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> As the global tech research company forecasts worldwide generative AI (GenAI) spending will reach $644 billion in 2025, up around 76 percent from 2024 I’m ha

> As the global tech research company forecasts worldwide generative AI (GenAI) spending will reach $644 billion in 2025, up around 76 percent from 2024 I’m having a hard time squaring the number $644 billion and the phrase “extinction phase.” I don’t believe their actual estimate of GenAI spending but if it’s even in the same ballpark as the real value, that’s not an extinction.

somenameforme 2y ago
That's the entire point. Bubbles are caused when future valuations drive excessive spending far beyond a reasonable valuation of something. Then at some point reality hits and it turns into a game of hot potato as people don't want to left holding the bag. Pushing towards a trillion bucks a year for what LLMs are mostly currently used for does not seem like a sustainable system.
- pjc50 2y ago
  Where are they going to get the trillions in revenue to pay any of that back? That's 10% of 2023 US total wages and salaries. Do people really believe it'll replace that much labour?
  - esseph 2y ago
    VC demands their valuation multipliers.
alexdoesstuff 2y ago
Reading through the source [1] they basically get to that huuuuge number by including AI-enabled devices such as phones that have some AI functionality even if not core to their value proposition. That's basically reclassifying a big chunk of smartphones, TVs, and other consumer tech as GenAI spending. Of the "real" categories, they expect: Service 27bn (+162% y/y) Software 37bn (+93% y/y) Servers 180bn (+33% y/y) for a total of $245bn (+58% y/y) That's not shabby numbers, but way more reasonable. Hyperscaler total capex [2] is expected to be around $330bn in 2025 (up +32% y/y) so that'll most likely include a good chunk of the server spend. [1] https://www.gartner.com/en/newsroom/press-releases/2025-03-31-gartner-forecasts-worldwide-genai-spending-to-reach-644-billion-in-2025 https://www.gartner.com/en/newsroom/press-releases/2025-03-3... [2] https://www.marvin-labs.com/blog/deepseek-impact-of-high-quality-low-cost-inference-on-ai-landscape/ https://www.marvin-labs.com/blog/deepseek-impact-of-high-qua...
petesergeant 2y ago
I'm an AI-bro, but I think the value of equity in OpenAI or Anthropic is likely zero. They've achieved incredible things with their models, but big-tech only ever seem to be a few months behind and have the economies of scale to make inference profitable. I think both will be acquired with valuations significantly below what was invested in them.
rchaud 2y ago
The $644b number comes from Gartner, who are a 'trends' consultancy, not an accounting firm. It likely includes spending 'pledges', and doesn't account for things like a looming recession and self-inflicted trade war.

somenameforme 2y ago

That's the entire point. Bubbles are caused when future valuations drive excessive spending far beyond a reasonable valuation of something. Then at some point reality hits and it turns into a game of hot potato as people don't want to left holding the bag. Pushing towards a trillion bucks a year for what LLMs are mostly currently used for does not seem like a sustainable system.

pjc50 2y ago
Where are they going to get the trillions in revenue to pay any of that back? That's 10% of 2023 US total wages and salaries. Do people really believe it'll replace that much labour?
- esseph 2y ago
  VC demands their valuation multipliers.

alexdoesstuff 2y ago

Reading through the source [1] they basically get to that huuuuge number by including AI-enabled devices such as phones that have some AI functionality even if not core to their value proposition. That's basically reclassifying a big chunk of smartphones, TVs, and other consumer tech as GenAI spending. Of the "real" categories, they expect: Service 27bn (+162% y/y) Software 37bn (+93% y/y) Servers 180bn (+33% y/y) for a total of $245bn (+58% y/y) That's not shabby numbers, but way more reasonable. Hyperscaler total capex [2] is expected to be around $330bn in 2025 (up +32% y/y) so that'll most likely include a good chunk of the server spend. [1] https://www.gartner.com/en/newsroom/press-releases/2025-03-31-gartner-forecasts-worldwide-genai-spending-to-reach-644-billion-in-2025 https://www.gartner.com/en/newsroom/press-releases/2025-03-3... [2] https://www.marvin-labs.com/blog/deepseek-impact-of-high-quality-low-cost-inference-on-ai-landscape/ https://www.marvin-labs.com/blog/deepseek-impact-of-high-qua...

petesergeant 2y ago

I'm an AI-bro, but I think the value of equity in OpenAI or Anthropic is likely zero. They've achieved incredible things with their models, but big-tech only ever seem to be a few months behind and have the economies of scale to make inference profitable. I think both will be acquired with valuations significantly below what was invested in them.

rchaud 2y ago

The $644b number comes from Gartner, who are a 'trends' consultancy, not an accounting firm. It likely includes spending 'pledges', and doesn't account for things like a looming recession and self-inflicted trade war.