616 https://news.ycombinator.com/item?id=41058616

soared 2y ago
IMo that’s kind of like saying cloud servers aren’t a product. Tons of companies need servers, but nobody wants to manage that. AI is similar in my mind, many companies will want (insert some use case for llms) but don’t want to manage it.
- lolinder 2y ago
  I'm not saying every random company is going to manage its own LLMs. I'm saying that the existing software solutions for any given industry are going to adapt and implement LLMs in their existing solutions. Github with copilot is a good example of what I'm talking about—new companies trying to be the software development LLM company don't really stand a chance of beating out GitHub. The same dynamic is playing out in every industry right now, and companies that are founded to be the AI solution for a given industry will not unseat the established players.
  - zooq_ai 2y ago
    It could be both. There will be existing companies using AI to enhance UX (like Github) and there will be new companies whose UX you can't even imagine now

up2isomorphism 2y ago

The problem is: None of the “nice” features you mentioned worth $10TB which is this bubble gets valued now.

SoftTalker 2y ago

I agree with most of what you say but I think it might be a bubble. Compare to the internet in 1999. Everyone could see that it wasn't going away, and had immense potential. Money was pouring in to ideas that had no paying customers and would not really be workable at scale for another decade or more. Most of it was lost because the vision was too far ahead of the technical and practical reality at the time. We're in dial-up days of AI but investors are ignoring the reality that it's still way too early to know what it will ultimately look like and what customers will want to pay for. But FOMO rules.

meristohm 2y ago
What's the relative energy cost of operating LLMs compared with dialup? On a finite planet, given some level of biological diversity is important to our survival, I find it increasingly difficult to justify development of these novel luxuries.
- airstrike 2y ago
  Humans in general don't think in collective terms beyond a handful of people at most. Expecting that to change overnight is a foolish cause.
- SoftTalker 2y ago
  I don't know but the Sun, HP, and Compaq servers that powered the internet in 1999 were not power-efficient at all compared to today's machines.
  - paulmd 2y ago
    Jevon’s paradox in action - improvements in the efficiency have caused our usage of these resources to soar. If you think AI uses a lot of energy now, just wait until there’s commercially successful use-cases. On the other hand it’s also no different from any other production process in our economy. Just newer. Why improve steel production if that’s just going to lead to more steel consumption? If you didn’t want to maximize paperclips maybe it was/is a mistake to build our economy around paperclip maximizers.

pants2 2y ago

Slack AI (to ask questions of your chat history) is very much a thing, you just have to talk to your Salesforce rep and buy a license for your whole org. We bought it, were all very excited about it, but in reality it's complete garbage. Their LLM is slow, hallucinates stuff, and never seems to find the answers you're looking for. It's like they take the top two search results and pipe them with no context into GPT-3. It's a shame because my home-brew email Q&A bot is extremely useful. I could integrate Slack but unfortunately you can't access DMs through the API which hampers it a bit

aurareturn 2y ago
I didn’t know that. I expect it to suck. No one knows how to build great RAG based apps yet. I’m guessing that Slack AI will rapidly improve and that it was more of a prototype. Small models are really good now. Mistral Large Enough 123 billion parameter model is competitive against GPT4, which is rumored to be 1.7 trillion parameters. Context sizes are also rapidly improving, as is inference hardware. There will be a convergence of model intelligence, context size, inference hardware, and developer experience at some point. One of these days, Slack AI will be good.
Gormo 2y ago
> Their LLM is slow, hallucinates stuff, and never seems to find the answers you're looking for. In other words, it's an LLM.

chamomeal 2y ago

Yeah most of my friends think that AI = chatbots. IMO the best of uses of AI will be smart RAG-ish stuff integrated into existing products. Like your slack example: imagine the fact-checking possibilities! Imagine a snarky message from a manager saying “you said this would be finished by Friday”. All you have to do is ask slack “is this message true?” And it’ll go and find the 15 messages where you made it very clear the feature would not be finished by Friday. I’m also really excited for more AI docs. Prisma (a typescript ORM) has an incredibly useful AI on their docs page. You can ask it anything about prisma, and it’ll provide a pretty thorough, hallucination-free answer, with links to all of the relevant doc pages and GitHub issues. Imagine if google’s most black-box API’s could be explained and navigated for you by an AI. A dream come true