6 ms·

The (economic) AI apocalypse is nigh

136 points by baobun 1y ago

TheCleric 1y ago
What can we do? Short those companies.
- ldx1024 1y ago
  I was just thinking about this. Exposure from a short is theoretically limitless. Some sort of derivative would be a better approach? Asking for a financially clueless friend.
  - klysm 1y ago
    All I have to say is good luck out competing the big firms!
  - tverbeure 1y ago
    If you buy a put option, you can’t lose more than you put in. The problem is still one of timing things right. Check out /r/wallstreetbets for expert advice on this. /s
  - hdseggbj 1y ago
    Buy puts
    - lisbbb 1y ago
      The financially illiterate don't understand that "going short" is not the simple reverse of "going long" and that there are more difficulties involved with borrowing stocks to short or in buying puts. Well, puts are easy to buy, at least, but the manner in which they decay makes it hard to win with that strategy, harder, in fact, than buying calls to go long. But yes, you can technically buy puts. You can also play Powerball.
- tverbeure 1y ago
  Something something irrational something something solvent.
dosinga 1y ago
I mean, sure we're in a bubble, but the trick is to call it, with that old Keynes quote about the market staying irrational longer than you can stay liquid. But also: > "So, you're saying a third of the stock market is tied up in seven AI companies that have no way to become profitable and that this is a bubble that's going to burst and take the whole economy with it?" > I said, "Yes, that's right." that is something different in this case isn't it? those seven companies making up a third of the market do not need to become profitable, they are insanely profitable. Mostly they invest a lot in AI but if that doesn't pay out, all but NVidia have their day job to go back to.
- loloquwowndueo 1y ago
  What’s OpenAI’s and anthropic’s day job?
  - BoxFour 1y ago
    Which of the seven OP referred to are OpenAI or Anthropic?
    - deleted 1y ago
      [deleted]
- pessimizer 1y ago
  > I mean, sure we're in a bubble, but the trick is to call it, with that old Keynes quote about the market staying irrational longer than you can stay liquid. It might be worth it just to call it now. All you really have to do is get out of the S&P, you don't have to get out of everything.
  - boringg 1y ago
    It can run for another year or two. Long time to sit on the sidelines with your cash inflating away. This is the crux of bubbles - timing and where do you move assets so they have protection.
tompccs 1y ago
The difference to the dot com bubble is that the unprofitable companies are privately held and the public companies are extremely profitable and have finally found something to soak up their ridiculous profits other than stock buybacks. How a crash affects anyone other than high-net-worth individuals with money tied up in VC funds is not explained. Real estate and crypto on the other hand...
- lumost 1y ago
  The real question would be the debt on the GPUs. If a hyper scalar puts 100B from profits into data centers, and borrows 400B against the datacenters (or their suppliers do!). Then the buildout could be quite problematic. If it’s just profits getting invested + some VC exuberance… I don’t actually know if it matters. If zuck simply shut off the money spigot and never spoke on ai again… would anything actually happen?
  - claudenm 1y ago
    Only oracle has taken on debt so far, among the hyper scalers.
    - toomuchtodo 1y ago
      CoreWeave has taken on $11.2B in debt with interest rates ranging from 7% to 15%, paying $250M in interest on that debt last quarter on just $19 million in operating income. Half of their assets are GPUs, depreciating over six years. (per Bloomberg)
- rvz 1y ago
  > How a crash affects anyone other than high-net-worth individuals with money tied up in VC funds is not explained. That is even worse. There are many so-called "AI companies" drowning in spending lots of tokens and the majority of them have lots of assumptions when going to raise more money to VCs. What if the VCs say no? What if 90% of all these startups get competition from a frontier AI lab and undercuts them? We are seeing this with Cursor and Anthropic already. What if early-stage startups cannot afford the 100K per H-1B hire anymore AND cannot hire remote overseas due to the HIRE act? Additionally, we are going to find out what does not mix well together with AI and will inevitably cause a crash that could come unexpectedly. > Real estate and crypto on the other hand... At least we do *know* that both of them do not mix well together. AI + layoffs + mortgages on the other hand...
rhetocj23 1y ago
Its a matter of time until the implosion happens. As a corporate finance and valuation geek, Ill warn you now: dont try and time mood and momentum. Thats what is driving much of the valuations being thrown around. If this blows up big time and it is found that the Big Tech firms were operating on lies and false hope, there will be consequences - in the form of shareholders demanding cash returned and setting limits on the cash balance held by Google et al. Apple has stayed smart staying out of this nonsense and not doing M&A. Investing in projects with negative NPV destroys the wealth of shareholders.
- bobxmax 1y ago
  No what's driving much of the valuations is the biggest leap in human technology since the internet and skyrocketing revenues as a result Private companies soaring to $100m ARR in 12 months is commonplace now. That's what's driving the valuation.
  - lumost 1y ago
    We don’t know how sticky that revenue is, or if it’s going to be a commodity in the long run. Similar things used to happen in ad-tech before investors got wise that there was no moat.
  - rhetocj23 1y ago
    Revenues mean nothing without positive equity earnings, especially so without a viable path to get there. Without a clear path, how do you justify the valuation? Lol. Uber and Amazon had a very logical path to get there. The reinvestment is so high that once you tack that onto the earnings youre in a fat negative. What does that mean? You will eat into the cash balance and eventually have to go raise more.
  - rvz 1y ago
    > No what's driving much of the valuations is the biggest leap in human technology since the internet and skyrocketing revenues as a result That is a 1999-like bubble and how you get 75 - 90% of these companies crashing when the music stops. > Private companies soaring to $100m ARR in 12 months is commonplace now. That's what's driving the valuation. We don't even know if that is even real to begin with. Even if it is, that revenue can be lost as quickly as it is gained. This happened to Hopin and other companies who grew extremely quickly and then their valuations crashed. The questions you should be asking yourself is even after looking at the competition, what is the retention and the switching cost of these said "$100m ARR in 12 months" companies if a competitor moves into their core business?
sobiolite 1y ago
So I do think we're in a bubble, but I also remember when all the discussion around here was around Uber, and I read many, many hot takes about how they were vastly unprofitable, had no real business model, could never be profitable, and only existed because investors were pumping in money and as soon as they stopped, Uber would be dead. Well, it's now ten years later, Uber still exists, and last year they made $43.9bn in revenue and net income of $9.8bn.
- pessimizer 1y ago
  The story about Uber was that they were going to be unprofitable until they destroyed taxi services, then they were going to charge more than taxis and give less of a share to the driver. Nobody is predicting that AI is going to do that. One thing I hadn't considered before is how much it was in google's interest to overestimate and market the impact of AI during their antitrust proceedings. For the conspiratorially minded (me), that's why the bottom is being allowed to drop out of the irrational exuberance over AI now, rather than a couple months ago.
  - LaGrange 1y ago
    I mean, hey, maybe they _will_ increase all those 10x programmer's bills to 20k per month. At least that would be funny.
  - Terr_ 1y ago
    > Nobody is predicting that AI is going to do that. ... Now that I hear it out loud, I can't help thinking if maybe it's something we should be thinking about. Subsidization to destroy competitors followed by lock-in is obvious, but is there any way these systems could turn professionals into serfs?
    - deadfoxygrandpa 1y ago
      it doesnt look likely that any particular ai service will have a moat. every time one of them does anything right now, theres a dozen competitors able to match it within months
AaronAPU 1y ago
There is on the other hand a strong correlation between the sky is falling and the sky not actually falling. It makes one tempted to take the sky is falling as a buy signal.
- fnord77 1y ago
  There were chicken littles during the run up to 2008, too. Actually, I think most were a little bit premature. I take articles like these as an early sell signal.
  - tim333 1y ago
    I think both are kind of inevitable with bubbles like the dotcom, 2008 and the present one. You get a positive feedback loop where the industry hypes their thing which causes the pubic to buy in which causes stocks to go up and the industry to hype more and the public to buy more. Then people point out prices are too high and capital misallocated but that doesn't stop the feedback loop so it goes on longer. It has to stop at some point though, often because the buyers run out of money to buy with. Then it goes into reverse - falling prices put off buyers, the industry doesn't get new cash flow to pay for its commitments to GPUs/office leases/mortgages, some of them go bust which puts off buyers even more. Then eventually, after around three years it level out. I'm a believer in the internet, housing and AI but during the bubbles you get money misallocated on stuff like pets.com or maybe OpenAI spending zillions on data centers to provide free idle chat to the public. Money on fundamental AI research is probably good but all those data centers... dunno.
bgwalter 1y ago
I disagree with Doctorow's conversation with a student at Cornell. You can prevent further misallocation of funds by agitating against "AI" usage in general. If you are at Cornell, organize meetings, protests etc. against the dehumanization and decreased job prospects. As a student, you have much more freedom to protest than as an employee, and that is where the resistance must come from. We also need to take into account that while there is a bubble, most of the insane amounts of investment that were seen in headlines have not materialized. Nvidia will crash, Tesla will crash (Optimus robot nonsense) but Microsoft and Google should be fine. If there is a bailout, protest again. preferably in the physical space and focusing on economic topics rather than culture wars (which is what the politicians want you to focus on).
jrecyclebin 1y ago
Something of a logical leap here: if LLMs aren't capable of replacing workers and it's all lies, then what company is going to engage in mass layoffs without seeing results first? Sounds like companies that deserve to go away.
- miltonlost 1y ago
  > If LLMs aren't capable of replacing workers and it's all lies, then what company is going to engage in mass layoffs without seeing results first? We see companies layoff workers for all sorts of short-sighted reasons. They'll mass layoff to reduce labor costs for short term profits and stock price increases, so the execs and shareholders can cash out. AI is just the current reason the executive class has decided to use for the layoffs they were going to do regardless.
  - dredmorbius 1y ago
    Further: business and management are exceptionally fad-driven, for numerous information-theoretic reasons. Performance is difficult to measure and slow to materialise. At the same time, everyone, especially senior leadership and managers, is desperately competitive, even where that competition is on the perception rather than reality of performance. There's a very strong follow-the-herd / follow-the-leader(s) mentality, often itself driven by core investors and creditors. A consequence is a tremendous amount of cargo-culting, in the sense of aping the manifest symbols of successful (or at least investor-favoured) firms and organisations, even where those policies and strategies end up incurring long-term harms. Then there's the apparent winner-take-all aspect of AI, which if true would result in tremendous economic power, if not necessarily financial gains, to a very small number of incumbents. Look at the earlier fallout of the railroad, oil, automobile, and electronics industries for similar cases. (I've found over the years various lists of companies which were either acquired or went belly-up in earlier booms, they're instructive.) NB: you'll find fad-prone fields anywhere a similar information-theoretic environment exists: fashion, arts, academics, government, fine food, wine collecting, off the top of my head. Oh, and for some reason: software development.
  - jrecyclebin 1y ago
bobxmax 1y ago
A good sign that an article is another pointless, naive AI doomerism piece is that they cite that atrocious MIT 95% "study".
- miltonlost 1y ago
  A good sign someone is an AI huckster is they ignore the rest of the article and citations.
  - rhetocj23 1y ago
    Plenty of hucksters around and for them I say three words: show me the money (free cashflows).
    - AnimalMuppet 1y ago
      Um, that's four words. Not saying you're wrong, though...
bee_rider 1y ago
> Plan for a future where you can buy GPUs for ten cents on the dollar, where there's a buyer's market for hiring skilled applied statisticians, and where there's a ton of extremely promising open source models that have barely been optimized and have vast potential for improvement. This actually sounds like a kinda cool outcome as long as you aren’t an applied statistician.
deleted 1y ago
[deleted]
fnord77 1y ago
> but an AI salesman can 100% convince your boss to fire you and replace you with an AI that can't do your job, and when the bubble bursts, the money-hemorrhaging "foundation models" will be shut off and we'll lose the AI that can't do your job, and you will be long gone, retrained or retired or "discouraged" and out of the labor market, and no one will do your job. Even if the big AI companies turn off their APIs, people will still be able to run local models as well as some other, new business spun up to run them as SaaS.
- rapjr9 1y ago
  Isn't the training most of the cost? In which case the current models could have a very long lifetime even if new models are never trained again. They'll go gradually out of date, but for many purposes will still be useful. If they can pull new info from the web they may stay relevant for decades. It's only if running the chatbots is not cost effective that everything halts and my understanding is that the cost of that is lower relatively. Even now, older models are still being used. Also, performance optimizations seem likely to soon reduce the need for data center build out and reduce costs. Seems too soon to say where this is all going. Who even knows if the GPU chips will improve dramatically or if something else (more AI optimized processor architectures) will replace them? It's true that right now it looks like a bubble, but the future is still very much in flux, and the value of the models already created may not disappear overnight.
jimbo808 1y ago
There is still a demand for these tools. I know they are useful to me. Do they make me more productive as a software engineer? Probably not, at least not significantly. But they're still useful, especially for little tools and one-off scripts which are not intended to become production code anywhere. I also just enjoy using them for bouncing ideas off of them and doing sanity checks on all sorts of topics, personal and work-related. Sometimes they spark a better idea that I may not have had otherwise. I will still be using them after the bubble bursts. That being said, I'm also fine if all the current AI companies implode and I'm just running an OSS model locally.
- Gigachad 1y ago
  That’s still not good enough. Being a mildly good idea assistant doesn’t come close to paying for the investment spent and valuations of these companies. It’s all bet on completely changing everything. And if that doesn’t happen soon, the valuations are going to crash bad. And since the entire US economy is being propped up by AI investing, it’s going to be a disaster.
- rhetocj23 1y ago
  The problem with this is, what you are using it for is not commensurate to what has been invested. In other words, to date, the investment has not been productive for society and doesnt seem to be on track to deliver what has been promised.
- oblio 1y ago
  Automating "little tools and one-off scripts" doesn't pay for $40bn of extra data centers (and that's just one provider), though.
  - rhetocj23 1y ago
    Yeah. For example I use chatgpt to refine my thoughts and dig deeper into ideas (to get my brain thinking by interacting with a machine with knowledge). But is this worthy of all the investment done? Absolutely not. Would I pay for this service? Nah. Personally I am incredibly sensitive to changes in price - I wouldnt pay a penny and thus my demand would disappear. Im sure there are others who find more value from it, however, I dont think that group of people is enough to get OAI to be free cash flow to the firm positive any time soon. Note this is not accounting profit - FCFF takes into account reinvestment, and is the cash profits left after.
boringg 1y ago
The whole thing was lost on the mag 7 being unprofitable and that he was so sick of talking about AI he decided to take his shot at making money writing a book about AI. So many AI hucksters these days
naveen99 1y ago
What percent of consumption will go to ai ? For me probably atleast 10%. What percent of investment will go to ai ? For me another 10% probably. I mean some of it will come from less consumption and investment in other things.
plaidfuji 1y ago
> Plan for a future where you can buy GPUs for ten cents on the dollar, where there's a buyer's market for hiring skilled applied statisticians, and where there's a ton of extremely promising open source models that have barely been optimized and have vast potential for improvement This doesn’t square entirely with the earlier claim that AI companies have (and will continue to have) “dogshit unit economics”. If you have a bunch of cheap “applied statistician” labor (kind of a reductive take, btw), cheap GPUs, and powerful open source models, it is a near certainty that companies would achieve favorable unit economics by optimizing existing models to run much more efficiently on existing GPUs. I happily pay $20/month for Google One to use Gemini 2.5 Pro. I don’t really need it to be a whole lot better. It’s a great product. If they can deliver inference of that level with positive margin (and keep it ad free), it’s a viable business. Investors will likely lose billions, if not trillions, but I don’t think the industry is inherently unprofitable - I just don’t think anybody has been incentivized to optimize for cost yet. Why would you, when investors continue to throw money at you to scale?
- tempodox 1y ago
  > If they can deliver inference of that level with positive margin (and keep it ad free), it’s a viable business. That “if” is doing tons of heavy lifting here.
- pier25 1y ago
  > I happily pay $20/month for Google One to use Gemini 2.5 Pro. I don’t really need it to be a whole lot better. So you think those $20/month are generating profits? Because Google is burning its own cash.
lisbbb 1y ago
I'm 52. I experienced the dot-com bubble very up close. I was in the Raleigh-Durham area for most of it. There were hundreds of startups all over the area. Companies like Nortel were booming. IBM was booming. By 2003 it was all gone--Nortel was a shell of its former self, IBM laid off huge numbers of workers. There was suddenly a glut of office space all over. We moved out in 2006, but even around then there was still a glut of office space! I don't know if it ever recovered because it was so overbuilt. I remember having lunch with a guy who was stubbornly holding on to his Nortel stock, which was worth mere pennies by like 2005 or so. They not only lost their jobs, they lost their 401Ks which were all in company stock. Anyways, this guy was sure it was going to bounce back. I saw in like 2008 where Nortel finally closed its doors and the stock was de-listed at $0. His dream was dead. I never worked for equity after that time period. The enormous build out of data centers reminds me of that time period. Yeah, it's all going to collapse.
- deleted 1y ago
  [deleted]
IAmGraydon 1y ago
I largely agree. I don't think AI is ultimately useless, but I think it's about 10% as useful as the broader market seems to think it is. That said, every time I see another article like this, I think to myself "well it's not going to come crashing down any time soon". This is the nature of bubbles - they only collapse when nearly everyone is finally convinced they never will. Right now, stories about the AI bubble collapsing are everywhere, which means the time hasn't come yet. I have an idea that the market may actually start to react positively to bad job numbers, as that could be taken as a signal that companies are shedding people to replace them with AI (even if that's not the actual reason for the bad numbers). If job numbers started suddenly improving and the unemployment rate dropping, it could be taken to mean that AI is not going to replace everyone after all.
- sahila 1y ago
  > they only collapse when nearly everyone is finally convinced they never will I get that rationale in some bubbles as that means people are not parking their money as cash where they can buy the dip and support the market (tell me if I'm widely off). But I think this case is different because there's actually VAST sums of money being spent in AI by some very big players who will need an return.
toomuchtodo 1y ago
There’s a quote from Gil Luria (Managing Director and Analyst at D.A. Davidson) I love on this bubble, which I hope becomes part of the zeitgeist: > No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer. https://www.wheresyoured.at/openai-onetrillion/ https://www.wheresyoured.at/openai-onetrillion/
Havoc 1y ago
Still think a middle of the road outcome is most likely here. General purpose technology that changes society but falls well short of agi hype. As for money side - think it’ll come. There is obvious utility (but not autonomy) and the economics of it will find their equilibrium. They always do
tim333 1y ago
>AI is the asbestos we are shoveling into the walls of our society and our descendants will be digging it out for generations Seems a bit pessimistic. AGI may not be here next year to keep the bubble going but will probably happen in the next decade or two and do much of the stuff advertised. It's like the dotcom bubble - much of commerce, banking and the like did move to the internet but not till a while after the financial bubble burst.
andsoitis 1y ago
"So, you're saying a third of the stock market is tied up in seven AI companies that have no way to become profitable and that this is a bubble that's going to burst and take the whole economy with it?" I said, "Yes, that's right." Which companies are those?
- ben_w 1y ago
  Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. I dispute the "no way to become profitable" claim (literally all profitable right now, it's the private ones which probably aren't). I do have other negative sentiments for most of them, but those are the seven that represent about that share of the S&P500.
  - andsoitis 1y ago
    Right. The are also not “AI companies” in any meaningful way — only NVidia’s revenue and market cap is heavily driven by AI sales. The author’s thesis seems to lack rigor.
logicprog 1y ago
> This isn't like the early days of the web, or Amazon, or any of those other big winners that lost money before becoming profitable. Those were all propositions with excellent "unit economics" – they got cheaper with every successive technological generation, and the more customers they added, the more profitable they became. AI companies have – in the memorable phraseology of Ed Zitron – "dogshit unit-economics." Each generation of AI has been vastly more expensive than the previous one, and each new AI customer makes the AI companies lose more money... See, I think this is wrong. The unit economics of LLMs are great, and more than that, they have a fuckton of users with obvious paths to funding for those users that aren't paying per unit (https://www.snellman.net/blog/archive/2025-06-02-llms-are-cheap/ https://www.snellman.net/blog/archive/2025-06-02-llms-are-ch...). The problem is the ludicrous up front over infestment, none of which was actually necessary to get to useful foundation models, as we saw with DeepSeek.
- treetalker 1y ago
  > infestment So true.
  - logicprog 1y ago
    That's a very serendipitous typo, I must say, LOL.
anon191928 1y ago
Great points but timing it can be very hard. It can last many more years because this time they have a thing called "money printer". When crash happens, they will use it. Yes it prints whatever amount they want, even trillions. Magically(!)
- viking123 1y ago
  Most people, who try to time these, usually get it completely wrong and end up losing huge amounts of money. I just stay invested in the indexes and some long term stocks, every time I try to predict something it goes badly.
  - Quarrelsome 1y ago
    Bear in mind that your index becomes more and more of those six or seven companies, the more they grow. I think they're over 30% of the market? So an index tracker is still greatly exposed to this.
    - nemomarx 1y ago
      I wish I could get an index without them but it would probably have no growth basically - the rest of the market is struggling in comparison, right?
      - StoneAndSky 1y ago
        It exists: XMAG https://finance.yahoo.com/quote/XMAG/ https://finance.yahoo.com/quote/XMAG/ > The index aims to provide a comprehensive and balanced representation of the U.S. equity market by including the largest 500 publicly traded equity securities, while specifically excluding the seven largest technology companies commonly referred to as the “Magnificent 7”. Up 12% in the last year. Unfortunately, it's ten times as expensive (0.35%) as a straight S&P 500 ETF (e.g. VOO, 0.03%).
- rsynnott 1y ago
  > When crash happens, they will use it. You're suggesting that _governments_ will bail out the AI industry? I mean, why would they do that?
whstl 1y ago
> Further: the topline growth that AI companies are selling comes from replacing most workers with AI, and re-tasking the surviving workers as AI babysitters ("humans in the loop"), which won't work. Finally: AI cannot do your job, but an AI salesman can 100% convince your boss to fire you and replace you with an AI that can't do your job This hits home. A lot of the supposed claims of improvements due to AI that I see are not really supported by measurements in actual companies. Or they could have been just some regular automation 10 years ago, except requiring less code. If anything I see a tendency of companies, and especially AI companies, to want developers and other workers to work 996 in exchange for magic beans (shares) or some other crazy stupid grift.
- AznHisoka 1y ago
  So what metric would you look at that would support the idea that AI is inproving a company?
  - whstl 1y ago
    I guess anything other than just claims from people that have a stake in it? If companies are shipping AI bots with a "human in the loop" to replace what could have been "a button with a human in the loop", but the deployment of the AI takes longer, then it's DEFINITELY not really an improvement, it's just pure waste of money and electricity. Similarly, what I see different from the pre-AI era are way too many SV and elsewhere companies having roughly the same size and shipping roughly the same amount of features as before (or less!), but are now requiring employees to do 996. That's the definition of loss of productivity. I'm not saying I hold the truth, but what I see in my day to day is that companies are masters at absorbing any kind of improvement or efficiency gain. Inertia still rules.
    - AznHisoka 1y ago
      So would a lower headcount, stable/improving revenue be a metric you would look at?
      - 1y ago
Dumblydorr 1y ago
Where’s the evidence, this writing strikes as purely belief based? For all the overhypers of AI, you also get extreme skeptics like this, and neither side has good evidence. It’s speculation. If he truly knew the future he’d short all the companies right before collapse.
- sigilis 1y ago
  There are various links in the article that have more information. Clicking these references will give the evidence for bad unit economics claims and whatnot. As for predicting the moment, the author has made a prediction and wants it to be wrong. They expect the system will continue to grow larger for some time before collapse. They would prefer that this timeline be abbreviated to reduce the negative economic impacts. He is advising others on how to take economic advantage of his prediction and is likely shorting the market in his own way. It may not be options trading, but making plans for the bust is functionally similar.
  - AznHisoka 1y ago
    The papers he linked all fail to support his claim. The first paper he linked simply counts the mentions of the term “deep learning” in papers. The 2nd surveyed people who lived in… Denmark and tried to extrapolate that to everyone globally His points are not backed by much evidence
    - scythmic_waves 1y ago
      The first link is a mistake. It's supposed to be the thing being discussed here: https://news.ycombinator.com/item?id=45170164 https://news.ycombinator.com/item?id=45170164. The 2nd link seems reasonable to me? Why does a study about 25k workers in Denmark (11 occupations, 7k workplaces) not count as evidence? If there was a strong effect to be found globally, it seems likely to be found in Denmark too. Also, what about the other links? The discussions about the strange accounting and lack of profitability seem like evidence as well. If anything, this article struck me as well-evidenced.
  - 1y ago
petesergeant 1y ago
> and when the bubble bursts, the money-hemorrhaging "foundation models" will be shut off This is not a serious piece of writing.
- baal80spam 1y ago
  Of course it isn't. It's a FUD piece.
Havoc 1y ago
I’m not convinced Unit economics is the right lens here given that it’s a general purpose technology. For the very near term perhaps but the large scale infra rollouts strike me as a 10+ year strategic bet and on that scale what matters is whether this delivers on automation and productivity
- TheOtherHobbes 1y ago
  They're all going to start selling ads, obviously.
  - Ekaros 1y ago
    Is there going to be enough new ad spend to justify that model? Will everyone else spend even more on ads than they do now?
    - jsnell 1y ago
      It doesn't need to be new ad spend. Just the possibility of the existing ad spend being up for grabs justifies all the capex so far.
  - Havoc 1y ago
    Does seem likely for Google though integrating ads into text in a durable way could be challenging. If it’s overt then it’s easily filtered out, if it’s baked in to deep the it harms response quality
trumbitta2 1y ago
Not an expert, but I'm convinced they will all pivot to military applications before they go bankrupt, and that will unleash a whole new type of hell
- meindnoch 1y ago
  The new doctrine: drown the enemy in slop!
  - tesdinger 1y ago
    Der Angriff des Slop ist nicht erfolgt.
AznHisoka 1y ago
>> A much-discussed MIT paper found that 95% of companies that had tried AI had either nothing to show for it, or experienced a loss The paper they linked to just analyzed how many times “deep learning” appears in academic papers… This is the proof that most companies unsuccessfully tried AI?
- blackbear_ 1y ago
  The link is wrong, I believe they meant to link this one: https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Business_2025_Report.pdf https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Bus...
- JimDabell 1y ago
  I think they linked to the wrong thing. It’s been discussed several times here: https://news.ycombinator.com/item?id=45170164 https://news.ycombinator.com/item?id=45170164
shubhamjain 1y ago
> I firmly believe the (economic) AI apocalypse is coming. These companies are not profitable. They can't be profitable. They keep the lights on by soaking up hundreds of billions of dollars in other people's money and then lighting it on fire. This is what I don't like. Debating in extremes. How can AI have bad unit economics? They are literally selling compute and code for a handsome markup. This is classic software economics, some of the best unit economics you can get. Look at Midjourney: it pulled in hundreds of millions without raising a single dime. Companies are unprofitable because they are chasing user growth and subsidising free users. This is not to say there isn't a bubble, but it's a rock-solid business and there to stay. Yes, music will stop one day, and there will be a crash, but I’d bet that most of the big players we see today will still be around after the shakeout. Anecdote: my wife is so dependent on ChatGPT that if the free version ever stopped being good enough, she’d happily pay for premium. And this is coming from someone who usually questions why anyone needs pay for software.
- fluidcruft 1y ago
  Generally I think the question is whether they actually are selling it at a markup. Inference is easier to reason about. I think the problem is financing training. The issue is the future value of inference seems to be being massively overstated to justify present day expenditures on training (particularly since the value of training today evaporates extremely quickly)
jcattle 1y ago
Can anyone give more than a hand-waived explanation on how this crash will come about? This paragraph reads kind of like: Companies not profitable, no more money coming in, ????, crash >> I firmly believe the (economic) AI apocalypse is coming. These companies are not profitable. They can't be profitable. They keep the lights on by soaking up hundreds of billions of dollars in other people's money and then lighting it on fire. Eventually those other people are going to want to see a return on their investment, and when they don't get it, they will halt the flow of billions of dollars. Anything that can't go on forever eventually stops. How will this actually lead to a crash? What would that crash look like? Are banks going bust? Which banks would go bust? Who is losing money, why are they losing money?
- zerosizedweasle 1y ago
  https://www.derekthompson.org/p/this-is-how-the-ai-bubble-will-pop https://www.derekthompson.org/p/this-is-how-the-ai-bubble-wi...
- ToucanLoucan 1y ago
  > What would that crash look like? What it usually looks like when one of the valley's "revolutions" fails to materialize: a formerly cheap and accessible tech becomes niche and expensive, acres of e-waste, the job market is flooded with applicants with years of experience in something no longer considered valuable, and the people responsible sail off into the sunset now richer for having rat fucked everyone else involved in the scheme. In this case though given the sheer scale of the money about to go away, I would also add: a lot of pensions are going to see huge losses, a lot of cities who have waived various taxes to encourage data-center build outs are going to be left holding bags and possibly huge, ugly concrete buildings in their limits that will need to be destroyed, and, a special added one for this bubble in particular, we'll have a ton of folks out there psychologically dependent on a product that is either priced out of their ability to pay or completely unavailable, and the ensuing mental health crises that might entail.
  - jcattle 1y ago
    Isn't the thing that costs everyone an arm and a leg at the moment the race for better models? So all of the training everyone is doing to get SOTA in some obscure AI benchmark? From all of the analysis I've read, inference is quite profitable for the AI companies. So at least for the last part: > we'll have a ton of folks out there psychologically dependent on a product that is either priced out of their ability to pay or completely unavailable, and the ensuing mental health crises that might entail. I doubt that this will become true. If there's one really tangible asset these companies are producing, which would be worth quite a bit in a bankruptcy it's the model architectures and weights, no?
tesdinger 1y ago
3% of the world GDP is more than the 2 trillion needed to fund AI
roxolotl 1y ago
I want the hype to die and the bubble to pop as much as Ed and Cory and everyone else writing about it but right now it’s just them basically recycling the same bad news and posting about it. I’d love to see some writing which looks at the factors which caused previous pops and to line them up with factors today to try and determine what’s actually coming. Clearly the market is irrational as hell right now but seemingly very little is going to change that. The closest I’ve seen to what I’m looking for is the coverage over at Notes on the Crises[0] and he also seems bewildered. Edit: I found this piece which does look at historical bubbles/market events and tries to discuss how they plan out in terms of timing [1] 0: https://www.crisesnotes.com/ https://www.crisesnotes.com/ 1: https://paulkrugman.substack.com/p/why-arent-markets-freaking-out https://paulkrugman.substack.com/p/why-arent-markets-freakin...
karlkloss 1y ago
There's always somebody predicting an apocalypse. This guarantees that, regardless of what happens, there's somebody who can claim they were right. Which makes those predictions completely useless. You could as well read your horoscope.
- newyankee 1y ago
  The funny thing though is that on balance I believe that since the launch of GPT to the public almost 3 years back, I feel GPT has delivered more than it has disappointed. I still feel that we should run into limitations soon and may be GPT5 is an example of that. Surely the tech still has a long way to go and keep improving especially as the money has attracted everyone to work on it in different ways that were not considered important till now but the financial side of things have to correct a bit for healthy growth
- kemitchell 1y ago
  You've given the argument from fallacy, dismissing an argument without any reference to its content, but only to its conclusion. The existence of bad arguments for a proposition doesn't condemn all other arguments for the same. The question is whether any particular argument's strong or weak. That's a matter of evidence and reasoning.
adrianbooth17 1y ago
Every day I see articles on HN discussing the AI bubble potentially crashing. The large number of such articles appearing daily is increasing my confidence that the AI space will be fine.
- deleted 1y ago
  [deleted]
AznHisoka 1y ago
Either the AI hype will slow down and the market will crash. Or AI really does have 100x productivity gains and fewer humans are needed. And you lose your job. I dont see a positive between any of these scenarios…
- tim333 1y ago
  2x productivity gain, jobs kept, more stuff?
TYPE_FASTER 1y ago
The AI bubble feels similar to the Dot.com bubble. The pattern is the same, right? There's some tech, a hype wave that people try to surf (if you paddle fast enough, you can start something and cash out in time), and when the water recedes before the next wave people/organizations either rode the wave cashed out and walked off the beach to their next thing, didn't make the wave and will try next time, or got pounded and their board broken. Or they ripped a great line, did a backflip like Medina, threw their hands in the air, and paddled back out to catch the next wave. But you don't always know what the wave is going to look like when it's building. You just know there's a wave, and either you get on it or you don't. The connectivity of the web was obvious, the monetization wasn't super obvious (remember K-Tel anybody?). The power of modern AI is obvious, the monetization and final form of the tech isn't. I mean, using natural language is cool and all, and I think there is a lot of value in using models to help/assist engineering and other work, but I think it's too soon to say what the end game is.
AndrewOMartin 1y ago
Markets can remain irrational longer than you can remain solvent.

136 points by baobun 1y ago

TheCleric 1y ago

What can we do? Short those companies.

ldx1024 1y ago
I was just thinking about this. Exposure from a short is theoretically limitless. Some sort of derivative would be a better approach? Asking for a financially clueless friend.
- klysm 1y ago
  All I have to say is good luck out competing the big firms!
- tverbeure 1y ago
  If you buy a put option, you can’t lose more than you put in. The problem is still one of timing things right. Check out /r/wallstreetbets for expert advice on this. /s
- hdseggbj 1y ago
  Buy puts
  - lisbbb 1y ago
    The financially illiterate don't understand that "going short" is not the simple reverse of "going long" and that there are more difficulties involved with borrowing stocks to short or in buying puts. Well, puts are easy to buy, at least, but the manner in which they decay makes it hard to win with that strategy, harder, in fact, than buying calls to go long. But yes, you can technically buy puts. You can also play Powerball.
tverbeure 1y ago
Something something irrational something something solvent.

dosinga 1y ago

I mean, sure we're in a bubble, but the trick is to call it, with that old Keynes quote about the market staying irrational longer than you can stay liquid. But also: > "So, you're saying a third of the stock market is tied up in seven AI companies that have no way to become profitable and that this is a bubble that's going to burst and take the whole economy with it?" > I said, "Yes, that's right." that is something different in this case isn't it? those seven companies making up a third of the market do not need to become profitable, they are insanely profitable. Mostly they invest a lot in AI but if that doesn't pay out, all but NVidia have their day job to go back to.

loloquwowndueo 1y ago
What’s OpenAI’s and anthropic’s day job?
- BoxFour 1y ago
  Which of the seven OP referred to are OpenAI or Anthropic?
  - deleted 1y ago
    [deleted]
pessimizer 1y ago
> I mean, sure we're in a bubble, but the trick is to call it, with that old Keynes quote about the market staying irrational longer than you can stay liquid. It might be worth it just to call it now. All you really have to do is get out of the S&P, you don't have to get out of everything.
- boringg 1y ago
  It can run for another year or two. Long time to sit on the sidelines with your cash inflating away. This is the crux of bubbles - timing and where do you move assets so they have protection.

tompccs 1y ago

The difference to the dot com bubble is that the unprofitable companies are privately held and the public companies are extremely profitable and have finally found something to soak up their ridiculous profits other than stock buybacks. How a crash affects anyone other than high-net-worth individuals with money tied up in VC funds is not explained. Real estate and crypto on the other hand...

lumost 1y ago
The real question would be the debt on the GPUs. If a hyper scalar puts 100B from profits into data centers, and borrows 400B against the datacenters (or their suppliers do!). Then the buildout could be quite problematic. If it’s just profits getting invested + some VC exuberance… I don’t actually know if it matters. If zuck simply shut off the money spigot and never spoke on ai again… would anything actually happen?
- claudenm 1y ago
  Only oracle has taken on debt so far, among the hyper scalers.
  - toomuchtodo 1y ago
    CoreWeave has taken on $11.2B in debt with interest rates ranging from 7% to 15%, paying $250M in interest on that debt last quarter on just $19 million in operating income. Half of their assets are GPUs, depreciating over six years. (per Bloomberg)
rvz 1y ago
> How a crash affects anyone other than high-net-worth individuals with money tied up in VC funds is not explained. That is even worse. There are many so-called "AI companies" drowning in spending lots of tokens and the majority of them have lots of assumptions when going to raise more money to VCs. What if the VCs say no? What if 90% of all these startups get competition from a frontier AI lab and undercuts them? We are seeing this with Cursor and Anthropic already. What if early-stage startups cannot afford the 100K per H-1B hire anymore AND cannot hire remote overseas due to the HIRE act? Additionally, we are going to find out what does not mix well together with AI and will inevitably cause a crash that could come unexpectedly. > Real estate and crypto on the other hand... At least we do *know* that both of them do not mix well together. AI + layoffs + mortgages on the other hand...

rhetocj23 1y ago

Its a matter of time until the implosion happens. As a corporate finance and valuation geek, Ill warn you now: dont try and time mood and momentum. Thats what is driving much of the valuations being thrown around. If this blows up big time and it is found that the Big Tech firms were operating on lies and false hope, there will be consequences - in the form of shareholders demanding cash returned and setting limits on the cash balance held by Google et al. Apple has stayed smart staying out of this nonsense and not doing M&A. Investing in projects with negative NPV destroys the wealth of shareholders.

bobxmax 1y ago
No what's driving much of the valuations is the biggest leap in human technology since the internet and skyrocketing revenues as a result Private companies soaring to $100m ARR in 12 months is commonplace now. That's what's driving the valuation.
- lumost 1y ago
  We don’t know how sticky that revenue is, or if it’s going to be a commodity in the long run. Similar things used to happen in ad-tech before investors got wise that there was no moat.
- rhetocj23 1y ago
  Revenues mean nothing without positive equity earnings, especially so without a viable path to get there. Without a clear path, how do you justify the valuation? Lol. Uber and Amazon had a very logical path to get there. The reinvestment is so high that once you tack that onto the earnings youre in a fat negative. What does that mean? You will eat into the cash balance and eventually have to go raise more.
- rvz 1y ago
  > No what's driving much of the valuations is the biggest leap in human technology since the internet and skyrocketing revenues as a result That is a 1999-like bubble and how you get 75 - 90% of these companies crashing when the music stops. > Private companies soaring to $100m ARR in 12 months is commonplace now. That's what's driving the valuation. We don't even know if that is even real to begin with. Even if it is, that revenue can be lost as quickly as it is gained. This happened to Hopin and other companies who grew extremely quickly and then their valuations crashed. The questions you should be asking yourself is even after looking at the competition, what is the retention and the switching cost of these said "$100m ARR in 12 months" companies if a competitor moves into their core business?

sobiolite 1y ago

So I do think we're in a bubble, but I also remember when all the discussion around here was around Uber, and I read many, many hot takes about how they were vastly unprofitable, had no real business model, could never be profitable, and only existed because investors were pumping in money and as soon as they stopped, Uber would be dead. Well, it's now ten years later, Uber still exists, and last year they made $43.9bn in revenue and net income of $9.8bn.

pessimizer 1y ago
The story about Uber was that they were going to be unprofitable until they destroyed taxi services, then they were going to charge more than taxis and give less of a share to the driver. Nobody is predicting that AI is going to do that. One thing I hadn't considered before is how much it was in google's interest to overestimate and market the impact of AI during their antitrust proceedings. For the conspiratorially minded (me), that's why the bottom is being allowed to drop out of the irrational exuberance over AI now, rather than a couple months ago.
- LaGrange 1y ago
  I mean, hey, maybe they _will_ increase all those 10x programmer's bills to 20k per month. At least that would be funny.
- Terr_ 1y ago
  > Nobody is predicting that AI is going to do that. ... Now that I hear it out loud, I can't help thinking if maybe it's something we should be thinking about. Subsidization to destroy competitors followed by lock-in is obvious, but is there any way these systems could turn professionals into serfs?
  - deadfoxygrandpa 1y ago
    it doesnt look likely that any particular ai service will have a moat. every time one of them does anything right now, theres a dozen competitors able to match it within months

AaronAPU 1y ago

There is on the other hand a strong correlation between the sky is falling and the sky not actually falling. It makes one tempted to take the sky is falling as a buy signal.

fnord77 1y ago
There were chicken littles during the run up to 2008, too. Actually, I think most were a little bit premature. I take articles like these as an early sell signal.
- tim333 1y ago
  I think both are kind of inevitable with bubbles like the dotcom, 2008 and the present one. You get a positive feedback loop where the industry hypes their thing which causes the pubic to buy in which causes stocks to go up and the industry to hype more and the public to buy more. Then people point out prices are too high and capital misallocated but that doesn't stop the feedback loop so it goes on longer. It has to stop at some point though, often because the buyers run out of money to buy with. Then it goes into reverse - falling prices put off buyers, the industry doesn't get new cash flow to pay for its commitments to GPUs/office leases/mortgages, some of them go bust which puts off buyers even more. Then eventually, after around three years it level out. I'm a believer in the internet, housing and AI but during the bubbles you get money misallocated on stuff like pets.com or maybe OpenAI spending zillions on data centers to provide free idle chat to the public. Money on fundamental AI research is probably good but all those data centers... dunno.

bgwalter 1y ago

I disagree with Doctorow's conversation with a student at Cornell. You can prevent further misallocation of funds by agitating against "AI" usage in general. If you are at Cornell, organize meetings, protests etc. against the dehumanization and decreased job prospects. As a student, you have much more freedom to protest than as an employee, and that is where the resistance must come from. We also need to take into account that while there is a bubble, most of the insane amounts of investment that were seen in headlines have not materialized. Nvidia will crash, Tesla will crash (Optimus robot nonsense) but Microsoft and Google should be fine. If there is a bailout, protest again. preferably in the physical space and focusing on economic topics rather than culture wars (which is what the politicians want you to focus on).

jrecyclebin 1y ago

Something of a logical leap here: if LLMs aren't capable of replacing workers and it's all lies, then what company is going to engage in mass layoffs without seeing results first? Sounds like companies that deserve to go away.

miltonlost 1y ago
> If LLMs aren't capable of replacing workers and it's all lies, then what company is going to engage in mass layoffs without seeing results first? We see companies layoff workers for all sorts of short-sighted reasons. They'll mass layoff to reduce labor costs for short term profits and stock price increases, so the execs and shareholders can cash out. AI is just the current reason the executive class has decided to use for the layoffs they were going to do regardless.
- dredmorbius 1y ago
  Further: business and management are exceptionally fad-driven, for numerous information-theoretic reasons. Performance is difficult to measure and slow to materialise. At the same time, everyone, especially senior leadership and managers, is desperately competitive, even where that competition is on the perception rather than reality of performance. There's a very strong follow-the-herd / follow-the-leader(s) mentality, often itself driven by core investors and creditors. A consequence is a tremendous amount of cargo-culting, in the sense of aping the manifest symbols of successful (or at least investor-favoured) firms and organisations, even where those policies and strategies end up incurring long-term harms. Then there's the apparent winner-take-all aspect of AI, which if true would result in tremendous economic power, if not necessarily financial gains, to a very small number of incumbents. Look at the earlier fallout of the railroad, oil, automobile, and electronics industries for similar cases. (I've found over the years various lists of companies which were either acquired or went belly-up in earlier booms, they're instructive.) NB: you'll find fad-prone fields anywhere a similar information-theoretic environment exists: fashion, arts, academics, government, fine food, wine collecting, off the top of my head. Oh, and for some reason: software development.
- jrecyclebin 1y ago

bobxmax 1y ago

A good sign that an article is another pointless, naive AI doomerism piece is that they cite that atrocious MIT 95% "study".

miltonlost 1y ago
A good sign someone is an AI huckster is they ignore the rest of the article and citations.
- rhetocj23 1y ago
  Plenty of hucksters around and for them I say three words: show me the money (free cashflows).
  - AnimalMuppet 1y ago
    Um, that's four words. Not saying you're wrong, though...

bee_rider 1y ago

deleted 1y ago

[deleted]

fnord77 1y ago

> but an AI salesman can 100% convince your boss to fire you and replace you with an AI that can't do your job, and when the bubble bursts, the money-hemorrhaging "foundation models" will be shut off and we'll lose the AI that can't do your job, and you will be long gone, retrained or retired or "discouraged" and out of the labor market, and no one will do your job. Even if the big AI companies turn off their APIs, people will still be able to run local models as well as some other, new business spun up to run them as SaaS.

rapjr9 1y ago
Isn't the training most of the cost? In which case the current models could have a very long lifetime even if new models are never trained again. They'll go gradually out of date, but for many purposes will still be useful. If they can pull new info from the web they may stay relevant for decades. It's only if running the chatbots is not cost effective that everything halts and my understanding is that the cost of that is lower relatively. Even now, older models are still being used. Also, performance optimizations seem likely to soon reduce the need for data center build out and reduce costs. Seems too soon to say where this is all going. Who even knows if the GPU chips will improve dramatically or if something else (more AI optimized processor architectures) will replace them? It's true that right now it looks like a bubble, but the future is still very much in flux, and the value of the models already created may not disappear overnight.

jimbo808 1y ago

There is still a demand for these tools. I know they are useful to me. Do they make me more productive as a software engineer? Probably not, at least not significantly. But they're still useful, especially for little tools and one-off scripts which are not intended to become production code anywhere. I also just enjoy using them for bouncing ideas off of them and doing sanity checks on all sorts of topics, personal and work-related. Sometimes they spark a better idea that I may not have had otherwise. I will still be using them after the bubble bursts. That being said, I'm also fine if all the current AI companies implode and I'm just running an OSS model locally.

Gigachad 1y ago
That’s still not good enough. Being a mildly good idea assistant doesn’t come close to paying for the investment spent and valuations of these companies. It’s all bet on completely changing everything. And if that doesn’t happen soon, the valuations are going to crash bad. And since the entire US economy is being propped up by AI investing, it’s going to be a disaster.
rhetocj23 1y ago
The problem with this is, what you are using it for is not commensurate to what has been invested. In other words, to date, the investment has not been productive for society and doesnt seem to be on track to deliver what has been promised.
oblio 1y ago
Automating "little tools and one-off scripts" doesn't pay for $40bn of extra data centers (and that's just one provider), though.
- rhetocj23 1y ago
  Yeah. For example I use chatgpt to refine my thoughts and dig deeper into ideas (to get my brain thinking by interacting with a machine with knowledge). But is this worthy of all the investment done? Absolutely not. Would I pay for this service? Nah. Personally I am incredibly sensitive to changes in price - I wouldnt pay a penny and thus my demand would disappear. Im sure there are others who find more value from it, however, I dont think that group of people is enough to get OAI to be free cash flow to the firm positive any time soon. Note this is not accounting profit - FCFF takes into account reinvestment, and is the cash profits left after.

boringg 1y ago

The whole thing was lost on the mag 7 being unprofitable and that he was so sick of talking about AI he decided to take his shot at making money writing a book about AI. So many AI hucksters these days

naveen99 1y ago

What percent of consumption will go to ai ? For me probably atleast 10%. What percent of investment will go to ai ? For me another 10% probably. I mean some of it will come from less consumption and investment in other things.

plaidfuji 1y ago

> Plan for a future where you can buy GPUs for ten cents on the dollar, where there's a buyer's market for hiring skilled applied statisticians, and where there's a ton of extremely promising open source models that have barely been optimized and have vast potential for improvement This doesn’t square entirely with the earlier claim that AI companies have (and will continue to have) “dogshit unit economics”. If you have a bunch of cheap “applied statistician” labor (kind of a reductive take, btw), cheap GPUs, and powerful open source models, it is a near certainty that companies would achieve favorable unit economics by optimizing existing models to run much more efficiently on existing GPUs. I happily pay $20/month for Google One to use Gemini 2.5 Pro. I don’t really need it to be a whole lot better. It’s a great product. If they can deliver inference of that level with positive margin (and keep it ad free), it’s a viable business. Investors will likely lose billions, if not trillions, but I don’t think the industry is inherently unprofitable - I just don’t think anybody has been incentivized to optimize for cost yet. Why would you, when investors continue to throw money at you to scale?

tempodox 1y ago
> If they can deliver inference of that level with positive margin (and keep it ad free), it’s a viable business. That “if” is doing tons of heavy lifting here.
pier25 1y ago
> I happily pay $20/month for Google One to use Gemini 2.5 Pro. I don’t really need it to be a whole lot better. So you think those $20/month are generating profits? Because Google is burning its own cash.

lisbbb 1y ago

I'm 52. I experienced the dot-com bubble very up close. I was in the Raleigh-Durham area for most of it. There were hundreds of startups all over the area. Companies like Nortel were booming. IBM was booming. By 2003 it was all gone--Nortel was a shell of its former self, IBM laid off huge numbers of workers. There was suddenly a glut of office space all over. We moved out in 2006, but even around then there was still a glut of office space! I don't know if it ever recovered because it was so overbuilt. I remember having lunch with a guy who was stubbornly holding on to his Nortel stock, which was worth mere pennies by like 2005 or so. They not only lost their jobs, they lost their 401Ks which were all in company stock. Anyways, this guy was sure it was going to bounce back. I saw in like 2008 where Nortel finally closed its doors and the stock was de-listed at $0. His dream was dead. I never worked for equity after that time period. The enormous build out of data centers reminds me of that time period. Yeah, it's all going to collapse.

deleted 1y ago
[deleted]

IAmGraydon 1y ago

I largely agree. I don't think AI is ultimately useless, but I think it's about 10% as useful as the broader market seems to think it is. That said, every time I see another article like this, I think to myself "well it's not going to come crashing down any time soon". This is the nature of bubbles - they only collapse when nearly everyone is finally convinced they never will. Right now, stories about the AI bubble collapsing are everywhere, which means the time hasn't come yet. I have an idea that the market may actually start to react positively to bad job numbers, as that could be taken as a signal that companies are shedding people to replace them with AI (even if that's not the actual reason for the bad numbers). If job numbers started suddenly improving and the unemployment rate dropping, it could be taken to mean that AI is not going to replace everyone after all.

sahila 1y ago
> they only collapse when nearly everyone is finally convinced they never will I get that rationale in some bubbles as that means people are not parking their money as cash where they can buy the dip and support the market (tell me if I'm widely off). But I think this case is different because there's actually VAST sums of money being spent in AI by some very big players who will need an return.

toomuchtodo 1y ago

There’s a quote from Gil Luria (Managing Director and Analyst at D.A. Davidson) I love on this bubble, which I hope becomes part of the zeitgeist: > No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer. https://www.wheresyoured.at/openai-onetrillion/ https://www.wheresyoured.at/openai-onetrillion/

Havoc 1y ago

Still think a middle of the road outcome is most likely here. General purpose technology that changes society but falls well short of agi hype. As for money side - think it’ll come. There is obvious utility (but not autonomy) and the economics of it will find their equilibrium. They always do

tim333 1y ago

>AI is the asbestos we are shoveling into the walls of our society and our descendants will be digging it out for generations Seems a bit pessimistic. AGI may not be here next year to keep the bubble going but will probably happen in the next decade or two and do much of the stuff advertised. It's like the dotcom bubble - much of commerce, banking and the like did move to the internet but not till a while after the financial bubble burst.

andsoitis 1y ago

"So, you're saying a third of the stock market is tied up in seven AI companies that have no way to become profitable and that this is a bubble that's going to burst and take the whole economy with it?" I said, "Yes, that's right." Which companies are those?

ben_w 1y ago
Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. I dispute the "no way to become profitable" claim (literally all profitable right now, it's the private ones which probably aren't). I do have other negative sentiments for most of them, but those are the seven that represent about that share of the S&P500.
- andsoitis 1y ago
  Right. The are also not “AI companies” in any meaningful way — only NVidia’s revenue and market cap is heavily driven by AI sales. The author’s thesis seems to lack rigor.

logicprog 1y ago

> This isn't like the early days of the web, or Amazon, or any of those other big winners that lost money before becoming profitable. Those were all propositions with excellent "unit economics" – they got cheaper with every successive technological generation, and the more customers they added, the more profitable they became. AI companies have – in the memorable phraseology of Ed Zitron – "dogshit unit-economics." Each generation of AI has been vastly more expensive than the previous one, and each new AI customer makes the AI companies lose more money... See, I think this is wrong. The unit economics of LLMs are great, and more than that, they have a fuckton of users with obvious paths to funding for those users that aren't paying per unit (https://www.snellman.net/blog/archive/2025-06-02-llms-are-cheap/ https://www.snellman.net/blog/archive/2025-06-02-llms-are-ch...). The problem is the ludicrous up front over infestment, none of which was actually necessary to get to useful foundation models, as we saw with DeepSeek.

treetalker 1y ago
> infestment So true.
- logicprog 1y ago
  That's a very serendipitous typo, I must say, LOL.

anon191928 1y ago

Great points but timing it can be very hard. It can last many more years because this time they have a thing called "money printer". When crash happens, they will use it. Yes it prints whatever amount they want, even trillions. Magically(!)

viking123 1y ago
Most people, who try to time these, usually get it completely wrong and end up losing huge amounts of money. I just stay invested in the indexes and some long term stocks, every time I try to predict something it goes badly.
- Quarrelsome 1y ago
  Bear in mind that your index becomes more and more of those six or seven companies, the more they grow. I think they're over 30% of the market? So an index tracker is still greatly exposed to this.
  - nemomarx 1y ago
    I wish I could get an index without them but it would probably have no growth basically - the rest of the market is struggling in comparison, right?
    - StoneAndSky 1y ago
      It exists: XMAG https://finance.yahoo.com/quote/XMAG/ https://finance.yahoo.com/quote/XMAG/ > The index aims to provide a comprehensive and balanced representation of the U.S. equity market by including the largest 500 publicly traded equity securities, while specifically excluding the seven largest technology companies commonly referred to as the “Magnificent 7”. Up 12% in the last year. Unfortunately, it's ten times as expensive (0.35%) as a straight S&P 500 ETF (e.g. VOO, 0.03%).
rsynnott 1y ago
> When crash happens, they will use it. You're suggesting that _governments_ will bail out the AI industry? I mean, why would they do that?

whstl 1y ago

> Further: the topline growth that AI companies are selling comes from replacing most workers with AI, and re-tasking the surviving workers as AI babysitters ("humans in the loop"), which won't work. Finally: AI cannot do your job, but an AI salesman can 100% convince your boss to fire you and replace you with an AI that can't do your job This hits home. A lot of the supposed claims of improvements due to AI that I see are not really supported by measurements in actual companies. Or they could have been just some regular automation 10 years ago, except requiring less code. If anything I see a tendency of companies, and especially AI companies, to want developers and other workers to work 996 in exchange for magic beans (shares) or some other crazy stupid grift.

AznHisoka 1y ago
So what metric would you look at that would support the idea that AI is inproving a company?
- whstl 1y ago
  I guess anything other than just claims from people that have a stake in it? If companies are shipping AI bots with a "human in the loop" to replace what could have been "a button with a human in the loop", but the deployment of the AI takes longer, then it's DEFINITELY not really an improvement, it's just pure waste of money and electricity. Similarly, what I see different from the pre-AI era are way too many SV and elsewhere companies having roughly the same size and shipping roughly the same amount of features as before (or less!), but are now requiring employees to do 996. That's the definition of loss of productivity. I'm not saying I hold the truth, but what I see in my day to day is that companies are masters at absorbing any kind of improvement or efficiency gain. Inertia still rules.
  - AznHisoka 1y ago
    So would a lower headcount, stable/improving revenue be a metric you would look at?
    - 1y ago

Dumblydorr 1y ago

Where’s the evidence, this writing strikes as purely belief based? For all the overhypers of AI, you also get extreme skeptics like this, and neither side has good evidence. It’s speculation. If he truly knew the future he’d short all the companies right before collapse.

sigilis 1y ago
There are various links in the article that have more information. Clicking these references will give the evidence for bad unit economics claims and whatnot. As for predicting the moment, the author has made a prediction and wants it to be wrong. They expect the system will continue to grow larger for some time before collapse. They would prefer that this timeline be abbreviated to reduce the negative economic impacts. He is advising others on how to take economic advantage of his prediction and is likely shorting the market in his own way. It may not be options trading, but making plans for the bust is functionally similar.
- AznHisoka 1y ago
  The papers he linked all fail to support his claim. The first paper he linked simply counts the mentions of the term “deep learning” in papers. The 2nd surveyed people who lived in… Denmark and tried to extrapolate that to everyone globally His points are not backed by much evidence
  - scythmic_waves 1y ago
    The first link is a mistake. It's supposed to be the thing being discussed here: https://news.ycombinator.com/item?id=45170164 https://news.ycombinator.com/item?id=45170164. The 2nd link seems reasonable to me? Why does a study about 25k workers in Denmark (11 occupations, 7k workplaces) not count as evidence? If there was a strong effect to be found globally, it seems likely to be found in Denmark too. Also, what about the other links? The discussions about the strange accounting and lack of profitability seem like evidence as well. If anything, this article struck me as well-evidenced.
- 1y ago

petesergeant 1y ago

> and when the bubble bursts, the money-hemorrhaging "foundation models" will be shut off This is not a serious piece of writing.

baal80spam 1y ago
Of course it isn't. It's a FUD piece.

Havoc 1y ago

I’m not convinced Unit economics is the right lens here given that it’s a general purpose technology. For the very near term perhaps but the large scale infra rollouts strike me as a 10+ year strategic bet and on that scale what matters is whether this delivers on automation and productivity

TheOtherHobbes 1y ago
They're all going to start selling ads, obviously.
- Ekaros 1y ago
  Is there going to be enough new ad spend to justify that model? Will everyone else spend even more on ads than they do now?
  - jsnell 1y ago
    It doesn't need to be new ad spend. Just the possibility of the existing ad spend being up for grabs justifies all the capex so far.
- Havoc 1y ago
  Does seem likely for Google though integrating ads into text in a durable way could be challenging. If it’s overt then it’s easily filtered out, if it’s baked in to deep the it harms response quality

trumbitta2 1y ago

Not an expert, but I'm convinced they will all pivot to military applications before they go bankrupt, and that will unleash a whole new type of hell

meindnoch 1y ago
The new doctrine: drown the enemy in slop!
- tesdinger 1y ago
  Der Angriff des Slop ist nicht erfolgt.

AznHisoka 1y ago

>> A much-discussed MIT paper found that 95% of companies that had tried AI had either nothing to show for it, or experienced a loss The paper they linked to just analyzed how many times “deep learning” appears in academic papers… This is the proof that most companies unsuccessfully tried AI?

blackbear_ 1y ago
The link is wrong, I believe they meant to link this one: https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Business_2025_Report.pdf https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Bus...
JimDabell 1y ago
I think they linked to the wrong thing. It’s been discussed several times here: https://news.ycombinator.com/item?id=45170164 https://news.ycombinator.com/item?id=45170164

shubhamjain 1y ago

> I firmly believe the (economic) AI apocalypse is coming. These companies are not profitable. They can't be profitable. They keep the lights on by soaking up hundreds of billions of dollars in other people's money and then lighting it on fire. This is what I don't like. Debating in extremes. How can AI have bad unit economics? They are literally selling compute and code for a handsome markup. This is classic software economics, some of the best unit economics you can get. Look at Midjourney: it pulled in hundreds of millions without raising a single dime. Companies are unprofitable because they are chasing user growth and subsidising free users. This is not to say there isn't a bubble, but it's a rock-solid business and there to stay. Yes, music will stop one day, and there will be a crash, but I’d bet that most of the big players we see today will still be around after the shakeout. Anecdote: my wife is so dependent on ChatGPT that if the free version ever stopped being good enough, she’d happily pay for premium. And this is coming from someone who usually questions why anyone needs pay for software.

fluidcruft 1y ago
Generally I think the question is whether they actually are selling it at a markup. Inference is easier to reason about. I think the problem is financing training. The issue is the future value of inference seems to be being massively overstated to justify present day expenditures on training (particularly since the value of training today evaporates extremely quickly)

jcattle 1y ago

Can anyone give more than a hand-waived explanation on how this crash will come about? This paragraph reads kind of like: Companies not profitable, no more money coming in, ????, crash >> I firmly believe the (economic) AI apocalypse is coming. These companies are not profitable. They can't be profitable. They keep the lights on by soaking up hundreds of billions of dollars in other people's money and then lighting it on fire. Eventually those other people are going to want to see a return on their investment, and when they don't get it, they will halt the flow of billions of dollars. Anything that can't go on forever eventually stops. How will this actually lead to a crash? What would that crash look like? Are banks going bust? Which banks would go bust? Who is losing money, why are they losing money?

zerosizedweasle 1y ago
https://www.derekthompson.org/p/this-is-how-the-ai-bubble-will-pop https://www.derekthompson.org/p/this-is-how-the-ai-bubble-wi...
ToucanLoucan 1y ago
> What would that crash look like? What it usually looks like when one of the valley's "revolutions" fails to materialize: a formerly cheap and accessible tech becomes niche and expensive, acres of e-waste, the job market is flooded with applicants with years of experience in something no longer considered valuable, and the people responsible sail off into the sunset now richer for having rat fucked everyone else involved in the scheme. In this case though given the sheer scale of the money about to go away, I would also add: a lot of pensions are going to see huge losses, a lot of cities who have waived various taxes to encourage data-center build outs are going to be left holding bags and possibly huge, ugly concrete buildings in their limits that will need to be destroyed, and, a special added one for this bubble in particular, we'll have a ton of folks out there psychologically dependent on a product that is either priced out of their ability to pay or completely unavailable, and the ensuing mental health crises that might entail.
- jcattle 1y ago
  Isn't the thing that costs everyone an arm and a leg at the moment the race for better models? So all of the training everyone is doing to get SOTA in some obscure AI benchmark? From all of the analysis I've read, inference is quite profitable for the AI companies. So at least for the last part: > we'll have a ton of folks out there psychologically dependent on a product that is either priced out of their ability to pay or completely unavailable, and the ensuing mental health crises that might entail. I doubt that this will become true. If there's one really tangible asset these companies are producing, which would be worth quite a bit in a bankruptcy it's the model architectures and weights, no?

tesdinger 1y ago

3% of the world GDP is more than the 2 trillion needed to fund AI

roxolotl 1y ago

I want the hype to die and the bubble to pop as much as Ed and Cory and everyone else writing about it but right now it’s just them basically recycling the same bad news and posting about it. I’d love to see some writing which looks at the factors which caused previous pops and to line them up with factors today to try and determine what’s actually coming. Clearly the market is irrational as hell right now but seemingly very little is going to change that. The closest I’ve seen to what I’m looking for is the coverage over at Notes on the Crises[0] and he also seems bewildered. Edit: I found this piece which does look at historical bubbles/market events and tries to discuss how they plan out in terms of timing [1] 0: https://www.crisesnotes.com/ https://www.crisesnotes.com/ 1: https://paulkrugman.substack.com/p/why-arent-markets-freaking-out https://paulkrugman.substack.com/p/why-arent-markets-freakin...

karlkloss 1y ago

There's always somebody predicting an apocalypse. This guarantees that, regardless of what happens, there's somebody who can claim they were right. Which makes those predictions completely useless. You could as well read your horoscope.

newyankee 1y ago
The funny thing though is that on balance I believe that since the launch of GPT to the public almost 3 years back, I feel GPT has delivered more than it has disappointed. I still feel that we should run into limitations soon and may be GPT5 is an example of that. Surely the tech still has a long way to go and keep improving especially as the money has attracted everyone to work on it in different ways that were not considered important till now but the financial side of things have to correct a bit for healthy growth
kemitchell 1y ago
You've given the argument from fallacy, dismissing an argument without any reference to its content, but only to its conclusion. The existence of bad arguments for a proposition doesn't condemn all other arguments for the same. The question is whether any particular argument's strong or weak. That's a matter of evidence and reasoning.

adrianbooth17 1y ago

Every day I see articles on HN discussing the AI bubble potentially crashing. The large number of such articles appearing daily is increasing my confidence that the AI space will be fine.

deleted 1y ago
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AznHisoka 1y ago

Either the AI hype will slow down and the market will crash. Or AI really does have 100x productivity gains and fewer humans are needed. And you lose your job. I dont see a positive between any of these scenarios…

tim333 1y ago
2x productivity gain, jobs kept, more stuff?

TYPE_FASTER 1y ago

The AI bubble feels similar to the Dot.com bubble. The pattern is the same, right? There's some tech, a hype wave that people try to surf (if you paddle fast enough, you can start something and cash out in time), and when the water recedes before the next wave people/organizations either rode the wave cashed out and walked off the beach to their next thing, didn't make the wave and will try next time, or got pounded and their board broken. Or they ripped a great line, did a backflip like Medina, threw their hands in the air, and paddled back out to catch the next wave. But you don't always know what the wave is going to look like when it's building. You just know there's a wave, and either you get on it or you don't. The connectivity of the web was obvious, the monetization wasn't super obvious (remember K-Tel anybody?). The power of modern AI is obvious, the monetization and final form of the tech isn't. I mean, using natural language is cool and all, and I think there is a lot of value in using models to help/assist engineering and other work, but I think it's too soon to say what the end game is.

AndrewOMartin 1y ago

Markets can remain irrational longer than you can remain solvent.