11 ms·

GenAI FOMO has spurred businesses to light nearly $40B on fire

246 points by rntn 1y ago

JCM9 1y ago
There’s no question we’re in a “GenAI” bubble, the only question is how big of a smoking crater in the ground is going to be created when this thing pops. The tech isn’t going away, and is cool/useful, but from a business standpoint this whole thing looks like a dumpster fire burning next to a gasoline truck. Right now VC FOMO is the only thing stopping all that from blowing up. When that slows down buckle up.
- j45 1y ago
  It's a bubble if the tech or audience wasn't there and capabilities weren't improving weekly. There's definitely people who don't understand the tech talking about applying it increasing the failure rate of software projects.
  - throwawayoldie 1y ago
    > It's a bubble if the tech or audience wasn't there and capabilities weren't improving weekly. But...is it and are they? Gen AI boosters tend to make assertions like this as if they're unassailable facts, but never seem interested in backing them up. I guess it's easier than thinking.
    - wiml 1y ago
      The whole mindset of LLM boosterism is that thinking is obsolete anyway — all you need is pattern matching on existing data — so it's not surprising that they don't want to indulge in it excessively.
      - j45 1y ago
        Thinking is absolutely not obsolete with LLMs. Human thought is the only way any software (including LLMs) operate efficiently. Same goes for leveraging LLMs.
    - j45 1y ago
      As a tech person.. It is, and they are. For the boosters, notice how few or many come from a tech background and pay attention accordingly
      - throwawayoldie 1y ago
        To paraphrase The Princess Bride, "Won't work, I know too many tech people."
- pier25 1y ago
  > Right now VC FOMO is the only thing stopping all that from blowing up That was probably 2-3 years ago. I'd be surprised if VCs hadn't already figured out they're in a bubble. They're probably playing a game of chicken to see who will remain to capture the actually profitable use cases. There's also a number of lawsuits going on against AI companies regarding piracy and copyright. It's already an established fact in the courts that these companies have downloaded ebooks, music, videos, and images illegally to train their models.
- mrbluecoat 1y ago
  It'll certainly be lonely on HN without pages of AI articles to read daily.. /s
- jandrese 1y ago
  CEOs are just salivating at the prospect of firing most of their staff and replacing them with AIs. And then you have hype men at these AI companies blowing a burning coal mine of smoke up their asses. And every month the products become even more expensive for even more incremental gains. The hype is unsustainable. How many "we will have AGI by X/X/201X" predictions have we blown past already?
  - arcanemachiner 1y ago
    > How many "we will have AGI by X/X/201X" predictions have we blown past already? Just imagine how many predictions we'll have in six months, or even a year from now!
    - ed_elliott_asc 1y ago
      We don’t need to imagine, we can ask ChatGPT
      - Terr_ 1y ago
        Yeah, everyone knows LLMs excel at providing mathematically-sound answers to novel questions. :p
  - sebastiennight 1y ago
    > How many "we will have AGI by X/X/201X" predictions have we blown past already? This seems wildly inaccurate. Can you find any single such claim from any credible source? Anybody hyping up an AGI timeframe within the 2010s?
    - jandrese 1y ago
      Ok, this one is for the end of 2025 so we could still achieve it, and this is from a guy with an AI company (xAI): https://www.reuters.com/technology/teslas-musk-predicts-ai-will-be-smarter-than-smartest-human-next-year-2024-04-08/ https://www.reuters.com/technology/teslas-musk-predicts-ai-w... Another AI company CEO prediction: https://time.com/7205596/sam-altman-superintelligence-agi/ https://time.com/7205596/sam-altman-superintelligence-agi/
- OtherShrezzing 1y ago
  The VCs are the small players in this bubble now. Big traditional finance is helping Microsoft, Google, Meta, and Amazon build out their datacenters, and the infrastructure to power them. VCs have a lot of money compared to your startup, but they can’t finance a trillion dollars in construction projects. They’re all so highly levered up that they can’t afford for the bubble to pop. If this goes on for another couple of years before the pop, we may see “too big to fail” wheeled out to justify a bailout of Google or Microsoft.
  - HDThoreaun 1y ago
    msft and google both made $100 billion in profit last year. Theyre nowhere near a bailout
  - impossiblefork 1y ago
    I don't think Microsoft has a lot of corporate debt relative to its profits etc., and Google has even less. I'm sure there will be losers, but I'm not quite sure who.
    - OtherShrezzing 1y ago
      Their recent filings show that they’re planning $100bn/yr in AI expenditures as early as 2027. They’re raising debt, rather than spending from revenues, because they get a better multiplier there. They’re also acting as a guarantor to lots of infrastructure project - meaning the debt is their responsibility, but not on their books. If the creditworthiness of any of the hyperscalers slip, even a tiny amount, the tech and banking sectors are in some hot water.
      - impossiblefork 1y ago
        Ah, I see. But 100 billion is still on the order of the current profit of each. I suppose with interest, if it's sustained over time it could be a problem though.
- sema4hacker 1y ago
  I like your phrases "a smoking crater in the ground" and "a dumpster fire burning next to a gasoline truck" enough to steal them for use in my own critiques.
woeirua 1y ago
It's 1999 again.
- j45 1y ago
  Truly, except now everyone's online and spending time online and spending cash online.
  - pixl97 1y ago
    And, the .com bomb killed some companies and slowed down spending for a bit. It did not kill the internet, and now companies like Amazon(.com) are absolutely enormous. Some people think the GenAI bomb is going to kill GenAI, I think it's just going to weed out those with too high of expenses and no way to evolve the compute to be cheaper over time.
    - sech8420 1y ago
      "Some people think the GenAI bomb is going to kill GenAI," Sure, a very very small percentage of people who know hardly anything about GenAI might think this.
      - __loam 1y ago
        It's the opposite. The more I learn about the financial state of these companies the worse my opinion gets.
    - j45 1y ago
      There was barely no one using the internet then let alone doing e-commerce. It’s worth reading up on it to see what’s actually comparable.
    - oinfoalgo 1y ago
      The forward P/E of the Nasdaq 100 is pretty exemplary of how this is not the same situation at all. https://en.macromicro.me/series/23955/nasdaq-100-pe https://en.macromicro.me/series/23955/nasdaq-100-pe It is easy to spot the dot com bubble on this chart.
at-fates-hands 1y ago
Feels like 2000 all over again. The arms race to throw money at anything has "AI" in their business name is the same thing I saw back in 2000. No business plan, just some idea to somehow monetize the internet and VC's were doing the exact same thing. Throwing tons of good money after bad. Although you can make an argument this is different, in a lot of ways, its just feels the same thing. The same energy, the same half baked ideas trying to get a few million to get something off the ground.
- throwawaysleep 1y ago
  I imagine it is the same, but 2000 was hardly a dead end. So there will be lots burned but keep on at it as the tech will revolutionize the world.
  - kalleboo 1y ago
    Yeah the market of 2000 crashed and burned but we were left with a bunch of dark fiber and developed tech that laid the foundation for the next decade.
- ebiester 1y ago
  I would say a bit more like 1997. I was young but kept thinking, "That which is good is not novel, and that which is novel isn't good." That said, we had the giant crash, but based on the dow jones the low in 2002 was the same as August 1998 but you can really look at the lost decade as to the true impact of the bubble. The question isn't if there will be a crash - there will - but there are always crashes. And there are always recoveries. It's all about "how long." And what happens to the companies that blow the money and then find out they can't fire all their white collar workers? (Or, what happens if they find out they can?)
mrsilencedogood 1y ago
I think vibe coding will get good enough that things like vercel's "0 to POC" thing are going to stick around. I think AI-powered IDE features will stick around. One notable head-and-shoulders-above-non-AI-competitor feature I've seen is "very very fuzzy search". I can ask AI "I think there's something in the code that inserts MyMessage into `my.kafka.topic`. But the gosh darn codebase is so convoluted that I literally can't find it. I suspect "my", "kafka", and "topic" all get constructed somewhere to produce that topic name because it doesn't show up in the code as a literal. I also think there's so much indirection between the producer setup and where the "event" actually first gets emitted that MyMessage might not look very much like the actual origination point. Where's the initial origin point?" Previously, that was "ctrl-shift-F my.kafka.topic" and then ask a staff engineer and hope to God they know off-hand, and if they don't, go read the entire codebase/framework for 16 hours straight until you figure it out. Now, LLMs have a decent shot at figuring it out. I also think things like "is this chest Xray cancer?" are going to be hugely impactful. But anyone expecting anything like Gen AI (being able to replace a real software engineer, or quality customer support rep, etc) is going to be disappointed. I also think AI will generally eviscerate the bottoms of industries (expect generic gacha girl-collection games to get a lot of AI art) but also leave people valuing the tops of industries a lot more (lovingly crafted indie games, etc). So now this compute-expensive AI is targeting the already low-margin bottoms of industries. Probably not what VCs want. They want to replace software engineers, not make a slop gacha game cost 1/10th of its already low cost.
- kgwgk 1y ago
  > I also think things like "is this chest Xray cancer?" are going to be hugely impactful. Yes, but https://radiologybusiness.com/topics/artificial-intelligence/ny-times-revisits-nobel-prize-winners-prediction-ai-will-render-radiologists-obsolete https://radiologybusiness.com/topics/artificial-intelligence... Nine years ago, scientist Geoffrey Hinton famously said, “People should stop training radiologists now,” believing it was “completely obvious” AI would outperform human rads within five years.
  - deleted 1y ago
    [deleted]
_ea1k 1y ago
I'm not shocked. It reminds me a bit of the way some people talk about their personal investing. They'll talk about wins (often exaggerated) and leave out the travails and failures. Next think you know, your friend is telling you about their new day trading plan. :) Unfortunately, the same thing is playing out here. Nobody likes being the guy that points out the gains are incremental when everyone is bragging about their 100x gains. And everyone in the management side starts getting, understandably, afraid that their company will miss out on these magical gains. It is all a recipe for wild overspending on the wrong things.
kayodelycaon 1y ago
Well, at least AI is going to be better than the blockchain hype. No one knew what “blockchain” was, how it worked, or what could be used for. I had a very hard time explaining once you put something in the chain, you can’t easily pull it back out. If you wanted to verify documents, all you have to do is put a hash in a database table. Which we already had. It has exactly one purpose: prevent any single entity from controlling the contents. That includes governments, business executives, lawyers, judges, and hackers. The only good thing is every single piece of data can be pulled out into a different data structure once you realize your mistake. Note, I’m greatly oversimplifying all the details and I’m not referring to cryptocurrency.
- Analemma_ 1y ago
  My monkey jpegs are surely going back up! Just have to keep hodling.
  - gerdesj 1y ago
    I've lost track of my memes. Should I be locking up the green crayons or my daughters?
    - krapp 1y ago
      A lot of y'all still don't get it. https://x.com/JuiceSimpsons/status/1523551892432953345 https://x.com/JuiceSimpsons/status/1523551892432953345
      - gerdesj 1y ago
        "monkey jpegs": NFT "hodl" - I think r/WallStreetBets came up with that. Perhaps not - its too ubiquitous, similar to teh. r/WSB did originate the eating green crayons thing along with smooth brain monkeys etc I simply mixed and matched and riffed in an old school "lock up your daughter" meme. Sorry, I don't have a Spongebob illustration. I do words.
        1y ago
varelse 1y ago
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fancyfredbot 1y ago
Article doesn't understand that cutting "between five and 20 percent of support and admin processing" is really valuable, instead it seems to want to dismiss that as a dull failure. Business process outsourcing companies are valued at $300bn according to the BPO Wikipedia page. So 5%-20% of that is 15-60bn. So even if we're valuing all the other GenAI impact at zero the impact on admin and support alone could plausibly justify this investment.
- weakfish 1y ago
  I suppose my question that I’m too tired to napkin math on is if those benefits justify the sometimes astronomical cost of the tooling or integration
  - __loam 1y ago
    Or the reputational risk.
  - YetAnotherNick 1y ago
    It can't be napkin mathed anyways.
  - fancyfredbot 1y ago
    The article author was also too tired to do any napkin math but unfortunately that does not seem to have stopped them from confidently declaring $40bn has been lit on fire.
- croes 1y ago
  But that's only the company side and not the customer side. Klarna also cut costs replacing support with AI. Didn't work well so ha to rehire.
- kurthr 1y ago
  What is missing even in this article is the install and expected failure rate of the dominant GB300 servers. Numbers I heard were, "~15% annual failure and it's not worth trying to swap/repair". That means in 5 years these entire installs are down more than half. Of course they can install the NEW GX500turbo servers which are 4x the compute, but 2x more power hungry. How much will that cost? What is the hyperscaler write down ~$200B/yr? Better have some income to make that up. They've got only 3 years to get there. That still means All New data centers. They aren't being built for for this now, and so the old ones'll have to get ripped out and rebuilt (in place?) before they get the new servers. I do think they've planned the external power delivery, but not cooling or IP infra. It's a CF.
jstummbillig 1y ago
What arrogant and cynical way of looking at business operations. You don't know how anything interesting turns out in the future. You make educated guesses and those cost money. When you run a business, everything costs money. But that is not "lighting money on fire", that is how all learning happens. If anyone thinks they have figured it all out, stop blabbering around. Short the market.
- mangamadaiyan 1y ago
  The market can stay irrational longer than the investor can stay solvent.
- compiler-guy 1y ago
  "The market can remain irrational longer than you can remain insolvent." --John Maynard Keynes Lots of people lost their shirts shorting the housing market prior to the 2008 crash. (_The Big Short_ highlights those who were successful, but plenty of people weren't.) But it was undoubtedly a bubble and there was a world-wide recession when it popped.
  - rvz 1y ago
    Maybe we will get another one soon if we don’t realize quick enough that the promise of AGI is a complete scam.
  - sebastiennight 1y ago
    nitpick: longer than you can remain "*solvent", not "insolvent"
  - jstummbillig 1y ago
    If someone claims to be certain of the future with much more clarity than the rest of us, yet is unable to find ANY way to turn that advantage into leverage, I certainly would not trust the person on that issue.
andy99 1y ago
$40B seems very low. I wouldn't be surprised to find the annual corporate churn on innovation / transformation / IT/IM new initiatives whatever you call it, is way higher than that. There's some subset of corporate spend that's just chasing new stuff and keeping up on what the hot topics are. I think there is a bubble, if it's really just $40B maybe I'm wrong.
throwmeaway222 1y ago
There is no real source for this data other than "executives" that only think in numbers and of course those are the types that collude with their CFOs to come up with great ways to get giant tax write-offs. I would imagine they are not "burning billions" they are coming up with new ways to describe how they ALREADY burned billions.
- 0cf8612b2e1e 1y ago
  I can just speak for myself, but my F500 has been setting money on fire chasing AI. Truly terrible ideas are being pursued just for the sake of movement. Were “AI” not part of the pitch, it would have been immediately tossed in the bin as a waste of time. Ideas which are not terrible, instead have awful ROIs. Nobody has a use case beyond generating text, so lots of ideas about automating some text generation in certain niches. Not appreciating that those bits represent 0.1% of the business ventures. Yet they are technically feasible, so full steam ahead.
  - bongodongobob 1y ago
    Same here. We are apparently obsessed with chatbots that no one asked for. If I brought up the same idea minus the AI a couple years ago, management would have been very confused as to why I wanted to build things no one asked for. The funniest thing is that management has no idea how AI works so they're pretty much just Copilot Agents with a couple docs and a prompt. It's the most laughable shit I've ever seen. Management is so proud while we're all just shaking our heads hoping this trend passes. Don't get me wrong, AI definitely has its use cases, but tossing a doc about company benefits into a bot is about the most worthless thing you could do with this tech.
    - toraway 1y ago
      > tossing a doc about company benefits into a bot is about the most worthless thing you could do with this tech. Hahaha, my company has spent half a year pursuing the exact same thing to the letter after one of our VPs got the idea in his head at some AI conference. Rollout kept getting pushed back because of hallucinations in testing. I'm not 100% sure at this point if he forgot he made it a top internal priority and it was quietly shelved or if it's still limping along with no one in HR/upper management willing to give it the green light for release. (using throwaway because my HN profile is linked to my real identity).
linotype 1y ago
Wait until someone tells them the ratio of public cloud vs self-hosted.
roxolotl 1y ago
Veracity of the article’s numbers is obviously an issue but the thing that’s interesting is that this number isn’t about investment in AI infrastructure or models. It’s money spent on consuming and using the models. Which puts the infra spend in an even starker light. If people don’t feel like they are getting value out of this spend at the peak of hype that’s not a great sign.
DiscourseFan 1y ago
Yes and no. Its clear from the article that there is industrial integration. But only workers who are very highly skilled at utilizing the technology--and there are very few of those--are seeing benefits, and only managers who have experience effectively utilizing it are adopting it well. Time will tell, but yes, most projects aren't going anywhere, because they make the fundamental error of thinking that its equivalent to a human in terms of intelligence.
dakial1 1y ago
Apparently the MIT Research Paper link is broken (probably removed due to traffic). Here is the Archived Version: https://web.archive.org/web/20250818145714/https://nanda.media.mit.edu/ai_report_2025.pdf https://web.archive.org/web/20250818145714/https://nanda.med...
dehugger 1y ago
There is a lot of organizational inertia to overcome, but it is happening. The first big wave of savings we are seeing in my org (which deals in physical goods, not software) is replacing very expensive enterprise software with in-house developed replacements.
- tamersalama 1y ago
  Would love to hear more (private is OK)
Nevermark 1y ago
Well run large companies often waste a lot, in order to (1) hedge risks of being left behind, (2) ensure they have options in the future in possible growth or new efficiency areas, and (3) to start on long learning curves for skills and capabilities that appear likely to be a baseline necessity in the long run. Bonfires of money. Predictably. Because all three of those concerns require highly speculative action to properly address. That doesn't make those reasons invalid. Failures are expected, especially in early days. And are not a sign they are making spurious bets, or starry eyed about industry upheavals. The minimal return is still experience gained and a ramped up institutional focus. How many of us here speed up our overall development by coding early on new projects before we have complete clarity? Writing code we will often throw away?
- jimmaswell 1y ago
  Agreed. Smug dismissal of new ideas is such a lazy shortcut to trying to look smart. I'd much rather talk to someone enthusiastic about something than someone who does nothing but sit there and say "this thing sucks" every time something happens even if person #2 is incidentally right a lot of the time.
  - etrautmann 1y ago
    While I agree in principle, someone has to make decisions about resource allocation and decide that some ideas are better than others. This takes a finely tuned sense of BS detector and technical feasibility estimation, which I would argue is a real skill. It thus becomes subtly different to be an accurate predictor of success vs default cynic if 95% of ideas aren’t going to work.
    - Nevermark 1y ago
      > if 95% of ideas aren’t going to work Well, if only 95% of our ideas don't work, with a little hard work and sacrifice, we are livin' in an optimish paradise.
  - jqpabc123 1y ago
    Smug acceptance of new ideas is such a lazy shortcut to trying to look smart. I'd much rather talk to someone who has objectively analyzed the concept rather than someone who does nothing but sit there and say "this thing is great" for no real reason other than "everyone is using it". Incidentally, "everyone" is wrong a lot of the time.
dade_ 1y ago
Strange advice to companies that can’t figure out how to deploy AI is to not use BPO when obviously they can’t figure it out themselves. Also, I am looking at a BPO RFP right now for a huge organization and they mostly care about is how the vendor going to leverage AI to reduce their price over the term of the contract.
m0llusk 1y ago
Looking back at recent technology advancements it seems pretty clear that first movers end up getting buried by the second wave. This may be a sign that AI is dramatically increasing the scale of the errors we make.
exasperaited 1y ago
In short: we have seen no real evidence it will work, we don’t believe it will work, but we’re definitely going to hire fewer people because of it It’s like the New York Jewish joke about the terrible food and the too small portions.
cc62cf4a4f20 1y ago
Aren't executives just responding rationally to the current environment? Right or wrong, the broadly speaking, the current thinking is that GenAI will be super impactful. Which means there is a lot of risk to be seen as underinvesting in GenAI, even when the ROI isn't there. Until the hype dies down and there is a broad, practical understanding of the value of GenAI, I don't see how it could work anyother way.
marenkay 1y ago
The wonderful thing about money is: its roots are only in belief, not in fact. If you get a sufficient amount of money users to believe pink colored dog poop has more value than a diamond, than it has. The entire shtick is made up. People just tend to forget this too quick.
- FooBarBizBazz 1y ago
  Moreover, money is not destroyed by spending, but rather circulates. Right now it's flowing around faster -- a manic phase for a portion of the economy. In other eras, everyone got excited and went to tent revivals. Granted there could be an opportunity cost -- the real effort and electricity could be used elsewhere -- but only if it were possible to create a similar amount of excitement about something useful, like putting solar panels everywhere. But that takes different people and different skills, so maybe this costs nothing? (Money can be created and destroyed -- it doesn't just circulate -- but that destruction happens when loans are repaid within a fractional reserve system. Which is kind of a scam, but money itself is, so, whatever.) Once you internalize that this is all sort of a scam, does that change your behavior? Maybe you start making NFTs or minting shitcoins.
IT4MD 1y ago
All while paying less taxes, at least in the US, because reasons!

246 points by rntn 1y ago

JCM9 1y ago

There’s no question we’re in a “GenAI” bubble, the only question is how big of a smoking crater in the ground is going to be created when this thing pops. The tech isn’t going away, and is cool/useful, but from a business standpoint this whole thing looks like a dumpster fire burning next to a gasoline truck. Right now VC FOMO is the only thing stopping all that from blowing up. When that slows down buckle up.

j45 1y ago
It's a bubble if the tech or audience wasn't there and capabilities weren't improving weekly. There's definitely people who don't understand the tech talking about applying it increasing the failure rate of software projects.
- throwawayoldie 1y ago
  > It's a bubble if the tech or audience wasn't there and capabilities weren't improving weekly. But...is it and are they? Gen AI boosters tend to make assertions like this as if they're unassailable facts, but never seem interested in backing them up. I guess it's easier than thinking.
  - wiml 1y ago
    The whole mindset of LLM boosterism is that thinking is obsolete anyway — all you need is pattern matching on existing data — so it's not surprising that they don't want to indulge in it excessively.
    - j45 1y ago
      Thinking is absolutely not obsolete with LLMs. Human thought is the only way any software (including LLMs) operate efficiently. Same goes for leveraging LLMs.
  - j45 1y ago
    As a tech person.. It is, and they are. For the boosters, notice how few or many come from a tech background and pay attention accordingly
    - throwawayoldie 1y ago
      To paraphrase The Princess Bride, "Won't work, I know too many tech people."
pier25 1y ago
> Right now VC FOMO is the only thing stopping all that from blowing up That was probably 2-3 years ago. I'd be surprised if VCs hadn't already figured out they're in a bubble. They're probably playing a game of chicken to see who will remain to capture the actually profitable use cases. There's also a number of lawsuits going on against AI companies regarding piracy and copyright. It's already an established fact in the courts that these companies have downloaded ebooks, music, videos, and images illegally to train their models.
mrbluecoat 1y ago
It'll certainly be lonely on HN without pages of AI articles to read daily.. /s
jandrese 1y ago
CEOs are just salivating at the prospect of firing most of their staff and replacing them with AIs. And then you have hype men at these AI companies blowing a burning coal mine of smoke up their asses. And every month the products become even more expensive for even more incremental gains. The hype is unsustainable. How many "we will have AGI by X/X/201X" predictions have we blown past already?
- arcanemachiner 1y ago
  > How many "we will have AGI by X/X/201X" predictions have we blown past already? Just imagine how many predictions we'll have in six months, or even a year from now!
  - ed_elliott_asc 1y ago
    We don’t need to imagine, we can ask ChatGPT
    - Terr_ 1y ago
      Yeah, everyone knows LLMs excel at providing mathematically-sound answers to novel questions. :p
- sebastiennight 1y ago
  > How many "we will have AGI by X/X/201X" predictions have we blown past already? This seems wildly inaccurate. Can you find any single such claim from any credible source? Anybody hyping up an AGI timeframe within the 2010s?
  - jandrese 1y ago
    Ok, this one is for the end of 2025 so we could still achieve it, and this is from a guy with an AI company (xAI): https://www.reuters.com/technology/teslas-musk-predicts-ai-will-be-smarter-than-smartest-human-next-year-2024-04-08/ https://www.reuters.com/technology/teslas-musk-predicts-ai-w... Another AI company CEO prediction: https://time.com/7205596/sam-altman-superintelligence-agi/ https://time.com/7205596/sam-altman-superintelligence-agi/
OtherShrezzing 1y ago
The VCs are the small players in this bubble now. Big traditional finance is helping Microsoft, Google, Meta, and Amazon build out their datacenters, and the infrastructure to power them. VCs have a lot of money compared to your startup, but they can’t finance a trillion dollars in construction projects. They’re all so highly levered up that they can’t afford for the bubble to pop. If this goes on for another couple of years before the pop, we may see “too big to fail” wheeled out to justify a bailout of Google or Microsoft.
- HDThoreaun 1y ago
  msft and google both made $100 billion in profit last year. Theyre nowhere near a bailout
- impossiblefork 1y ago
  I don't think Microsoft has a lot of corporate debt relative to its profits etc., and Google has even less. I'm sure there will be losers, but I'm not quite sure who.
  - OtherShrezzing 1y ago
    Their recent filings show that they’re planning $100bn/yr in AI expenditures as early as 2027. They’re raising debt, rather than spending from revenues, because they get a better multiplier there. They’re also acting as a guarantor to lots of infrastructure project - meaning the debt is their responsibility, but not on their books. If the creditworthiness of any of the hyperscalers slip, even a tiny amount, the tech and banking sectors are in some hot water.
    - impossiblefork 1y ago
      Ah, I see. But 100 billion is still on the order of the current profit of each. I suppose with interest, if it's sustained over time it could be a problem though.
sema4hacker 1y ago
I like your phrases "a smoking crater in the ground" and "a dumpster fire burning next to a gasoline truck" enough to steal them for use in my own critiques.

woeirua 1y ago

It's 1999 again.

j45 1y ago
Truly, except now everyone's online and spending time online and spending cash online.
- pixl97 1y ago
  And, the .com bomb killed some companies and slowed down spending for a bit. It did not kill the internet, and now companies like Amazon(.com) are absolutely enormous. Some people think the GenAI bomb is going to kill GenAI, I think it's just going to weed out those with too high of expenses and no way to evolve the compute to be cheaper over time.
  - sech8420 1y ago
    "Some people think the GenAI bomb is going to kill GenAI," Sure, a very very small percentage of people who know hardly anything about GenAI might think this.
    - __loam 1y ago
      It's the opposite. The more I learn about the financial state of these companies the worse my opinion gets.
  - j45 1y ago
    There was barely no one using the internet then let alone doing e-commerce. It’s worth reading up on it to see what’s actually comparable.
  - oinfoalgo 1y ago
    The forward P/E of the Nasdaq 100 is pretty exemplary of how this is not the same situation at all. https://en.macromicro.me/series/23955/nasdaq-100-pe https://en.macromicro.me/series/23955/nasdaq-100-pe It is easy to spot the dot com bubble on this chart.

at-fates-hands 1y ago

Feels like 2000 all over again. The arms race to throw money at anything has "AI" in their business name is the same thing I saw back in 2000. No business plan, just some idea to somehow monetize the internet and VC's were doing the exact same thing. Throwing tons of good money after bad. Although you can make an argument this is different, in a lot of ways, its just feels the same thing. The same energy, the same half baked ideas trying to get a few million to get something off the ground.

throwawaysleep 1y ago
I imagine it is the same, but 2000 was hardly a dead end. So there will be lots burned but keep on at it as the tech will revolutionize the world.
- kalleboo 1y ago
  Yeah the market of 2000 crashed and burned but we were left with a bunch of dark fiber and developed tech that laid the foundation for the next decade.
ebiester 1y ago
I would say a bit more like 1997. I was young but kept thinking, "That which is good is not novel, and that which is novel isn't good." That said, we had the giant crash, but based on the dow jones the low in 2002 was the same as August 1998 but you can really look at the lost decade as to the true impact of the bubble. The question isn't if there will be a crash - there will - but there are always crashes. And there are always recoveries. It's all about "how long." And what happens to the companies that blow the money and then find out they can't fire all their white collar workers? (Or, what happens if they find out they can?)

mrsilencedogood 1y ago

I think vibe coding will get good enough that things like vercel's "0 to POC" thing are going to stick around. I think AI-powered IDE features will stick around. One notable head-and-shoulders-above-non-AI-competitor feature I've seen is "very very fuzzy search". I can ask AI "I think there's something in the code that inserts MyMessage into `my.kafka.topic`. But the gosh darn codebase is so convoluted that I literally can't find it. I suspect "my", "kafka", and "topic" all get constructed somewhere to produce that topic name because it doesn't show up in the code as a literal. I also think there's so much indirection between the producer setup and where the "event" actually first gets emitted that MyMessage might not look very much like the actual origination point. Where's the initial origin point?" Previously, that was "ctrl-shift-F my.kafka.topic" and then ask a staff engineer and hope to God they know off-hand, and if they don't, go read the entire codebase/framework for 16 hours straight until you figure it out. Now, LLMs have a decent shot at figuring it out. I also think things like "is this chest Xray cancer?" are going to be hugely impactful. But anyone expecting anything like Gen AI (being able to replace a real software engineer, or quality customer support rep, etc) is going to be disappointed. I also think AI will generally eviscerate the bottoms of industries (expect generic gacha girl-collection games to get a lot of AI art) but also leave people valuing the tops of industries a lot more (lovingly crafted indie games, etc). So now this compute-expensive AI is targeting the already low-margin bottoms of industries. Probably not what VCs want. They want to replace software engineers, not make a slop gacha game cost 1/10th of its already low cost.

kgwgk 1y ago
> I also think things like "is this chest Xray cancer?" are going to be hugely impactful. Yes, but https://radiologybusiness.com/topics/artificial-intelligence/ny-times-revisits-nobel-prize-winners-prediction-ai-will-render-radiologists-obsolete https://radiologybusiness.com/topics/artificial-intelligence... Nine years ago, scientist Geoffrey Hinton famously said, “People should stop training radiologists now,” believing it was “completely obvious” AI would outperform human rads within five years.
- deleted 1y ago
  [deleted]

_ea1k 1y ago

I'm not shocked. It reminds me a bit of the way some people talk about their personal investing. They'll talk about wins (often exaggerated) and leave out the travails and failures. Next think you know, your friend is telling you about their new day trading plan. :) Unfortunately, the same thing is playing out here. Nobody likes being the guy that points out the gains are incremental when everyone is bragging about their 100x gains. And everyone in the management side starts getting, understandably, afraid that their company will miss out on these magical gains. It is all a recipe for wild overspending on the wrong things.

kayodelycaon 1y ago

Well, at least AI is going to be better than the blockchain hype. No one knew what “blockchain” was, how it worked, or what could be used for. I had a very hard time explaining once you put something in the chain, you can’t easily pull it back out. If you wanted to verify documents, all you have to do is put a hash in a database table. Which we already had. It has exactly one purpose: prevent any single entity from controlling the contents. That includes governments, business executives, lawyers, judges, and hackers. The only good thing is every single piece of data can be pulled out into a different data structure once you realize your mistake. Note, I’m greatly oversimplifying all the details and I’m not referring to cryptocurrency.

Analemma_ 1y ago
My monkey jpegs are surely going back up! Just have to keep hodling.
- gerdesj 1y ago
  I've lost track of my memes. Should I be locking up the green crayons or my daughters?
  - krapp 1y ago
    A lot of y'all still don't get it. https://x.com/JuiceSimpsons/status/1523551892432953345 https://x.com/JuiceSimpsons/status/1523551892432953345
    - gerdesj 1y ago
      "monkey jpegs": NFT "hodl" - I think r/WallStreetBets came up with that. Perhaps not - its too ubiquitous, similar to teh. r/WSB did originate the eating green crayons thing along with smooth brain monkeys etc I simply mixed and matched and riffed in an old school "lock up your daughter" meme. Sorry, I don't have a Spongebob illustration. I do words.
      - 1y ago

varelse 1y ago

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fancyfredbot 1y ago

Article doesn't understand that cutting "between five and 20 percent of support and admin processing" is really valuable, instead it seems to want to dismiss that as a dull failure. Business process outsourcing companies are valued at $300bn according to the BPO Wikipedia page. So 5%-20% of that is 15-60bn. So even if we're valuing all the other GenAI impact at zero the impact on admin and support alone could plausibly justify this investment.

weakfish 1y ago
I suppose my question that I’m too tired to napkin math on is if those benefits justify the sometimes astronomical cost of the tooling or integration
- __loam 1y ago
  Or the reputational risk.
- YetAnotherNick 1y ago
  It can't be napkin mathed anyways.
- fancyfredbot 1y ago
  The article author was also too tired to do any napkin math but unfortunately that does not seem to have stopped them from confidently declaring $40bn has been lit on fire.
croes 1y ago
But that's only the company side and not the customer side. Klarna also cut costs replacing support with AI. Didn't work well so ha to rehire.
kurthr 1y ago
What is missing even in this article is the install and expected failure rate of the dominant GB300 servers. Numbers I heard were, "~15% annual failure and it's not worth trying to swap/repair". That means in 5 years these entire installs are down more than half. Of course they can install the NEW GX500turbo servers which are 4x the compute, but 2x more power hungry. How much will that cost? What is the hyperscaler write down ~$200B/yr? Better have some income to make that up. They've got only 3 years to get there. That still means All New data centers. They aren't being built for for this now, and so the old ones'll have to get ripped out and rebuilt (in place?) before they get the new servers. I do think they've planned the external power delivery, but not cooling or IP infra. It's a CF.

jstummbillig 1y ago

What arrogant and cynical way of looking at business operations. You don't know how anything interesting turns out in the future. You make educated guesses and those cost money. When you run a business, everything costs money. But that is not "lighting money on fire", that is how all learning happens. If anyone thinks they have figured it all out, stop blabbering around. Short the market.

mangamadaiyan 1y ago
The market can stay irrational longer than the investor can stay solvent.
compiler-guy 1y ago
"The market can remain irrational longer than you can remain insolvent." --John Maynard Keynes Lots of people lost their shirts shorting the housing market prior to the 2008 crash. (_The Big Short_ highlights those who were successful, but plenty of people weren't.) But it was undoubtedly a bubble and there was a world-wide recession when it popped.
- rvz 1y ago
  Maybe we will get another one soon if we don’t realize quick enough that the promise of AGI is a complete scam.
- sebastiennight 1y ago
  nitpick: longer than you can remain "*solvent", not "insolvent"
- jstummbillig 1y ago
  If someone claims to be certain of the future with much more clarity than the rest of us, yet is unable to find ANY way to turn that advantage into leverage, I certainly would not trust the person on that issue.

andy99 1y ago

$40B seems very low. I wouldn't be surprised to find the annual corporate churn on innovation / transformation / IT/IM new initiatives whatever you call it, is way higher than that. There's some subset of corporate spend that's just chasing new stuff and keeping up on what the hot topics are. I think there is a bubble, if it's really just $40B maybe I'm wrong.

throwmeaway222 1y ago

There is no real source for this data other than "executives" that only think in numbers and of course those are the types that collude with their CFOs to come up with great ways to get giant tax write-offs. I would imagine they are not "burning billions" they are coming up with new ways to describe how they ALREADY burned billions.

0cf8612b2e1e 1y ago
I can just speak for myself, but my F500 has been setting money on fire chasing AI. Truly terrible ideas are being pursued just for the sake of movement. Were “AI” not part of the pitch, it would have been immediately tossed in the bin as a waste of time. Ideas which are not terrible, instead have awful ROIs. Nobody has a use case beyond generating text, so lots of ideas about automating some text generation in certain niches. Not appreciating that those bits represent 0.1% of the business ventures. Yet they are technically feasible, so full steam ahead.
- bongodongobob 1y ago
  Same here. We are apparently obsessed with chatbots that no one asked for. If I brought up the same idea minus the AI a couple years ago, management would have been very confused as to why I wanted to build things no one asked for. The funniest thing is that management has no idea how AI works so they're pretty much just Copilot Agents with a couple docs and a prompt. It's the most laughable shit I've ever seen. Management is so proud while we're all just shaking our heads hoping this trend passes. Don't get me wrong, AI definitely has its use cases, but tossing a doc about company benefits into a bot is about the most worthless thing you could do with this tech.
  - toraway 1y ago
    > tossing a doc about company benefits into a bot is about the most worthless thing you could do with this tech. Hahaha, my company has spent half a year pursuing the exact same thing to the letter after one of our VPs got the idea in his head at some AI conference. Rollout kept getting pushed back because of hallucinations in testing. I'm not 100% sure at this point if he forgot he made it a top internal priority and it was quietly shelved or if it's still limping along with no one in HR/upper management willing to give it the green light for release. (using throwaway because my HN profile is linked to my real identity).

linotype 1y ago

Wait until someone tells them the ratio of public cloud vs self-hosted.

roxolotl 1y ago

Veracity of the article’s numbers is obviously an issue but the thing that’s interesting is that this number isn’t about investment in AI infrastructure or models. It’s money spent on consuming and using the models. Which puts the infra spend in an even starker light. If people don’t feel like they are getting value out of this spend at the peak of hype that’s not a great sign.

DiscourseFan 1y ago

Yes and no. Its clear from the article that there is industrial integration. But only workers who are very highly skilled at utilizing the technology--and there are very few of those--are seeing benefits, and only managers who have experience effectively utilizing it are adopting it well. Time will tell, but yes, most projects aren't going anywhere, because they make the fundamental error of thinking that its equivalent to a human in terms of intelligence.

dakial1 1y ago

Apparently the MIT Research Paper link is broken (probably removed due to traffic). Here is the Archived Version: https://web.archive.org/web/20250818145714/https://nanda.media.mit.edu/ai_report_2025.pdf https://web.archive.org/web/20250818145714/https://nanda.med...

dehugger 1y ago

There is a lot of organizational inertia to overcome, but it is happening. The first big wave of savings we are seeing in my org (which deals in physical goods, not software) is replacing very expensive enterprise software with in-house developed replacements.

tamersalama 1y ago
Would love to hear more (private is OK)

Nevermark 1y ago

Well run large companies often waste a lot, in order to (1) hedge risks of being left behind, (2) ensure they have options in the future in possible growth or new efficiency areas, and (3) to start on long learning curves for skills and capabilities that appear likely to be a baseline necessity in the long run. Bonfires of money. Predictably. Because all three of those concerns require highly speculative action to properly address. That doesn't make those reasons invalid. Failures are expected, especially in early days. And are not a sign they are making spurious bets, or starry eyed about industry upheavals. The minimal return is still experience gained and a ramped up institutional focus. How many of us here speed up our overall development by coding early on new projects before we have complete clarity? Writing code we will often throw away?

jimmaswell 1y ago
Agreed. Smug dismissal of new ideas is such a lazy shortcut to trying to look smart. I'd much rather talk to someone enthusiastic about something than someone who does nothing but sit there and say "this thing sucks" every time something happens even if person #2 is incidentally right a lot of the time.
- etrautmann 1y ago
  While I agree in principle, someone has to make decisions about resource allocation and decide that some ideas are better than others. This takes a finely tuned sense of BS detector and technical feasibility estimation, which I would argue is a real skill. It thus becomes subtly different to be an accurate predictor of success vs default cynic if 95% of ideas aren’t going to work.
  - Nevermark 1y ago
    > if 95% of ideas aren’t going to work Well, if only 95% of our ideas don't work, with a little hard work and sacrifice, we are livin' in an optimish paradise.
- jqpabc123 1y ago
  Smug acceptance of new ideas is such a lazy shortcut to trying to look smart. I'd much rather talk to someone who has objectively analyzed the concept rather than someone who does nothing but sit there and say "this thing is great" for no real reason other than "everyone is using it". Incidentally, "everyone" is wrong a lot of the time.

dade_ 1y ago

Strange advice to companies that can’t figure out how to deploy AI is to not use BPO when obviously they can’t figure it out themselves. Also, I am looking at a BPO RFP right now for a huge organization and they mostly care about is how the vendor going to leverage AI to reduce their price over the term of the contract.

m0llusk 1y ago

Looking back at recent technology advancements it seems pretty clear that first movers end up getting buried by the second wave. This may be a sign that AI is dramatically increasing the scale of the errors we make.

exasperaited 1y ago

In short: we have seen no real evidence it will work, we don’t believe it will work, but we’re definitely going to hire fewer people because of it It’s like the New York Jewish joke about the terrible food and the too small portions.

cc62cf4a4f20 1y ago

Aren't executives just responding rationally to the current environment? Right or wrong, the broadly speaking, the current thinking is that GenAI will be super impactful. Which means there is a lot of risk to be seen as underinvesting in GenAI, even when the ROI isn't there. Until the hype dies down and there is a broad, practical understanding of the value of GenAI, I don't see how it could work anyother way.

marenkay 1y ago

The wonderful thing about money is: its roots are only in belief, not in fact. If you get a sufficient amount of money users to believe pink colored dog poop has more value than a diamond, than it has. The entire shtick is made up. People just tend to forget this too quick.

FooBarBizBazz 1y ago
Moreover, money is not destroyed by spending, but rather circulates. Right now it's flowing around faster -- a manic phase for a portion of the economy. In other eras, everyone got excited and went to tent revivals. Granted there could be an opportunity cost -- the real effort and electricity could be used elsewhere -- but only if it were possible to create a similar amount of excitement about something useful, like putting solar panels everywhere. But that takes different people and different skills, so maybe this costs nothing? (Money can be created and destroyed -- it doesn't just circulate -- but that destruction happens when loans are repaid within a fractional reserve system. Which is kind of a scam, but money itself is, so, whatever.) Once you internalize that this is all sort of a scam, does that change your behavior? Maybe you start making NFTs or minting shitcoins.

IT4MD 1y ago

All while paying less taxes, at least in the US, because reasons!