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Reality Check
- rsynnott 1y ago> I apologize, this is going to be a little less reserved than usual. It's a bit of an open question which comes first; the AI bubble bursting, or Ed Zitron exploding from pure indignation.
- crop_rotation 1y agoI think the author might need a reality check. In almost every company the usage of AI is becoming more and more valuable. Even if progress in models freezes and halts, the current state is too valuable. I have talked to multiple people in multiple companies and LLMs are becoming indispensable at so many things. Yes chatgpt might or might not conquer the world but the enterprise usage I don't see decreasing (and I am not talking about customer facing LLM usage which might be very stupid).
- janalsncm 1y agoThere is a difference between valuable and profitable. I think anyone who wants to say there isn’t a bubble needs to solve two problems: 1) Inference is too damn expensive. 2) The models/products aren’t reliable enough. I also personally think talking to industry folks isn’t a silver bullet. No one knows how to solve #2. No one. We can improve by either waiting for better chips or using bigger models, which has diminishing returns and makes #1 worse. Maybe OpenAI’s next product should be selling dollars for 99 cents. They just need a billion dollars of SoftBank money, and they can do 100 billion in sales before they need to reraise. And if SoftBank agrees to buy at $1.01 the business can keep going even longer!
- ryandrake 1y agoI think AI will be useful to industries/companies where #2 is unimportant: Where the quantity of product is far more important than its quality. Disturbingly, this describes the market for a lot of industries/companies.
- hu3 1y ago> The models/products aren’t reliable enough. People aren't reliable enough. Nature isn't reliable enough. For most uses, all that is needed is a system to handle cases where it is not reliable enough. Then suddenly it becomes reliable enough.
- th0ma5 1y agoThere are different kinds of reliable. There is the reliability of certain failure for instance. These things are unreliable in a way that the other things that you listed are not.
- Juliate 1y agoNature is reliable in that we have rules (physics) and practices (engineering) to base our process upon. People aren't reliable, for a specific value of reliable. We expect of technology(machines, software, AI, whatever) to be: deterministically reliable (knowing their failure modes), and significantly more reliable than humans at what they do (because that's what we rely upon, why we use them to replace humans at what they, in ways humans can't: harder, faster, stronger).
- void-pointer 1y agoA computer can never be held accountable. Therefore, a computer must never make a management decision.
- nearbuy 1y agoIt seems like every 6 months they come out with a new model that's as good as the previous generation but with a fraction of the inference cost. Inference cost for a given level of quality has been dropping fast. E.g. GPT-4.1 nano outperforms the old GPT-4 model but costs 300x less. Right now, the API cost for asking a single question costs about a fiftieth of a cent on their cheap 4.1-nano model, up to about 2 cents on their o3 model. This is pretty affordable. On the other end of the spectrum, if you're maxing out the context window on o3 or 4.1, it'll cost you around $0.50 to $2. Pricy, but on 4.1, this is like inputting several novels worth of text (maybe around 2000 pages).
- arm32 1y agoThat's besides the point, though. How are they gonna meet the shareholder's expectations of future revenue? When AI becomes equally expensive as a human, what happens then?
- n_ary 1y agoWhen AI becomes equally expensive as a human, layoff humans to continue finance AI because, it is easy to fire and rehire but expensive(more precisely acknowledging failure and bad decision making to hurt leadership ego) to remove and become independent from complex integrations. Edit: I am just sharing how our CTO responds to the massive push of AI into everything, because integration of a non deterministic system has massive cost and eventually once the thing is made deterministic, the additional steps add expenses which finally makes the entire solution too expensive compared to the benefit. This is not my opinion, just sharing how typical leaderships hope to tackle the expense issue.
- skybrian 1y agoIt seems like the question is whether you believe in cost-based or value-based pricing. The cost of AI for the same amount of power is going down a lot year-to-year. [1] If market prices go down with costs, then we see something like solar power where it’s everywhere but suppliers don’t make money, not even in China. Or maybe customers spend a lot more on more-expensive models? Hard to say. [1] https://simonwillison.net/2025/Feb/9/sam-altman/ https://simonwillison.net/2025/Feb/9/sam-altman/
- cowanon2222 1y agoThe author's tone is over the top, but I think this quote is true: > Large Language Models and their associated businesses are a $50 billion industry masquerading as a trillion-dollar panacea for a tech industry that’s lost the plot. There are very real use cases with high value, but it's not an economy-defining technology, and the total value is going to fall far short of projections. On bottom lines, the overall productivity gain from AI for most companies is almost a rounding error compared to other factors.
- HeatrayEnjoyer 1y agoHopefully you are right, but I fear this is a very naive and premature judgement. At one point the internet was a $50B industry insisting it would be a $1T industry. It even had a bubble, bursting and burying entire companies. Yet, $1T was nevertheless a profound underestimation.
- wrs 1y agoIs it? There's certainly $1T of other businesses built with the internet, but the internet business, itself, was rapidly commoditized. The valuable things were the applications built on it, not the network. The argument here is that nobody's found the $1T applications built on AI foundation models yet, but OpenAI is valued as if they have, because their demo chatbot took off out of peoples' curiosity and people are extrapolating that accident exponentially into the future.
- janalsncm 1y agoIt’s not enough to be right eventually. Being too early is as good as wrong.
- cowanon2222 1y agoThe internet bubble is probably a good analogy. It took almost 20 years and several rounds of failed businesses for the internet to have the impact that was originally promised. The big internet companies of the 90s are not where the money was ultimately made. Similarly, the current LLM vendors and cloud providers are likely not where the money will ultimately be made. Some startup 10-15 years from now will likely stack a cheaply hosted or distributed LLM with several other technologies, and create a whole new category of use cases we haven't even thought of yet, and that will actually create the new value. It's basically the Gartner hype cycle in action.
- Gerardo1 1y ago> In almost every company the usage of AI is becoming more and more valuable. It's certainly becoming more common, and there are lots of people who want it to be valuable, and indeed believe it's valuable. Personally, I find it about as valuable as a really, really good intellisense. Which is certainly valuable, but I feel like that's way off from the type/quality/quantity of value you're suggesting.
- n_ary 1y agoI also find the intellisense aspect of it good though the price is still too high when my local IDE can do 1/10th of that for a long time. Additionally, LLMs are sort of using old day google mastery to find the right result quickly to save a huge waste of wading through junk and SEO spam, which translates to productivity but then we are again balanced out because this gained productivity was lost once SEO spam took off a decade back. I am indifferent about this gain again, as anything with mass adaptation tends to devolve in garbage behavior eventually, slowly the gains will again be eaten up.
- kristjank 1y agoThis is the comment I wanted to write before scrolling down. Information retrieval in general is really improving computer-related tasks, but I think present or visible is a much better term to describe it than valuable.
- croes 1y agoWhere is the more of value coming from if everyone uses the same tool to do the same things? Your emails, presentations etc. will all look the same and what’s worse so will the emails, presentations etc. of scammers and phishers.
- archagon 1y agoWhy is there a ChatGPT button on my gaming mouse? https://www.yankodesign.com/2025/04/27/razers-first-vertical-gaming-mouse-also-comes-with-a-dedicated-chatgpt-button/ https://www.yankodesign.com/2025/04/27/razers-first-vertical... How is this not indicative of a massive bubble?
- kunley 1y agoAt these companies it becomes more and more forced, but not more and more valuable. Please make a distinction between what people say and what can be measured
- jimbokun 1y agoI noticed there is not a single number in your comment.
- xnx 1y agoOpenAI is a bubble. AI industry is a bubble. AI value is real (and probably underestimated). It would take at least a decade for all the relevant industries to incorporate the progress so far. If Ed fees this strongly, he should short NVDA and laugh all the way to the bank when it pops.
- janalsncm 1y agoThe market can stay irrational longer than you can stay solvent. It's not enough to be right. You have to be right at the right time i.e. lucky.
- n_ary 1y agoI think, such sayings are more and more being proven wrong. Buy the rumor, sell the news, or buy the dip and hodl long term etc have severely backfired in recent months and many individuals(I personally know) lost huge. Until we return to ZIRP somehow, there is just too much money in AI to keep the hype going as long as possible to avoid the investor backlash or cause mass layoffs(cutting costs and recovering because we spent too much on AI but can’t get refunds so layoff people instead), as money seem to only chase hype and due to not enough free and openly available money for other topics, all flows to only thing that everyone chases.
- janalsncm 1y agoWell, people have been saying Tesla is overvalued for years and it’s only just now started to come down. It’s still massively overvalued on PE compared to other car companies. GameStop is still trading at 82 PE. Insane valuation. Apple and Google are money printers and only trade at 20-30.
- throwanem 1y agoAs long as we're throwing bromides around, "how did he go bankrupt? Well, two ways: slowly at first, and then all at once."
- th0ma5 1y agoI don't agree with Ed's general style of rhetoric but everything single thing he says is important and are active topics of avoidance and hand waving from language model advocates who are also obviously also upset by what he says.
- bobosha 1y agoOpenAI could very well be to this AI boom what Netscape was to the dotcom bubble. Even post dotcom crash, a lot of lasting value remained—and I believe the same will happen this time too.
- deleted 1y ago[deleted]
- asadotzler 1y agoThe lasting value was a trillion dollars worth of broadband, fiber, and cellular build-out, the literal physical internet that was built between 1998 and 2008 and persists today, allowing for trillions of dollars of new economic activity. The lasting value of OpenAI and all of the other frontier labs and hardware makers supporting them will be what? What have they collectively built that will outlive their doomed corporations for decades providing trillions of dollars in new economic activity? Are all those GPU warehouses going to bolster the economy by a trillion or two every year when these AI companies are all gone? Will those ancient LLMs be adding trillions to the economy? I'm just not seeing it.
- paulluuk 1y ago> I don't know why I'm the one writing what I'm writing, and I frequently feel weird that I, a part-time blogger and podcaster, am writing the things that I'm writing. I can't tell whether this man actually believes that he is the only one critiquing AI? I mean.. I can barely walk 2 feet without tripping over anti-AI blogs, posts, news articles, youtube videos or comments.
- ReadEvalPost 1y agoEd's main critique is about business sustainability -- it's true that there are many articles about AI on IP issues or ethics but he is unique in actually crunching the numbers on profit.
- paulluuk 1y agoThere's Financial Times, Forbes, tons of reddit posts, youtube videos.. I suppose it's possible that he's the only blogger doing this, but as far as I can see he is not the only one crunching profit numbers on the most "visible" company in the world.
- disgruntledphd2 1y agoThe FT have not covered the economics of this in any real detail at all. Not even Alphaville :(
- rsynnott 1y agoLots of people are saying "this doesn't work very well", but I think he probably _is_ the main person banging the "this makes no financial sense whatsoever" drum; that bit does seem to get weirdly skimmed over most of the time, even by many AI sceptics.
- disgruntledphd2 1y agoI think the intersection of people who use AI tools enough to have informed opinions on them, as well as enough understanding of business/finance to critique the economics is very, very small.
- light_triad 1y agoOpenAI has a massive brand advantage because the general public equates their products with AI. Even if they don't 100% figure out agents they are now big enough that they can acquire those that do. If the future is mostly about the app layer then they'll be very aggressive in consolidating the same way Facebook did with social media, see for example Windsurf.
- throwanem 1y agoImagine what would happen if the ever fickle tide of public opinion were to change, though. That's what people are really worrying about.
- AstroBen 1y agoAre they not competing with every other massive tech company to acquire the best app layers? I don't think OpenAI has a moat here at all. Their brand advantage is very temporary
- wavemode 1y agoAs other commenters have rightly pointed out - agents being a good product is orthogonal to agents being profitable. If you can start securing big contracts with enterprises by convincing them that the AI revolution is coming, that's enough for profit. It will only be years down the road when people start realizing that they're spending millions on AI agents that are significantly less capable than human employees. But by that point OpenAI will already be filthy rich. To put it a different way - AI is currently a gold rush. While Nvidia sells shovels, OpenAI sells automated prospecting machines. Both are good businesses to be in right now.
- throwanem 1y ago"Gold rush" implies there is gold in fact to be had. Zitron's thesis is and has long been that there is not.
- th0ma5 1y agoAbsolutely. Although another sentiment also on HN is that it also doesn't matter which I find cynical when I see people use that as a pro-llm sentiment like "who cares if it doesn't work."
- deleted 1y ago[deleted]
- janalsncm 1y agoNvidia made $44B profit last year. They are functionally a monopoly and can charge whatever they want. That’s a good business. OpenAI lost $5B last year. There are many competitors offering similar products, preventing OpenAI from extracting large profits. It isn’t a good business now. Sam Altman is promising it will be in the future.
- Yossarrian22 1y agoHe’s not wrong when it comes to revenue and CapEx, what so the TAM here?
- brador 1y agoCurrent AI could have produced this article in under 5 minutes. Does knowing a human wrote this article over days of mulling increase or decrease its value?
- throwanem 1y agoI don't know. Neither do you. Stay long NVDA, somebody'll take the other side of the bet, and eventually we'll all be able to look back and see where we started finding out who'd called it.
- brador 1y agoDyson sphere is coming. Gen 1 test panels going up as early as next year. 2026. Thorium reactors coming online. Interesting times ahead.
- deleted 1y ago[deleted]
- throwanem 1y agoI think I know your taste in science fiction. You might want to take a break. Siskind is entertaining, yes. So on occasion are NK Jemisin, Adrian Tchaikovsky, and on the rare occasion he can't help it, even Gabriel García Márquez. How reliable a literal or Hitch Hiker's guide to pericontemporaneous events does that make any of them?
- alganet 1y ago> sky rains blood This reminds me of Neon Genesis Evangelion. Of course, no one realized (at least publicly) that it is a metaphor for "everyone claps at the end" (also the ending of the original series). Sound of rain sounds like an audience clapping. "Blood rain" means real claps, not some fake condescending simulacra of it. "So that is how democracy dies? With thunderous applause." is also a reference to the same metaphor. Both movies relate to the theme of sacrifice, worthiness, humanity survival. Are you guys are too much into giant robots to even notice those things?
- skrebbel 1y agoSeriously, this opening! > people are babbling about the "AI revolution" as the sky rains blood and crevices open in the Earth, dragging houses and cars and domesticated animals into their maws. Things are astronomically fucked outside, It took me 20+ ranty paragraphs to realise that this guy is not, actually, an AI doomer. Dear tech writers, there's camps and sides here, and they're all very deeply convinced of being right. Please make clear which one you're on before going down the deep end in anger.
- pavel_lishin 1y agoEd is a very verbose guy. I ended up unsubscribing from his podcast & blog, just because he seems to have graphomania. He makes good points! I just wish he'd make them quicker.
- skrebbel 1y agoI don't mind the verbosity so much as steering me the entirely wrong way for that long.
- senordevnyc 1y agoIf only we had some kind of tool that could give you a great summary of his points…
- pavel_lishin 1y agoEspecially a reliable one, that I could trust not to hallucinate extra bullet points!
- senordevnyc 1y agoI question whether you’ve used a SOTA LLM recently.
- monktastic1 1y agoLike o3, which hallucinates more (as I learned from this piece)? https://techcrunch.com/2025/04/18/openais-new-reasoning-ai-models-hallucinate-more/ https://techcrunch.com/2025/04/18/openais-new-reasoning-ai-m...
- Juliate 1y agoThe pivot of the article is this, at the end: "There are no other hypergrowth markets left in tech." That's the key. Tech is, at the moment, the only growth engine for capitalism at this time, that sustains the whole world economy (before, it used to be "just" IT [2015], credit [2008], oil [1973], coal, which all have demonstrated their limits to sustain a continuous growth). AI is the only growth engine left within tech at this moment, supported by GPU/TPU/parallelization hardware. Given what's at stake, if/when the AI bubble bursts, if there's no alternative growth engine to jump to, the dominos effect will not be pretty. EDIT: clarified.
- demosito666 1y agoGood. The the sooner this idioticy ends the better.
- antihipocrat 1y agoCould say that capital has been searching for the next great productivity tech for a while now. AI presents this opportunity, and is the only idea available that could actually work. It's no wonder that capital has flooded in to support it. Thing is, if it succeeds at the pace and extent that the optimists are predicting then the economic disruption will be massive.. and if it doesn't succeed, and there is no other alternative available for long term productivity improvement, then the economic disruption will also be massive.
- Juliate 1y agoMy bet is that either there is something sustainable and sense-making outside of IT to drive economic stability and evolution (away from growth, which is a dead-end on a finite planet) or we are toast for good. The odds are even worse because of the time pressure climate change imposes on us.
- nyarlathotep_ 1y ago> The pivot of the article is this, at the end: "There are no other hypergrowth markets left in tech." Bingo. This is the last attempted hurrah. Party's over.
- vogu66 1y agoMight be a bit naive, but by the time 2029 comes around, and AI companies have started 'monetising free users', won't a lot of people/companies have open-source models tuned and tailored to their needs running locally, no provider required?
- AstroBen 1y agoI think it'll mostly still be centralized around providers I don't see good local models happening on mobile devices anytime soon, and the majority of desktop users will use whatever is the best + most convenient. Competitive open source models running on your average laptop? Seems unlikely
- janalsncm 1y agoDoesn’t seem that unlikely to me. Ollama on Mac can already run decent DeepSeek/Llama distillations. For a lot of tasks it’s already good enough. And 2029 is in 4 years. Four years ago leetcode benchmarks still meant something and OpenAI was telling us GPT3 was too dangerous to release.
- gh0stcat 1y agoIf there is anything I can expect to remain consistent over the next 30-40 years, it's that the majority of people have no interest or ability to maintain technical systems themselves, as evidenced by the often banal and extremely simplistic tasks that are required of me as an IT support technician, family, friends, etc. There absolutely will be a direction in models toward more specific tasks, but they will be packaged and distributed by channels and entities that need to monetize their services in some way. That is just inevitable. The problem was never the access to information, it was the nature of most people. (Just to be clear, I don't think this is technically a bad thing, just something I have noticed.)
- jimbokun 1y ago> it's that the majority of people have no interest or ability to maintain technical systems themselves In the same way you likely don't grow your own food or make your own shoes.
- andai 1y agoWhat are you guys using for RAG? I noticed OpenAI's embeddings struggle a bit with retrieval of specialized material. Is there anything better?
- hnhn34 1y agoI haven't used RAG yet, but OpenAI's embeddings are pretty far behind AFAIK. Gemini has the SOTA in embeddings right now. Check out the MTEB leaderboard: https://huggingface.co/spaces/mteb/leaderboard https://huggingface.co/spaces/mteb/leaderboard
- TheRealNGenius 1y ago[dead]
- joenot443 1y agoI think Ed maybe buries the lede a little bit with all the ranting. About halfway through the piece he drops this chart[1] which personally left me shocked. To my knowledge, a 10,000% growth in revenue over 7 years isn't a reality once you're at that level of volume. Asking 4o about this projection acknowledges the reality - "OpenAI’s projection to grow from approximately $1 billion in revenue in 2023 to $125 billion by 2029 is extraordinarily ambitious, implying a compound annual growth rate (CAGR) exceeding 90%. Such rapid scaling is unprecedented, even among the fastest-growing tech companies." Am I missing something? I like OAI and I use ChatGPT every day, but I remain unconvinced of those figures. [1] https://lh7-rt.googleusercontent.com/docsz/AD_4nXcTvV_KScCMt6maPCLAD5qACLXB0A9UFlxBy7vmR4oO6y99lGkJJOfKhOCB9a3-GeZrY83n6xFepHBUxmf4fUXpDuYAypFPjGBTV-i1B8xYCkhZ1JaIaiAkpUazxVVqwjbiVJF9?key=5iQ8LZzyYfTKSGqXLxb-sOQh https://lh7-rt.googleusercontent.com/docsz/AD_4nXcTvV_KScCMt...
- B56b 1y agoThe fact that people are generally uncritical of this growth claim is just stunning. You have to believe that this is as big as smartphones while ignoring all of the differences with this cycle of hype.
- delusional 1y agoNobody intelligent is actually uncritical about these growth claims. What you are seeing is the other side of "the market can remain irrational longer than you can remain liquid". There's no financial benefit to calling bullshit, because timing when the market is suddenly going to correct is impossible. Rational investors are either in the market of boosting the stock to sell it in the short term (a bigger fools scam) or staying as far away from it as possible. It doesn't have to hit the projections. It just has to keep looking like it could 2 months from now when you sell. The market has never been determined by the actual value of the underlying tangible thing, but rather the market value of that tangible thing. Although they may seem similar they are not the same. As the market becomes increasingly detached from reality, you'll see more of this.
- __loam 1y agoEd's style is very much to rant about this stuff lol. But it's really important to have critical voices right now since a miss with this stuff could have devastating consequences for the industry and the people who work in it.
- photonthug 1y ago> Generative AI has never had the kind of meaningful business returns or utility that actually underpins something meaningful Even if we assume this is true, it’s worth asking.. did the promised efficiency of the advertising economy ever need to be “real” to completely transform society?
- dcre 1y ago"The costs of inference are coming down: Source? Because it sure seems like they're increasing for OpenAI, and they're effectively the entire userbase of the generative AI industry!" Seems to me like Ed is making a very elementary mistake here. I don't think anyone has ever claimed the total amount of money spent on inference would decrease. Claims about inference cost are always about cost per quality of output (admittedly there is no consensus on how to measure the latter). If usage goes up faster than cost per unit goes down, then you spend more, but the point is that you're also getting more.
- senordevnyc 1y agoI don't have the energy to dig back through this person's old posts, but I'm curious: did they correctly project that we'd be here two years ago? Because if not, why would I care about their insufferable ranting about where things are going from here? It’s easy to be a critic and declare that every new fad is overhyped, and you’ll mostly be right. But when you’re wrong, damn do you look foolish.