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The AI bubble is 17 times bigger than the dot-com bust
- billy99k 1y agoIt's not a bubble yet. Many companies are already getting direct value out of AI. The Dot com burst happened because there were lots of unsustainable business models. I don't see them as equal.
- Terr_ 1y ago> Many companies are already getting direct value out of AI. There's always some "value" in a bubble, but how does one confirm that it's enough "direct value" that the investments are proportionate? Enormous investments should go with enormous benefits, and by now a very-measurable portion of expected benefit should have arrived...
- belter 1y ago> Many companies are already getting direct value out of AI Name one
- johnfn 1y agoCursor?
- raw_anon_1111 1y agoIs cursor profitable?
- bdangubic 1y agogetting direct value and being profitable are two different things… META and AMZN and … have all been non-profitable early
- raw_anon_1111 1y agoMeta was profitable long before they went public and never had any significant amount of losses and Amazon had profitable unit economics and they were investing in real things like warehouses. But still that is the ultimate survivorship bias. Is each new customer that Cursor has bringing in more money than they cost Cursor?
- bdangubic 1y agoif we learned anything over the last decade or so it is that profitability is absolutely irrelevant. just look at UBER… value is the only thing that matters, you can be significantly unprofitable for a very, very long time
- raw_anon_1111 1y agoAgain survivorship bias. And all of the companies that failed? Let’s just look at how the YC companies that have gone public are doing https://medium.com/@Arakunrin/the-post-ipo-performance-of-y-combinator-companies-a-mixed-bag-of-success-and-struggle-58e9a4006f01 https://medium.com/@Arakunrin/the-post-ipo-performance-of-y-...
- bdangubic 1y agosome companies prosper, some die. some AI companies will prosper, some will die
- raw_anon_1111 1y agoTrue. But it’s the whole idea that if they lose a lot of money now, they will definitely be successful. This is the thought process these let’s startups - especially a lot of the YC companies - to underpay developers and give them equity that will statistically be worthless.
- tibbydudeza 1y agoNVidia :).
- sph 1y agoGP's question should've been "name two", because there is only one winner here, and it's a dude with a leather jacket.
- beberlei 1y agocustomers also got value out of pets.com selling them products for below cost.
- waterTanuki 1y ago> Many companies are already getting direct value out of AI. Source that immediately refutes this claim: https://www.artificialintelligence-news.com/wp-content/uploads/2025/08/ai_report_2025.pdf https://www.artificialintelligence-news.com/wp-content/uploa... > Despite $30–40 billion in enterprise investment into GenAI, this report uncovers a surprising result in that 95% of organizations are getting zero return
- dragonwriter 1y ago> It's not a bubble yet. Yes, it is. > Many companies are already getting direct value out of AI. Many companies were already getting direct value out of the internet during the dotcom bubble. Bubbles do not require the absence of real value being delivered by the bubble industry, they require levels of investment that are anticipate more real value that can be delivered on a time frame for existing valuations across the industry to be sustainable. > The Dot com burst happened because there were lots of unsustainable business models. There are lots of unsustainable business models in the AI space, too. If you are looking at OpenAI, Google, and Anthropic (even though they, too, may be somewhat inflated), you are making the same mistake as looking at Google (ironically) during the dotcom bubble. > I don't see them as equal. They aren't equal, the AI bubble is much bigger.
- paulpauper 1y agoPeople make this type of prediction every year. useless.What if it becomes 20x bigger? There is nothing actionable contained in this observation.
- gretch 1y agoEach time this happens, there's a new generation of people that think "surely the market will become rational again before I'm insolvent"
- arisAlexis 1y agoMarket is very rational, AI is exponential and everyone understands what that means for world GDP.
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- hansmayer 1y agoAI is exponential? What do you mean, like, inversely exponential?
- arisAlexis 1y agoCan you read charts?
- hansmayer 1y agoWhy, yes I can, that's why I could not but wonder at your statement. I can see it as being directly exponential in burning through cash and GPUs and inversely exponential in terms of benefits delivered. What else do you have for us ?
- arisAlexis 1y agoI don't think you can be convinced with evidence sorry
- arisAlexis 1y agoBecause AI is indeed working.
- deadbabe 1y agoIt’s disingenuous because since the dotcom bubble there has been at least 2x inflation, and then on top of that the tech market has expanded a lot more than what it was in 1999, so of course it will be bigger. This is nothing.
- sharpfuryz 1y agoBubble/Not bubble, what does that really change? The economy will rise and fall one way or another; it is really in cycles. If the bubble pops, it will be a sharper fall. Unless you own AI, tech stocks - probably not a big deal
- BenFranklin100 1y agoAll i know is that I’m looking forward to picking up deep learning programmers for biomed applications in about nine months time.
- bitwize 1y agoI've quipped a lot here about s/AI/statistics/g, but the applications where that is most straightforwardly true are probably the most solid that are going to produce a lot of value over the long term. Before computers came along, we really couldn't fit curves to data much beyond simple linear regression. Too much raw number crunching to make the task practical. Now that we have computers—powerful ones—we've developed ever more advanced statistical inference techniques and the payoff in terms of what that enables in research and development is potentially immense.
- BenFranklin100 1y agoYep. Right now it’s hard for biomed companies to compete on salary from the AI craze, but if the bubble bursts salaries will come back to down to earth. Deep/machine learning will, imo, prove to have large societal benefits over the next decade.
- Agingcoder 1y agoWhat I want to know is whether people who believe in a bubble actually short AI/tech-related stocks.
- ng12 1y agoUsually not, because shorting a broad chunk of market is very hard. "Markets can remain irrational longer than you can remain solvent".
- sitzkrieg 1y agoor you could sell a single broad market etf lol. or buy a short etf.. it hasn't been hard to selectively exposure yourself to dang near any slice of equities since the ETF boom
- ng12 1y agoShort ETFs are usually leveraged and make for a really good way to lose money. Realistically, timing is the issue. "This is a bubble" is worth ~nothing. "This is a bubble and it will pop in late December" is worth a lot if you're correct.
- sitzkrieg 1y agothe question was of exposure, not timing.
- lelanthran 1y ago> What I want to know is whether people who believe in a bubble actually short AI/tech-related stocks. Why? What does that tell you?
- ThrowawayTestr 1y agoThe common phrase is "putting one's money where their mouth is"
- dist-epoch 1y agoWhen everybody agrees about something in finance, it's typically the other way around. Reminds me of the "everybody knows Tether doesn't have the dollars it claims and it's collapse is imminent" that was parroted here for years.
- GenerWork 1y agoPeople here are still in denial that crypto will ever have a use case, meanwhile you have Larry Fink saying that he wants to tokenize the financial ecosystem.
- AaronAPU 1y agoNumber go up isn’t a use case. This seems to be the disconnect.
- sph 1y ago> Number go up isn’t a use case. Ever heard of gold or real estate? https://en.wikipedia.org/wiki/Store_of_value https://en.wikipedia.org/wiki/Store_of_value
- Yizahi 1y agoToken do have use case, obviously. Like, we can see countless usecases with our own eyes. Tokens don't have any legal and at the same time competitive use case, that was the argument. All of those castle in sky constructs about how there would be property deeds on blockchain (technically and legally impossible), how there there would be game assets on blockchain (also technically impossible plus no game studio would ever be interested), how ticket scalpers would solved on blockchain (technically possible, but no ticket vendor is interested because they are the ones who benefit from scalpers) etc. And the list goes on. All of those legal use cases were a dud, because it is simply a shitty technology. But to reiterate, there is great and massive actual use case for the tokens, yes. No one would argue against it :) . We just think that it is bad.
- singularity2001 1y ago
- dcre 1y ago“At the heart of the note is a golden rule I’ve developed, which is that if you use large language model AI to create an application or a service, it can never be commercial. One of the reasons is the way they were built. The original large language model AI was built using vectors to try and understand the statistical likelihood that words follow each other in the sentence. And while they’re very clever, and it’s a very good bit of engineering required to do it, they’re also very limited. The second thing is the way LLMs were applied to coding. What they’ve learned from — the coding that’s out there, both in and outside the public domain — means that they’re effectively showing you rote learned pieces of code. That’s, again, going to be limited if you want to start developing new applications.” Frankly kind of amazing to be so wrong right out of the gate. LLMs do not predict the most likely next token. Base models do that, but the RLed chat models we actually use do not — RL optimizes for reward and the unit of being rewarded is larger than a single token. On the second point, approximately all commercial software consists of a big pile of chunks of code that are themselves rote and uninteresting on their own. They may well end up at the right conclusion, but if you start out with false premises as the pillars of your analysis, the path that leads you to the right place can only be accidental.
- criticalfault 1y agoCan you explain a bit more on the topic of what happens after the base model?
- dcre 1y agoThe base model is a pure next token predictor. It just continues whatever prompt you give it — if you ask it a question, it might just keep elaborating the question. To turn these models into something that can actually chat (and more recently, that can do things like tool calls) they do a second phase of training, including reinforcement learning, which teaches the model to maximize some kind of reward signal meant to represent good answers of various kinds. This reward signal applies at the level of the whole response (or possibly parts of the response) so it is not predicting the most likely next token. I don’t know in an absolute sense how much this ends up changing the base model weights, and it’s surprisingly hard to find discussions of this, I guess because the state of the art is quite secret. But it’s clear that RL is important for getting the models to become useful. This is a reasonable explanation, though as a non-expert I can’t vouch for the formal parts: https://www.harysdalvi.com/blog/llms-dont-predict-next-word/ https://www.harysdalvi.com/blog/llms-dont-predict-next-word/ There are other posttraining techniques that are not strictly speaking RL (again, not an expert) but it sounds to me like they are still not teaching straightforward next token prediction in the way people mean when they say LLMs can’t do X because they’re merely predicting the most likely next token based on the training corpus.
- ctoth 1y ago> There are certain bullsh*t jobs out there — some parts of management, consultancy, jobs where people don’t check if you’re getting it right or don’t know if you’ve got it right. Market Analyst, perhaps?
- zippyman55 1y agoI suggest AI is cover to reign these jobs in. All those people who had a nice paying job, but did about 2 hrs work a day. AI is coming for them. In some respects, management previously looked the other way, but that is becoming less frequent and its easy to blame the reduction on AI.
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- jauntywundrkind 1y agoOk but Amazon is how many times bigger than the dot-com bubble?
- maroon_unperson 1y ago0.45 times. Less if inflation adjusted. Amazon's market cap is 2.27 trillion [0] and 5 trillion was wiped off the NASDAQ over two years [1]. [0] https://www.macrotrends.net/stocks/charts/AMZN/amazon/market-cap https://www.macrotrends.net/stocks/charts/AMZN/amazon/market... [1] https://web.archive.org/web/20191218173143/https://www.latimes.com/archives/la-xpm-2006-jul-16-fi-overheat16-story.html https://web.archive.org/web/20191218173143/https://www.latim...
- lukeschlather 1y agoThe bubble referenced in the article is $1 Trillion, compared to Google's $3 trillion market cap. And OpenAI / Anthropic legitimately compete with Google Search. I feel weirdly like AI's detractors are somehow drinking too much of the AI Kool-Aid. All AI has to do to justify these valuations is capture 1/3rd of Google. Unless Google is wildly overvalued, which it may be, but that's not a phenomenon that has anything to do with AI hype. And there are legitimately applications beyond search, I don't know how big those markets are, but it doesn't seem that odd to suggest they might be larger than the search market.
- exsomet 1y ago> All AI has to do to justify these valuations is capture 1/3rd of Google. Is that all? It really is that easy huh.
- bdangubic 1y ago> And OpenAI / Anthropic legitimately compete with Google Search They compete legitimately with Google Search as I compete legitimately with Jay-Z over Beyonce :)
- OrvalWintermute 1y agoJust ask yourself this question though... Is there a reason why AI cannot be far better than Google at providing results to queries? Inherently, they are in the same business, but I am not very aware of any AI specifically aimed right at Google's business....... but it is completely logical that they would. Furthermore, it appears that Google just sells off placement to the highest bidder, and these AIs could easily beat that by giving free AI access in exchange for nibbling at the queries and adding a tab of 'sponsored results'
- bdangubic 1y ago> Is there a reason why AI cannot be far better than Google at providing results to queries? There isn't just like there isn't any reason why Bing or Duck could have overtaken Google all these years. > but it is completely logical that they would. Logical yes, there are a lot of things that are logical, actually making something logical practical is whole other thing... > it appears that Google just sells off placement to the highest bidder They have been doing this for years while their search and other business has been growing and growing... > these AIs could easily beat that by giving free AI access in exchange for nibbling at the queries and adding a tab of 'sponsored results' agree 100% on everything here except easily part :)
- placebo 1y agoEven if this is true, a possible takeaway is that after the bubble bursts and the dust settles, AI's effect will be 17 times stronger than that of the Internet... Personally, I think it will end up being much higher, but that doesn't mean I'm going to invest in it any time soon
- tim333 1y agoSee also https://news.ycombinator.com/item?id=45493287 https://news.ycombinator.com/item?id=45493287 246 comments and https://news.ycombinator.com/item?id=45465969 https://news.ycombinator.com/item?id=45465969 111 comments both on "AI bubble is 17 times bigger" By the way the 17 times refers to an interest rate model and is largely unrelated to AI. Explained here https://www.youtube.com/watch?v=uz2EqmqNNlE&t=306 https://www.youtube.com/watch?v=uz2EqmqNNlE&t=306
- ChrisArchitect 1y agoPreviously: https://news.ycombinator.com/item?id=45465969 https://news.ycombinator.com/item?id=45465969
- 1vuio0pswjnm7 1y ago"Earlier this month, Garran published a report claiming that we are in "the biggest and most dangerous bubble the world has ever seen."" Here is the report https://www.youtube.com/watch?v=uz2EqmqNNlE https://www.youtube.com/watch?v=uz2EqmqNNlE
- jimbo808 1y agoThis may just be wishful thinking, but is it reasonable to hope that it won't hit the middle class as bad this time around? Seems like most of the people holding the AI bags are the very wealthy, and it doesn't seem like these AI companies are employing a huge number of people.