5 ms·

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 mone

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?
  - ToucanLoucan 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. From what I've read: The cost to AI companies, per inference as a single operation, is going down. However, all newer models, all reasoning models, and their "agents" thing that's still trying desperately to be an actual product category all require magnitudes more inferences per request to operate. It's also worth noting that code generation and debugging, which is one of the few LLM applications I will actually say has a use and is reasonably good, also costs far more inferences per request to operate. And that number of inferences can increase massively with a sufficiently large chunk of code you're asking it to look at/change. > 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? I mean, not really? If the companies enter bankruptcy that's a pretty solid indicator that the models are not profitable to operate, unless you're envisioning this as like a long-tail support model that you see with old MMO games, where a company picks up a hugely expensive to produce product, like LOTRO, and runs it with basically a skeleton crew of devs and support folks for the handful of users who still want to play it, and eeks out a humble if legitimate profit for doing so. I guess I could see that, but it's also worth noting that type of business has extremely thin margins, and operating servers for old MMO games is WAY less energy and compute intensive than running any version of ChatGPT post 2023. Edit: Also, worth noting specifically in the case of OpenAI are it's deep and OLD ties to Microsoft. Microsoft doesn't OWN OpenAI in any meaningful sense, but it is incredibly core to it's entire LLM backend. IMO (not a lawyer) if OpenAI were to go completely belly up, I'm not even sure the models would go to any sort of auction, unless Microsoft was ready to just let them do so. I think they'd devour whatever of the tech stack is available whole without even really spending too much, if any, money on it and continue running it as is.
hyperbovine 1y ago
See comments elsewhere in this thread. To cite one well known recent example, Oracle stock went crazy recently (and Larry Ellison briefly became the world’s richest person) after they disclosed in their earnings report that they are expecting something like $400b in revenue from serving OpenAI in the coming years. These overinflated expectations systematically multiply and propagate until you’ve arrive at the situation we’re in. As soon as that does _not_ happen and everyone realizes it, the whole house of cards come crashing down, in a very 1929 sort of way. This is the point TFA is making, albeit a bit hyperbolically.
- piva00 1y ago
  It also happened in the dotcom bubble, telecom companies were providing leasing/loans to their customers to purchase more networking equipment. Very similar to the circular funding happening between Nvidia, and their customers, Nvidia funding investments in AI datacenters which get spent in Nvidia equipment, each step of the cycle has to take a cut for paying their own OpEx where the money getting back to Nvidia diminishes in each pass through the cycle.
_ZeD_ 1y ago
everyone will lose money.
- jcattle 1y ago
  How? Everyone everyone? How about some guy not invested in the stock market, building a house and working as a plumber be impacted?
  - nemomarx 1y ago
    If his clients lose all their money in stocks or lose their jobs he also loses work. Depressions tend to impact everyone in the end as unemployment gets high enough

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?
- ToucanLoucan 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. From what I've read: The cost to AI companies, per inference as a single operation, is going down. However, all newer models, all reasoning models, and their "agents" thing that's still trying desperately to be an actual product category all require magnitudes more inferences per request to operate. It's also worth noting that code generation and debugging, which is one of the few LLM applications I will actually say has a use and is reasonably good, also costs far more inferences per request to operate. And that number of inferences can increase massively with a sufficiently large chunk of code you're asking it to look at/change. > 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? I mean, not really? If the companies enter bankruptcy that's a pretty solid indicator that the models are not profitable to operate, unless you're envisioning this as like a long-tail support model that you see with old MMO games, where a company picks up a hugely expensive to produce product, like LOTRO, and runs it with basically a skeleton crew of devs and support folks for the handful of users who still want to play it, and eeks out a humble if legitimate profit for doing so. I guess I could see that, but it's also worth noting that type of business has extremely thin margins, and operating servers for old MMO games is WAY less energy and compute intensive than running any version of ChatGPT post 2023. Edit: Also, worth noting specifically in the case of OpenAI are it's deep and OLD ties to Microsoft. Microsoft doesn't OWN OpenAI in any meaningful sense, but it is incredibly core to it's entire LLM backend. IMO (not a lawyer) if OpenAI were to go completely belly up, I'm not even sure the models would go to any sort of auction, unless Microsoft was ready to just let them do so. I think they'd devour whatever of the tech stack is available whole without even really spending too much, if any, money on it and continue running it as is.

hyperbovine 1y ago

See comments elsewhere in this thread. To cite one well known recent example, Oracle stock went crazy recently (and Larry Ellison briefly became the world’s richest person) after they disclosed in their earnings report that they are expecting something like $400b in revenue from serving OpenAI in the coming years. These overinflated expectations systematically multiply and propagate until you’ve arrive at the situation we’re in. As soon as that does _not_ happen and everyone realizes it, the whole house of cards come crashing down, in a very 1929 sort of way. This is the point TFA is making, albeit a bit hyperbolically.

piva00 1y ago
It also happened in the dotcom bubble, telecom companies were providing leasing/loans to their customers to purchase more networking equipment. Very similar to the circular funding happening between Nvidia, and their customers, Nvidia funding investments in AI datacenters which get spent in Nvidia equipment, each step of the cycle has to take a cut for paying their own OpEx where the money getting back to Nvidia diminishes in each pass through the cycle.

_ZeD_ 1y ago

everyone will lose money.

jcattle 1y ago
How? Everyone everyone? How about some guy not invested in the stock market, building a house and working as a plumber be impacted?
- nemomarx 1y ago
  If his clients lose all their money in stocks or lose their jobs he also loses work. Depressions tend to impact everyone in the end as unemployment gets high enough