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The weird crisscrossing relationships make me think of Collateralized Debt Obligations during the 2008 housing crash. Everybody's valuation depends on everybod

by Terr_ 1y ago

The weird crisscrossing relationships make me think of Collateralized Debt Obligations during the 2008 housing crash. Everybody's valuation depends on everybody else's valuation and a bad revelation takes everything down.

Imustaskforhelp 1y ago
Exactly. I feel like this tbh: AI Skeptic: Sure its profitable but its a bubble... AI guru: Sure it may be a bubble but its profitable... Pick your sides logically because bubbles (by definition I think, are profitable till they aren't)
- blitzar 1y ago
  Truth: its only profitable for nvidia, everyone else is just setting cash on fire. talk of bubbles is irrelevant.
  - kakacik 1y ago
    Phase 1: Collect underpants. Phase 2: ?? Phase 3: Profit. Everybody has starry dollar signs looking at last part. CEOs are really bunch of pretentious little boys (and few girls) cargo culting each other, and showing very little innovation or originality... Clearly enough for markets, till its not.
    - apercu 1y ago
      There’s maybe a better way to phrase it but you’re 100% correct re: innovation/originality.
  - yokaze 1y ago
    I think the article points quite well out, these profits cannot be taken at face value, if they are financend by Nvidia in the form of investments.
  - Fade_Dance 1y ago
    It's profitable for a large swath of hardware and datacenter adjacent companies. Look at AVGO, now trading at 1.5 trillion (which may or may not be overvalued, but the ryzen evaluation does reflect significant windfalls from AI spending). Optical interconnect/photonics companies, actual server rack builders, you name it, the pick and shovels companies are having an absolute boom in real terms, not just valuations.
- Terr_ 1y ago
  Most people doing some investing have heard that diversification is important, but I think a lot of people forget that thit employment sector is part of that. I keep thinking of those Enron employees whose 401ks were all stock in their own employer. As software engineer, that means there are reasons to avoid investing in AI stuff, regardless of what I think about its trajectory.
  - rwyinuse 1y ago
    In this case I feel like it's the opposite. If generative AI really succeeds, most software devs will be out of job, in which case profits from those investments could become useful. If it flops, then there's a greater chance devs will be still needed.
    - _w1tm 1y ago
      If these things really become good enough to automate software engineering then it’s just a matter of time before they are used to automate all information work. That would be such a radical societal transformation that I’m not sure we would come out of the other side even having a capitalist society.
    - Terr_ 1y ago
      They aren't symmetric sides of a coin though. 1. If you become unemployed because it "succeeds", then a diversified portfolio probably does well as other industries reap the benefits, and if you have to cover lost wages you're at least "selling high." 2. If you become unemployed because it "fails", then there's a crash/recession where everyone is spooked and you get screwed by being forced to "sell low" during the transition. I suppose there's also the chance you're put out of a job by powerful AI, but the "winners" are all lesser companies you never invested in, so you lose both your job and investments.
- Ekaros 1y ago
  As AI skeptic I must also present question how profitable? Unlike previous "tech" and products. There might not be marginal costs for extra units. Instead each generated answer or message use significant amount of power and needs large physical investment in infra. And if generating those messages are cheap, well there might be competition as price maters more than quality to enough of users.
  - Imustaskforhelp 1y ago
    Yup. See, I am not an AI skeptic in the sense that I don't think the tech is great, I mean its kinda great but its also a lot overhyped tbh, but I mean its definitely a mix bag of opinions for me imo But there are some people who think that just because a tech is great fundamentally makes it oh so lucrative and profitable. That is the one thing that I really really took away from intelligent investor. And I think he even paraphrased it that this should be the one thing you should take away from the book iirc but I am not sure Its that, just as how historically airplane companies have been kinda bad in profit even though they are technologically marvels. It doesn't matter the tech if there is a P/E mis-match imo / stock price is overvalued. The same goes for tech. You can appreciate tech while still thinking that its sort of being a bubble/shit's not good. What are your thoughts?
- rsynnott 1y ago
  … Wait, what on earth makes you think it’s _profitable_?! Are you using WeWork’s ‘community-adjusted EBITDA’ (a measure of ‘profit’ that was basically just revenue) or something?
mlnj 1y ago
And all of it just driven on vague statements of "AGI next year" (a year ago) and now "cancer cure on 10 gigawatts". Almost every podcast nowadays is just "Where is all this money coming from?", "This is just infinite money and you are just out of the loop." Feels so weird to hear.
- impossiblefork 1y ago
  I have actually become less skeptical about claims like this over time. I didn't expect LMs to be able to attack IMO problems this soon. There's also this video stuff recently discussed here, where it was explained that video models can be prompted to segment, solve blind deconvolution problems, solve maces, etc. I'm not sure it's going to work out economically-- I think a crash is unavoidable because P/E ratios for firms like Tesla of 200 or whatever it is are silly, but I think that technology is going to keep evolving throughout and I don't see why some kind of mild not-quite-AGI-but-beating-humans-on-what-we-pay-humans-to-do-for-their-jobs type thing is not achievable. If these video models get better and more available we might actually be able to use them to spot patterns in the natural world and in humans.
  - marginalia_nu 1y ago
    Yeah it's worth remembering that the dot com bubble didn't come crashing down because the ideas weren't viable, we're very much living in a world dominated by the very things people were hyped on back then. The dot com bubble came crashing down because we were still not there yet, at the turn of the millenium. We lacked the logistics to make large scale ecommerce viable, and we also lacked the smartphones to make it practical. I generally feel we are in a very similar position right now. LLMs shows real promise, but also real limitations. I'm very skeptical it will bring significant utility in the next few years. Maybe in a decade or more, when other pieces of the puzzle are in place.
    - tasuki 1y ago
      > I'm very skeptical it will bring significant utility in the next few years. LLMs are already bringing significant utility to me. I don't think they're a good investment though: they're very expensive to train and somewhat expensive to run. And I'm extremely fickle and will jump ship to the next one without a second thought.
fzeroracer 1y ago
We're one bad Nvidia release away from the entire market crashing down, and given Nvidia's penchant for sometimes just shitting themselves for a release cycle or two it seems insane to hold the entire market on their back.
- deleted 1y ago
  [deleted]
jasonsb 1y ago
In 2008, the system collapsed because politicians and global institutions hadn’t yet fully embraced debt-fueled illusions as the only path forward. Back then, Ponzi-like schemes still carried stigma, they weren’t openly endorsed as policy. Today? When every government and leader treats infinite debt as inevitable, and growth itself hinges on ever-expanding financial mirages, there’s no brake left on the system. To be clear: I’m not calling AI a Ponzi scheme. I genuinely value this technology. But nearly everything else is: the markets, the policies, the promises.
- surgical_fire 1y ago
  > To be clear: I’m not calling AI a Ponzi scheme. I genuinely value this technology. But nearly everything else is: the markets, the policies, the promises. Both things can be true. The technology may be valuable, and the investment in the technology may make zero sense from a financial perspective.
- pas 1y ago
  ... also sometimes a bubble is just a brutal unnecessary wealth transfer between generations everyone was crying how unsustainable these real estate prices are ... and then they kept going up still. because supply fucking stagnates, yet demand in cities rises with the force of an angry god (cross-financed by the whole economy, of course) https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
- rightbyte 1y ago
  Using some sort of circular investment scheme to take on debt seem like some sort of Ponzi scheme to me.
- Workaccount2 1y ago
  It's already been decided that the debt will be inflated away. At this point it's just been who has been paying attention. Look at gold's breakout this year, it's not happening in a vacuum.
  - 1y ago
scotty79 1y ago
Haven't it already happened when DeepSeek came out?
- conartist6 1y ago
  Yes. Every single stock in the S&P500 took a dive that day
  - FreakLegion 1y ago
    Not even every stock in the Big Five was down that day. Three of them were up.
andy99 1y ago
Same thing with Enron. They spun their money losing projects off into new businesses that were capitalized from Enron stock (which kept going up) and so somehow all of these spin offs were also solvent but only because of the value of the stock they had, which only went up because Enron was not showing the losses they would have shown if not for their increasing stock. It's always the same idea, people just find different contortions to make it seem legit this time.
- xg15 1y ago
  Yeah, feels similar to the various crypto perpetual motion machine scams of "we'll use our own token as capital, but the token only has value because people believe we have capital"...

by Terr_ 1y ago

Imustaskforhelp 1y ago

Exactly. I feel like this tbh: AI Skeptic: Sure its profitable but its a bubble... AI guru: Sure it may be a bubble but its profitable... Pick your sides logically because bubbles (by definition I think, are profitable till they aren't)

blitzar 1y ago
Truth: its only profitable for nvidia, everyone else is just setting cash on fire. talk of bubbles is irrelevant.
- kakacik 1y ago
  Phase 1: Collect underpants. Phase 2: ?? Phase 3: Profit. Everybody has starry dollar signs looking at last part. CEOs are really bunch of pretentious little boys (and few girls) cargo culting each other, and showing very little innovation or originality... Clearly enough for markets, till its not.
  - apercu 1y ago
    There’s maybe a better way to phrase it but you’re 100% correct re: innovation/originality.
- yokaze 1y ago
  I think the article points quite well out, these profits cannot be taken at face value, if they are financend by Nvidia in the form of investments.
- Fade_Dance 1y ago
  It's profitable for a large swath of hardware and datacenter adjacent companies. Look at AVGO, now trading at 1.5 trillion (which may or may not be overvalued, but the ryzen evaluation does reflect significant windfalls from AI spending). Optical interconnect/photonics companies, actual server rack builders, you name it, the pick and shovels companies are having an absolute boom in real terms, not just valuations.
Terr_ 1y ago
Most people doing some investing have heard that diversification is important, but I think a lot of people forget that thit employment sector is part of that. I keep thinking of those Enron employees whose 401ks were all stock in their own employer. As software engineer, that means there are reasons to avoid investing in AI stuff, regardless of what I think about its trajectory.
- rwyinuse 1y ago
  In this case I feel like it's the opposite. If generative AI really succeeds, most software devs will be out of job, in which case profits from those investments could become useful. If it flops, then there's a greater chance devs will be still needed.
  - _w1tm 1y ago
    If these things really become good enough to automate software engineering then it’s just a matter of time before they are used to automate all information work. That would be such a radical societal transformation that I’m not sure we would come out of the other side even having a capitalist society.
  - Terr_ 1y ago
    They aren't symmetric sides of a coin though. 1. If you become unemployed because it "succeeds", then a diversified portfolio probably does well as other industries reap the benefits, and if you have to cover lost wages you're at least "selling high." 2. If you become unemployed because it "fails", then there's a crash/recession where everyone is spooked and you get screwed by being forced to "sell low" during the transition. I suppose there's also the chance you're put out of a job by powerful AI, but the "winners" are all lesser companies you never invested in, so you lose both your job and investments.
Ekaros 1y ago
As AI skeptic I must also present question how profitable? Unlike previous "tech" and products. There might not be marginal costs for extra units. Instead each generated answer or message use significant amount of power and needs large physical investment in infra. And if generating those messages are cheap, well there might be competition as price maters more than quality to enough of users.
- Imustaskforhelp 1y ago
  Yup. See, I am not an AI skeptic in the sense that I don't think the tech is great, I mean its kinda great but its also a lot overhyped tbh, but I mean its definitely a mix bag of opinions for me imo But there are some people who think that just because a tech is great fundamentally makes it oh so lucrative and profitable. That is the one thing that I really really took away from intelligent investor. And I think he even paraphrased it that this should be the one thing you should take away from the book iirc but I am not sure Its that, just as how historically airplane companies have been kinda bad in profit even though they are technologically marvels. It doesn't matter the tech if there is a P/E mis-match imo / stock price is overvalued. The same goes for tech. You can appreciate tech while still thinking that its sort of being a bubble/shit's not good. What are your thoughts?
rsynnott 1y ago
… Wait, what on earth makes you think it’s _profitable_?! Are you using WeWork’s ‘community-adjusted EBITDA’ (a measure of ‘profit’ that was basically just revenue) or something?

mlnj 1y ago

And all of it just driven on vague statements of "AGI next year" (a year ago) and now "cancer cure on 10 gigawatts". Almost every podcast nowadays is just "Where is all this money coming from?", "This is just infinite money and you are just out of the loop." Feels so weird to hear.

impossiblefork 1y ago
I have actually become less skeptical about claims like this over time. I didn't expect LMs to be able to attack IMO problems this soon. There's also this video stuff recently discussed here, where it was explained that video models can be prompted to segment, solve blind deconvolution problems, solve maces, etc. I'm not sure it's going to work out economically-- I think a crash is unavoidable because P/E ratios for firms like Tesla of 200 or whatever it is are silly, but I think that technology is going to keep evolving throughout and I don't see why some kind of mild not-quite-AGI-but-beating-humans-on-what-we-pay-humans-to-do-for-their-jobs type thing is not achievable. If these video models get better and more available we might actually be able to use them to spot patterns in the natural world and in humans.
- marginalia_nu 1y ago
  Yeah it's worth remembering that the dot com bubble didn't come crashing down because the ideas weren't viable, we're very much living in a world dominated by the very things people were hyped on back then. The dot com bubble came crashing down because we were still not there yet, at the turn of the millenium. We lacked the logistics to make large scale ecommerce viable, and we also lacked the smartphones to make it practical. I generally feel we are in a very similar position right now. LLMs shows real promise, but also real limitations. I'm very skeptical it will bring significant utility in the next few years. Maybe in a decade or more, when other pieces of the puzzle are in place.
  - tasuki 1y ago
    > I'm very skeptical it will bring significant utility in the next few years. LLMs are already bringing significant utility to me. I don't think they're a good investment though: they're very expensive to train and somewhat expensive to run. And I'm extremely fickle and will jump ship to the next one without a second thought.

fzeroracer 1y ago

We're one bad Nvidia release away from the entire market crashing down, and given Nvidia's penchant for sometimes just shitting themselves for a release cycle or two it seems insane to hold the entire market on their back.

deleted 1y ago
[deleted]

jasonsb 1y ago

In 2008, the system collapsed because politicians and global institutions hadn’t yet fully embraced debt-fueled illusions as the only path forward. Back then, Ponzi-like schemes still carried stigma, they weren’t openly endorsed as policy. Today? When every government and leader treats infinite debt as inevitable, and growth itself hinges on ever-expanding financial mirages, there’s no brake left on the system. To be clear: I’m not calling AI a Ponzi scheme. I genuinely value this technology. But nearly everything else is: the markets, the policies, the promises.

surgical_fire 1y ago
> To be clear: I’m not calling AI a Ponzi scheme. I genuinely value this technology. But nearly everything else is: the markets, the policies, the promises. Both things can be true. The technology may be valuable, and the investment in the technology may make zero sense from a financial perspective.
pas 1y ago
... also sometimes a bubble is just a brutal unnecessary wealth transfer between generations everyone was crying how unsustainable these real estate prices are ... and then they kept going up still. because supply fucking stagnates, yet demand in cities rises with the force of an angry god (cross-financed by the whole economy, of course) https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
rightbyte 1y ago
Using some sort of circular investment scheme to take on debt seem like some sort of Ponzi scheme to me.
Workaccount2 1y ago
It's already been decided that the debt will be inflated away. At this point it's just been who has been paying attention. Look at gold's breakout this year, it's not happening in a vacuum.
- 1y ago

scotty79 1y ago

Haven't it already happened when DeepSeek came out?

conartist6 1y ago
Yes. Every single stock in the S&P500 took a dive that day
- FreakLegion 1y ago
  Not even every stock in the Big Five was down that day. Three of them were up.

andy99 1y ago

Same thing with Enron. They spun their money losing projects off into new businesses that were capitalized from Enron stock (which kept going up) and so somehow all of these spin offs were also solvent but only because of the value of the stock they had, which only went up because Enron was not showing the losses they would have shown if not for their increasing stock. It's always the same idea, people just find different contortions to make it seem legit this time.

xg15 1y ago
Yeah, feels similar to the various crypto perpetual motion machine scams of "we'll use our own token as capital, but the token only has value because people believe we have capital"...