5 ms·

The AI bubble is 17 times the size of the dot-com frenzy, analyst says

97 points by CharlesW 1y ago

garganzol 1y ago
Because it is not a bubble but a tectonic shift in technology.
- jmaestrooper 1y ago
  Obviously it's both. Just like dot-com bubble was, as were countless bubbles before that.
caminanteblanco 1y ago
>Garran then calculates the Wicksellian deficit, which to be clear includes not only artificial-intelligence spending but also housing and office real estate, NFTs and venture capital...think of it as the misallocated portion of gross domestic product fueled by artificially low interest rates In other words, this is a statement on current US interest rates, not AI. The analyst just chose to single out the AI industry because they believe it has no ability to return on investment. But the actual numbers are not AI-specific.
- Fade_Dance 1y ago
  I don't understand these claims from an interest rate perspective either. 2022 was a huge unwind of the interest rate bubble, and a mass extinction of ZIRP-driven business models (including the state of banking itself to an extent, which necessitated a Fed intervention). And remember, the 2022 duration bubble unwind came immediately after the DotCom Bubble 2.0, with ten billion dollar treadmill/space tourism/vaporware EV/dog walking companies. Yet it doesn't show on the chart of misallocated capital. There was a huge amount of misallocated capital destroyed then: https://images.squarespace-cdn.com/content/v1/5f3bf522f05eaf6f9effd5fe/f2590dfc-181c-4bce-8ee4-d5591ae9daed/Picture1.png?format=2500w https://images.squarespace-cdn.com/content/v1/5f3bf522f05eaf... Maybe it would make more sense with the full context of the original report.
3pt14159 1y ago
I remember the first bubble. It was absolutely huge. This is nothing compared to that. This is a bit frothy, but given the difference between AGI and human intelligences it is at least understandable. If AI can replace most workers then we should expect to see sky high valuations. That is a big if but it is at least conceivable.
rapsey 1y ago
If it is a bubble it is not in public markets. Private markets are another matter. In public markets it is an insane investment boom, fueled by the most profitable companies in history.
- cheema33 1y ago
  > In public markets it is an insane investment boom, fueled by the most profitable companies in history. There are many many examples of companies that make little money or are actually losing money, yet their valuations are sky high. In other words, valuations are not in touch with reality. I see a massive bubble in the public markets as well.
  - rapsey 1y ago
    There are always companies like that. Does not mean the entire market is in a bubble.
- jmaestrooper 1y ago
  OpenAI burned $6.7bln on R&D with revenue of $4.3 bln in 1st half of 2025. And is planning on raising _trillions_ to build compute/storage for the next gen/AGI. How's this not a bubble?
  - rapsey 1y ago
    I said private companies are another matter. The public ones are all funding it from cash flow not leverage and excessive debt which are the real hallmarks of an unsustainable bubble.
  - shpx 1y ago
    Like 10% of the entire human race is using their product.
    - tonyedgecombe 1y ago
      I wonder if 10% of the human race will accept paying the real, non-subsidised price .
nextworddev 1y ago
2021 was crazier. I remember shitty stocks like Affirm or Carvana gapping 15% every day on practically no news
- Judgmentality 1y ago
  Carvana is currently up more than 100x from their 2022 low.
  - bix6 1y ago
    100 P/E… wtf
    - Sohcahtoa82 1y ago
      If you think that's insane, check out TSLA. As of the time of this comment, it's a whopping 247. There is no possible justification for that kind of valuation. Even if Robotaxi is a huge success, they sell more rides than Uber, Lyft, and traditional taxis services combined, it wouldn't justify it.
      - bix6 1y ago
        Tesla at least I can understand the cult but carvana?!? What!!!
ijidak 1y ago
In my years, I've noticed bubbles tend to burst after we move past the phase of bubble skepticism being the dominant voice. When the dominant voices begin to claim, "This time it's different!!" that's usually a sign we're nearing the end. Look this up. During the dot-com bubble, the popular notion emerged that the business cycle might have ended. "The end of the business cycle!!" Many media outlets pushed the narrative that humanity would experience endless growth thanks to technological advancements. During the housing bubble, towards the end, multiple media outlets suddenly started repeating the idea that housing prices, in real terms, have never fallen. When I heard that farcical argument gain steam, I got out of housing immediately—before the bubble burst. So, for me, that AI-bubble skepticism is still the dominant opinion suggests that this bubble is far from over. I think we're closer to the Netscape IPO than we are to the .com crash. Maybe we're at the halfway point. Just one person's opinion.
- cosmic_cheese 1y ago
  Not a bad theory. Throwing caution to the wind and going all in usually follows abandonment of skepticism, which accelerates the bubble’s progression quickly landing it in its end phase.
- ojbyrne 1y ago
  Somewhat similar to the Shoeshine Boy Theory: https://quotulatiousness.ca/blog/2020/06/11/in-1929-the-warning-sign-was-getting-stock-tips-from-shoeshine-boys-and-elevator-operators/ https://quotulatiousness.ca/blog/2020/06/11/in-1929-the-warn...
- deleted 1y ago
  [deleted]
- jerf 1y ago
  The parallel doesn't hold, because the AI-bubble skepticism was near zero even six months ago. Yes, I was a skeptic, and I know where I was getting my info from, so I know it was not zero, but it was not a significant market force and nobody in the mainstream was issuing any cautionary notes on it. It has now progressed to what you might call a "mainstream contrarian" position. The relevant Overton window has shifted to where it is just barely in the acceptable discourse window. It's been a while, but if I remember my dotcom bubble, that never happened from the zero-skepticism position. It was all RAH RAH RAH and then blammo it blew apart. Skepticism was always around... again, I know because I was a skeptic and I arranged my career, with modest but far from total success, around the bubble not being sustainable, but everyone around me had no idea what I was talking about (although since my alternative was "go to grad school" I didn't get much flak since they figured the market would still be as hot years later). The skeptical position was never in the Overton window, so I don't think the comparison is useful on this particular metric. Personally I'm watching, intrigued, to see how far the general awareness that this is a bubble can go while the bubble refuses to pop. At some point that awareness needs to translate into ceasing to feed the bubble the feedstock capital it is so rapaciously consuming, but "I can always find a bigger idiot to unload on" can run quite a ways, it seems. (I don't find that an appealing investment thesis personally but I seem to be in the minority.)
tananaev 1y ago
Read the article, but couldn't understand how they measured it. To be fair, I think it's definitely a bubble, but it's hard to compare something like this.
- kleiba 1y ago
  It's a click-baity title, for sure.
marstall 1y ago
Having lived through both ... the job market was INSANE during dot-com. Getting a job was like falling off a tree. If this is 17 times bigger, where are the jobs (serious question)?
- badpun 1y ago
  The money goes to hardware this time, not to labor.
  - jmaestrooper 1y ago
    Hardware doesn't just pop out of the thin air. Data centers need to be built, GPUs need to be produced, and storage, and other compute, and networking, etc etc. All this needs people. Shouldn't there be boom in construction? Hardware manufacturing?
    - orwin 1y ago
      I've read that the US have almost a million skilled worker shortage in construction (especially commercial and industrial that demand more specific skills), and that since a quarter of the demand is for federal/state/county projects that cannot decide as fast as a company to accept rising prices, it also mean the already decaying public infrastructure risk to never be repaired in time (constructing new stuff is more expensive than repairing expensive stuff. More GDP growth i guess, but :/) And you have a boom in hardware manufacturing, in Asia mostly, but even in europe you see new companies popping up (before Covid we had like 2 comapnies that could print custom pcbs, both german, now i found like 5 in France (2 of them are the german who expended but still))
    - badpun 1y ago
      All the electronics (inlcuding the insanely expensive GPUs from Nvidia) are imported from Asia.
- mongol 1y ago
  Good point. The dot-com co-incided with the Y2K bug timeframe. I don't think getting a job in IT was ever easier.
christkv 1y ago
If it turns out to be a complete waste of time and money there will be a bunch of companies that will go belly up and some that will just see less revenue but still go on. I don't believe this to be the case. Worst case it's mostly a bolt-on for most companies not a "core" money maker. It will be mostly be the hardware vendors like Nvidia and the AI as platform that will get hit.
idkwhattocallme 1y ago
The bubble bursts when Apple announces it's doing good enough (private/secure) LLMs on device. At that point the capex on cloud infra starts to come into question and the dominos start to fall...
- fao_ 1y ago
  Google's been doing this since at least 2022 and... well, nobody really cares.
- goalieca 1y ago
  LLM to me are the least interesting part of AI. Deep learning has proven very useful for signal processing and image segmentation among other things. Those are small enough to run on phones. LLM simply don’t seem to be that useful at small scales because the illusion of knowledge falls apart with too few parameters.
- kelipso 1y ago
  Yeah, it’s only a matter of time till LLMs can easily be run locally by more people and once the market realizes that it’s over.
  - gtirloni 1y ago
    You can't run anything close to ChatGPT levels of parameters locally though.
- mscbuck 1y ago
  As laughable as Apple's efforts have been so far, I think they still have an advantage precisely because of the unified architecture.
megaman821 1y ago
If the bubble pops, the blast radius seems extremely small. Most of the money is coming from companys' excess cash. Even the loans that default will be backed some amount of useful capital. It just doesn't seem likely at all to cause the same pain as the dot-com bubble.
- benjaminwootton 1y ago
  The public markets are hitting all time highs every week. It’s going to be painful if that pops.
- Lapsa 1y ago
  "blast radius seems extremely small" - I agree, couple days ago there was an article that such occurence may cause full blown recession in USA
  - BoredPositron 1y ago
    It will but not because of companies going down but because the bubble is casting a giant shadow over the real economical deficits we have atm.
    - karmakurtisaani 1y ago
      The S&P500 is largely held up by a small number of tech companies. If they go down, there is no hiding what's really going on in Trumps economy. E: getting some downvotes, feel free to elaborate where you disagree.
      - brazukadev 1y ago
        Not the one downvoting but I'd guess they have a bag full of these stocks
  - rsynnott 1y ago
    It would likely cause a technical recession at the very least, but would probably not result in the sort of contagion that some market crashes do.
simianwords 1y ago
The dot com bubble was aberration. It was not even supposed to happen because the prices went back up. The bubble was literally an incorrect prediction by the market. Why isn’t this being discussed? By that I mean that the learning we should take from the dot com bubble is that the bubble should not have burst, not that we should not have let it go that high in the first place.
- Fade_Dance 1y ago
  >It was not even supposed to happen because the prices went back up The vast majority of the constituents of the DotCom bubble went entirely extinct and their stock prices went to zero. You are looking through a lens of survivorship bias. I'm guessing you are referencing the price of market cap weighted index funds when you say "prices went back up", which is just one aspect of the DotCom bubble. The primary event was the prices of most of the hyped companies going to zero and the investors losing everything. The number prints from market cap weighted indexes are somewhat arbitrary calculations that doesn't necessarily reflect the underlying market behavior. >The dot com bubble was aberration. It was a fairly typical bull mania, seen many times in history, and seen since as well (DotCom 2.0 was the 2020-era cycle with ten billion dollar Peloton, ten billion dollar space tourism companies, companies like Nikola with literally no product hitting 30 billion, etc, but don't take my word for it, look at the chart of the two events: https://static.seekingalpha.com/uploads/2024/10/9/48422113-17284511487545593_origin.png https://static.seekingalpha.com/uploads/2024/10/9/48422113-1...) >the bubble should not have burst Bubbles are often based on a reality of future growth, which is what draws people in. The fact that Amazon was eventually worth obscene amounts of money doesn't negate the fact that hundreds of listed companies went to zero. That is the DotCom bust. The bust of a huge swathe of real companies in the real economy, and their listed stock prices going to zero. Passive ETF domination is more of a recent phenomenon anyway. The world was much more actively managed and stock picking/mutual fund oriented until the last decade or two. Funds like Janus getting decimated with 330 billion AUM in year 2000 money was the catastrophe in the fund space. Index tracker funds like QQQ were secondary to that when it came to DotCom.
marstall 1y ago
bubble bursting data point: I am about to throw away my side project's vibe coded front end (~5000loc) and rewrite it by hand. At the scale it's gotten to, its become too difficult to change. i try to tweak it and it doesn't quite get it right, and then breaks some other thing, ad infinitum. maybe this is the "AI developer" skill - to somehow do it so you dont get to this point - but I ENJOY programming, so i'm going back to doing it by hand. It will have less (probably unnecessary) features but i will be able to craft it to my needs and achieve the daily flow my mental health requires ...
- karmakurtisaani 1y ago
  Another data point: I recently encountered my first vibe coded website on the wild. Everything looked great, but some fields didn't work, it displayed my data incorrectly and could not process my order. In the end a person had to process my order and they confirmed that their new web site had issues..
  - Fade_Dance 1y ago
    All I can think is this is how bad security risks must be on these sorts of projects.
- thedougd 1y ago
  This happened to me at or near a similar size project. I tried the same project again with Vibe coding but used some very different approaches. Far from a home run on the second try, but it was a much more manageable and maintenable project than my first attempt. I'm still skeptical and presently subscribe to the opinion that AI is a multiplier for skilled, competent engineers but a potential detriment to inexperienced.
somewhereoutth 1y ago
If I understand correctly, the cost of training each next model is the biggest cost - and much of why so much capex has been required. I have also seen it stated that e.g. OpenAI could be profitable right now if they stopped spending on the next model (not sure I'm convinced of that though). Given that a half (or 80% or whatever) trained model is worthless, there is a threshold for each new model cycle to continue. As soon as the anticipated ROI fails to justify that cost, new model production stops. Dead. Old models will still be used, but will become more and more out of date, and less and less useful. This will be the end of AI. (sorry, paraphrasing/developing my comment on an earlier thread)
mgh2 1y ago
https://archive.is/mVUfw https://archive.is/mVUfw
chermi 1y ago
I'll be the "this time it's different" guy. 1) the bubble burst hit telecom spend, which was overbuilt relative to the use. 2) the dot com companies were mostly not profitable with small revenues, while the big players here are either profitable (google, Facebook), backed by big players, and/or have massive revenues and user bases. And growing. 3) people actually use LLMs, a lot. 4) even if the data centers are overbuilt because the big guys get diminishing returns, they're still useful, with immediate demand. Search, ads, content are all going to use some sort of LLM crap, and thus need GPUs. So I don't think there will be as big of a fallout. My bet is there will/should be a healthy winnowing, but not a crash (at least not one due solely to AI hype).
- KaiserPro 1y ago
  > 2) the dot com companies were mostly not profitable with small revenues, while the big players here are either profitable (google, Facebook), backed by big players, and/or have massive revenues and user bases. And growing. 3) OpenAI is losing 4x its income from operating expenses. Facebook is pouring tens of billions into it Google, fuck knows. These are all loss leaders, looking to make the others fold, rather than say a geared company that is profitable but geared to expand. better AI costs much much more to make and run, and there isn't much brand loyalty.
w10-1 1y ago
For dot-com's it became clear that just having a web site wouldn't move customers. You could expect strong negative signal within a year of putting up the site, prompting broad pull-back. For AI now, the question is (a) how well one can monetize a LLM (size of the market); and (b) how much better one LLM can be than another (enduring competitive advantage). Both of these are generation-long questions. The other factor is who's investing. A lot of money now is from (mostly foreign) non-players who are paying to play, and who have a vested interest in managing their online and business ecosystems. They're not really subject to uncertainty about (a) or (b). Any good LLM will likely be good enough for them, and they already know what they're using it for. So when turbulence hits, those in it for profit will drop out, ceding control to those in it to control society. The bubble bursting is not the important risk.
thedougd 1y ago
I don't know if we're in a bubble, but I'm a bit baffled at the lack of AI in my personal life. Where are all the consumer products? Where I use it outside of work: - Product review summarizations (Amazon.com, HomeDepot.com, etc) - Search summarization (top of DuckDuckGo, Google, etc) - Chat (eg ChatGPT. Better Search, Q&A) It's not on my TV, barely on my iPhone, not in my smart home, just generally not much of a presence for me outside of work. Why isn't it changing my life yet? Or perhaps the average persons?

97 points by CharlesW 1y ago

garganzol 1y ago

Because it is not a bubble but a tectonic shift in technology.

jmaestrooper 1y ago
Obviously it's both. Just like dot-com bubble was, as were countless bubbles before that.

caminanteblanco 1y ago

>Garran then calculates the Wicksellian deficit, which to be clear includes not only artificial-intelligence spending but also housing and office real estate, NFTs and venture capital...think of it as the misallocated portion of gross domestic product fueled by artificially low interest rates In other words, this is a statement on current US interest rates, not AI. The analyst just chose to single out the AI industry because they believe it has no ability to return on investment. But the actual numbers are not AI-specific.

Fade_Dance 1y ago
I don't understand these claims from an interest rate perspective either. 2022 was a huge unwind of the interest rate bubble, and a mass extinction of ZIRP-driven business models (including the state of banking itself to an extent, which necessitated a Fed intervention). And remember, the 2022 duration bubble unwind came immediately after the DotCom Bubble 2.0, with ten billion dollar treadmill/space tourism/vaporware EV/dog walking companies. Yet it doesn't show on the chart of misallocated capital. There was a huge amount of misallocated capital destroyed then: https://images.squarespace-cdn.com/content/v1/5f3bf522f05eaf6f9effd5fe/f2590dfc-181c-4bce-8ee4-d5591ae9daed/Picture1.png?format=2500w https://images.squarespace-cdn.com/content/v1/5f3bf522f05eaf... Maybe it would make more sense with the full context of the original report.

3pt14159 1y ago

I remember the first bubble. It was absolutely huge. This is nothing compared to that. This is a bit frothy, but given the difference between AGI and human intelligences it is at least understandable. If AI can replace most workers then we should expect to see sky high valuations. That is a big if but it is at least conceivable.

rapsey 1y ago

If it is a bubble it is not in public markets. Private markets are another matter. In public markets it is an insane investment boom, fueled by the most profitable companies in history.

cheema33 1y ago
> In public markets it is an insane investment boom, fueled by the most profitable companies in history. There are many many examples of companies that make little money or are actually losing money, yet their valuations are sky high. In other words, valuations are not in touch with reality. I see a massive bubble in the public markets as well.
- rapsey 1y ago
  There are always companies like that. Does not mean the entire market is in a bubble.
jmaestrooper 1y ago
OpenAI burned $6.7bln on R&D with revenue of $4.3 bln in 1st half of 2025. And is planning on raising _trillions_ to build compute/storage for the next gen/AGI. How's this not a bubble?
- rapsey 1y ago
  I said private companies are another matter. The public ones are all funding it from cash flow not leverage and excessive debt which are the real hallmarks of an unsustainable bubble.
- shpx 1y ago
  Like 10% of the entire human race is using their product.
  - tonyedgecombe 1y ago
    I wonder if 10% of the human race will accept paying the real, non-subsidised price .

nextworddev 1y ago

2021 was crazier. I remember shitty stocks like Affirm or Carvana gapping 15% every day on practically no news

Judgmentality 1y ago
Carvana is currently up more than 100x from their 2022 low.
- bix6 1y ago
  100 P/E… wtf
  - Sohcahtoa82 1y ago
    If you think that's insane, check out TSLA. As of the time of this comment, it's a whopping 247. There is no possible justification for that kind of valuation. Even if Robotaxi is a huge success, they sell more rides than Uber, Lyft, and traditional taxis services combined, it wouldn't justify it.
    - bix6 1y ago
      Tesla at least I can understand the cult but carvana?!? What!!!

ijidak 1y ago

In my years, I've noticed bubbles tend to burst after we move past the phase of bubble skepticism being the dominant voice. When the dominant voices begin to claim, "This time it's different!!" that's usually a sign we're nearing the end. Look this up. During the dot-com bubble, the popular notion emerged that the business cycle might have ended. "The end of the business cycle!!" Many media outlets pushed the narrative that humanity would experience endless growth thanks to technological advancements. During the housing bubble, towards the end, multiple media outlets suddenly started repeating the idea that housing prices, in real terms, have never fallen. When I heard that farcical argument gain steam, I got out of housing immediately—before the bubble burst. So, for me, that AI-bubble skepticism is still the dominant opinion suggests that this bubble is far from over. I think we're closer to the Netscape IPO than we are to the .com crash. Maybe we're at the halfway point. Just one person's opinion.

cosmic_cheese 1y ago
Not a bad theory. Throwing caution to the wind and going all in usually follows abandonment of skepticism, which accelerates the bubble’s progression quickly landing it in its end phase.
ojbyrne 1y ago
Somewhat similar to the Shoeshine Boy Theory: https://quotulatiousness.ca/blog/2020/06/11/in-1929-the-warning-sign-was-getting-stock-tips-from-shoeshine-boys-and-elevator-operators/ https://quotulatiousness.ca/blog/2020/06/11/in-1929-the-warn...
deleted 1y ago
[deleted]
jerf 1y ago
The parallel doesn't hold, because the AI-bubble skepticism was near zero even six months ago. Yes, I was a skeptic, and I know where I was getting my info from, so I know it was not zero, but it was not a significant market force and nobody in the mainstream was issuing any cautionary notes on it. It has now progressed to what you might call a "mainstream contrarian" position. The relevant Overton window has shifted to where it is just barely in the acceptable discourse window. It's been a while, but if I remember my dotcom bubble, that never happened from the zero-skepticism position. It was all RAH RAH RAH and then blammo it blew apart. Skepticism was always around... again, I know because I was a skeptic and I arranged my career, with modest but far from total success, around the bubble not being sustainable, but everyone around me had no idea what I was talking about (although since my alternative was "go to grad school" I didn't get much flak since they figured the market would still be as hot years later). The skeptical position was never in the Overton window, so I don't think the comparison is useful on this particular metric. Personally I'm watching, intrigued, to see how far the general awareness that this is a bubble can go while the bubble refuses to pop. At some point that awareness needs to translate into ceasing to feed the bubble the feedstock capital it is so rapaciously consuming, but "I can always find a bigger idiot to unload on" can run quite a ways, it seems. (I don't find that an appealing investment thesis personally but I seem to be in the minority.)

tananaev 1y ago

Read the article, but couldn't understand how they measured it. To be fair, I think it's definitely a bubble, but it's hard to compare something like this.

kleiba 1y ago
It's a click-baity title, for sure.

marstall 1y ago

Having lived through both ... the job market was INSANE during dot-com. Getting a job was like falling off a tree. If this is 17 times bigger, where are the jobs (serious question)?

badpun 1y ago
The money goes to hardware this time, not to labor.
- jmaestrooper 1y ago
  Hardware doesn't just pop out of the thin air. Data centers need to be built, GPUs need to be produced, and storage, and other compute, and networking, etc etc. All this needs people. Shouldn't there be boom in construction? Hardware manufacturing?
  - orwin 1y ago
    I've read that the US have almost a million skilled worker shortage in construction (especially commercial and industrial that demand more specific skills), and that since a quarter of the demand is for federal/state/county projects that cannot decide as fast as a company to accept rising prices, it also mean the already decaying public infrastructure risk to never be repaired in time (constructing new stuff is more expensive than repairing expensive stuff. More GDP growth i guess, but :/) And you have a boom in hardware manufacturing, in Asia mostly, but even in europe you see new companies popping up (before Covid we had like 2 comapnies that could print custom pcbs, both german, now i found like 5 in France (2 of them are the german who expended but still))
  - badpun 1y ago
    All the electronics (inlcuding the insanely expensive GPUs from Nvidia) are imported from Asia.
mongol 1y ago
Good point. The dot-com co-incided with the Y2K bug timeframe. I don't think getting a job in IT was ever easier.

christkv 1y ago

If it turns out to be a complete waste of time and money there will be a bunch of companies that will go belly up and some that will just see less revenue but still go on. I don't believe this to be the case. Worst case it's mostly a bolt-on for most companies not a "core" money maker. It will be mostly be the hardware vendors like Nvidia and the AI as platform that will get hit.

idkwhattocallme 1y ago

The bubble bursts when Apple announces it's doing good enough (private/secure) LLMs on device. At that point the capex on cloud infra starts to come into question and the dominos start to fall...

fao_ 1y ago
Google's been doing this since at least 2022 and... well, nobody really cares.
goalieca 1y ago
LLM to me are the least interesting part of AI. Deep learning has proven very useful for signal processing and image segmentation among other things. Those are small enough to run on phones. LLM simply don’t seem to be that useful at small scales because the illusion of knowledge falls apart with too few parameters.
kelipso 1y ago
Yeah, it’s only a matter of time till LLMs can easily be run locally by more people and once the market realizes that it’s over.
- gtirloni 1y ago
  You can't run anything close to ChatGPT levels of parameters locally though.
mscbuck 1y ago
As laughable as Apple's efforts have been so far, I think they still have an advantage precisely because of the unified architecture.

megaman821 1y ago

If the bubble pops, the blast radius seems extremely small. Most of the money is coming from companys' excess cash. Even the loans that default will be backed some amount of useful capital. It just doesn't seem likely at all to cause the same pain as the dot-com bubble.

benjaminwootton 1y ago
The public markets are hitting all time highs every week. It’s going to be painful if that pops.
Lapsa 1y ago
"blast radius seems extremely small" - I agree, couple days ago there was an article that such occurence may cause full blown recession in USA
- BoredPositron 1y ago
  It will but not because of companies going down but because the bubble is casting a giant shadow over the real economical deficits we have atm.
  - karmakurtisaani 1y ago
    The S&P500 is largely held up by a small number of tech companies. If they go down, there is no hiding what's really going on in Trumps economy. E: getting some downvotes, feel free to elaborate where you disagree.
    - brazukadev 1y ago
      Not the one downvoting but I'd guess they have a bag full of these stocks
- rsynnott 1y ago
  It would likely cause a technical recession at the very least, but would probably not result in the sort of contagion that some market crashes do.

simianwords 1y ago

The dot com bubble was aberration. It was not even supposed to happen because the prices went back up. The bubble was literally an incorrect prediction by the market. Why isn’t this being discussed? By that I mean that the learning we should take from the dot com bubble is that the bubble should not have burst, not that we should not have let it go that high in the first place.

Fade_Dance 1y ago
>It was not even supposed to happen because the prices went back up The vast majority of the constituents of the DotCom bubble went entirely extinct and their stock prices went to zero. You are looking through a lens of survivorship bias. I'm guessing you are referencing the price of market cap weighted index funds when you say "prices went back up", which is just one aspect of the DotCom bubble. The primary event was the prices of most of the hyped companies going to zero and the investors losing everything. The number prints from market cap weighted indexes are somewhat arbitrary calculations that doesn't necessarily reflect the underlying market behavior. >The dot com bubble was aberration. It was a fairly typical bull mania, seen many times in history, and seen since as well (DotCom 2.0 was the 2020-era cycle with ten billion dollar Peloton, ten billion dollar space tourism companies, companies like Nikola with literally no product hitting 30 billion, etc, but don't take my word for it, look at the chart of the two events: https://static.seekingalpha.com/uploads/2024/10/9/48422113-17284511487545593_origin.png https://static.seekingalpha.com/uploads/2024/10/9/48422113-1...) >the bubble should not have burst Bubbles are often based on a reality of future growth, which is what draws people in. The fact that Amazon was eventually worth obscene amounts of money doesn't negate the fact that hundreds of listed companies went to zero. That is the DotCom bust. The bust of a huge swathe of real companies in the real economy, and their listed stock prices going to zero. Passive ETF domination is more of a recent phenomenon anyway. The world was much more actively managed and stock picking/mutual fund oriented until the last decade or two. Funds like Janus getting decimated with 330 billion AUM in year 2000 money was the catastrophe in the fund space. Index tracker funds like QQQ were secondary to that when it came to DotCom.

marstall 1y ago

bubble bursting data point: I am about to throw away my side project's vibe coded front end (~5000loc) and rewrite it by hand. At the scale it's gotten to, its become too difficult to change. i try to tweak it and it doesn't quite get it right, and then breaks some other thing, ad infinitum. maybe this is the "AI developer" skill - to somehow do it so you dont get to this point - but I ENJOY programming, so i'm going back to doing it by hand. It will have less (probably unnecessary) features but i will be able to craft it to my needs and achieve the daily flow my mental health requires ...

karmakurtisaani 1y ago
Another data point: I recently encountered my first vibe coded website on the wild. Everything looked great, but some fields didn't work, it displayed my data incorrectly and could not process my order. In the end a person had to process my order and they confirmed that their new web site had issues..
- Fade_Dance 1y ago
  All I can think is this is how bad security risks must be on these sorts of projects.
thedougd 1y ago
This happened to me at or near a similar size project. I tried the same project again with Vibe coding but used some very different approaches. Far from a home run on the second try, but it was a much more manageable and maintenable project than my first attempt. I'm still skeptical and presently subscribe to the opinion that AI is a multiplier for skilled, competent engineers but a potential detriment to inexperienced.

somewhereoutth 1y ago

If I understand correctly, the cost of training each next model is the biggest cost - and much of why so much capex has been required. I have also seen it stated that e.g. OpenAI could be profitable right now if they stopped spending on the next model (not sure I'm convinced of that though). Given that a half (or 80% or whatever) trained model is worthless, there is a threshold for each new model cycle to continue. As soon as the anticipated ROI fails to justify that cost, new model production stops. Dead. Old models will still be used, but will become more and more out of date, and less and less useful. This will be the end of AI. (sorry, paraphrasing/developing my comment on an earlier thread)

mgh2 1y ago

https://archive.is/mVUfw https://archive.is/mVUfw

chermi 1y ago

I'll be the "this time it's different" guy. 1) the bubble burst hit telecom spend, which was overbuilt relative to the use. 2) the dot com companies were mostly not profitable with small revenues, while the big players here are either profitable (google, Facebook), backed by big players, and/or have massive revenues and user bases. And growing. 3) people actually use LLMs, a lot. 4) even if the data centers are overbuilt because the big guys get diminishing returns, they're still useful, with immediate demand. Search, ads, content are all going to use some sort of LLM crap, and thus need GPUs. So I don't think there will be as big of a fallout. My bet is there will/should be a healthy winnowing, but not a crash (at least not one due solely to AI hype).

KaiserPro 1y ago
> 2) the dot com companies were mostly not profitable with small revenues, while the big players here are either profitable (google, Facebook), backed by big players, and/or have massive revenues and user bases. And growing. 3) OpenAI is losing 4x its income from operating expenses. Facebook is pouring tens of billions into it Google, fuck knows. These are all loss leaders, looking to make the others fold, rather than say a geared company that is profitable but geared to expand. better AI costs much much more to make and run, and there isn't much brand loyalty.

w10-1 1y ago

For dot-com's it became clear that just having a web site wouldn't move customers. You could expect strong negative signal within a year of putting up the site, prompting broad pull-back. For AI now, the question is (a) how well one can monetize a LLM (size of the market); and (b) how much better one LLM can be than another (enduring competitive advantage). Both of these are generation-long questions. The other factor is who's investing. A lot of money now is from (mostly foreign) non-players who are paying to play, and who have a vested interest in managing their online and business ecosystems. They're not really subject to uncertainty about (a) or (b). Any good LLM will likely be good enough for them, and they already know what they're using it for. So when turbulence hits, those in it for profit will drop out, ceding control to those in it to control society. The bubble bursting is not the important risk.

thedougd 1y ago

I don't know if we're in a bubble, but I'm a bit baffled at the lack of AI in my personal life. Where are all the consumer products? Where I use it outside of work: - Product review summarizations (Amazon.com, HomeDepot.com, etc) - Search summarization (top of DuckDuckGo, Google, etc) - Chat (eg ChatGPT. Better Search, Q&A) It's not on my TV, barely on my iPhone, not in my smart home, just generally not much of a presence for me outside of work. Why isn't it changing my life yet? Or perhaps the average persons?