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Current AI datacenter/model development investment rate is roughly 1T/year. That's a lot. But the US economy is 33T/year. So the investment pays back (roughly)

Current AI datacenter/model development investment rate is roughly 1T/year. That's a lot. But the US economy is 33T/year. So the investment pays back (roughly) over ten years if, each year, the AI investments increase overall productivity by 0.6%, assuming the AI companies can capture half of the value of that productivity gain. > „[AI vendors are] paying for a fixed cost with a depreciating commodity“ That's just a confusing way to say you don't think future models will be worth the development costs. Because if future models are significantly better, why would the price of tokens to access those models deprecate?

jiggawatts 5mo ago
The $1T number seems more promises than reality, which is closer to the $300B to $500B level. Still a big number, but between a third and a half of the value used in the popular media.
flextheruler 5mo ago
These are similar numbers to the dotcom bubble. With GDP growth and the percentage of productivity AI contributes staying the same in this scenario this requires regular gains in revenue or growth. If things just stumble, like with most datacenters going unbuilt the bubble will pop.
timacles 5mo ago
I'm surprised people think LLMs, a thing which mainly excels at advertising, spam and writing code is going to generate that much economic activity.
- ashdksnndck 5mo ago
  Companies whose main core competency is writing code were already making up a big chunk of the economy before AI. Also, less wealthy companies were constrained in their use of software by the inability to afford the salaries of talented programmers (and ripoff practices from software consulting companies who in theory could help). Lowering the cost of building software systems ought to unblock a good amount of economic activity as the technology diffuses.
  - bunderbunder 5mo ago
    Those companies are certainly writing more code. But It isn’t clear that they are increasing their economic productivity. It could even conceivably have the opposite effect by fueling a race to the bottom. e.g. an interesting possible canary in this coal mine is that there’s been a 200% increase in the rate of new apps appearing on Apple’s App Store, but it has not been accompanied by a 200% increase in the rate at which people are buying apps.
    - therealdrag0 5mo ago
      That’s great for consumers.
      - bryanrasmussen 5mo ago
        If the quality of all apps remains high, but if there is an increase of low quality apps it may not necessarily be great for consumers as it becomes difficult to distinguish which are the good and bad quality apps, making it risky to purchase apps.
      - lelanthran 5mo ago
        A lower signal/noise ratio is never better for consumers.
      - bandrami 5mo ago
        Not necessarily. European grocery shoppers report higher satisfaction with the shopping experience than American grocery shoppers do.
    - andwur 5mo ago
      The AI pundits often seem to apply the logic that code output is directly proportional to revenue and/or profit, and as such it follows that an AI usage increase leads to more code which leads to more revenue. I don't believe this aligns with the reality of any major company, unless your business is in the literal sense "selling code" your revenue and profit is tangential to the quantity of code you produce. Google is a good example of this: most of their revenue and profit comes from their ad network, which is disconnected from their development productivity and instead heavily reliant on network effects and time in market. If I was a new competitor with infinite AI funds to throw at whatever problem I choose, I can't simply capture their market by developing an exact copy of Google's ad platform. In the same way, Google can't substantially grow their ad network by coding "more" or "better", they still need more customers and consumers to interact with their network to see any increase in revenue. So it doesn't directly follow that a productivity increase will inherently follow an AI usage increase.
- lesostep 5mo ago
  But what if it kills current ad-tech as we know it (paying to show ads on random sites without any way to verify that the site is legit), and the flow of ad money for legitimate goods turns back to journalism, magazines and other publications? That would be half a trillion[1] redirected to regular people just from Google Ads. [1] snatched my number from here: https://pixis.ai/blog/2025-google-advertising-benchmarks-for-every-industry/ https://pixis.ai/blog/2025-google-advertising-benchmarks-for...
  - ZeroGravitas 5mo ago
    The other day I watched a YouTube video on a work machine with no history and got 2 AI generated video ads for scam products before the video played. An AI generated man talking about his product building journey to make a pressure washer hose that didn't need power (in the AI video it didn't even have a water supply connected!) that was going to be banned in a week because it was too powerful so buy now. I've seen AI slop before and scam ads before but the combination of the two gave me some real tingly spider-sense that things are going to get worse and that some unethical people will make a lot of money from it so be in no hurry to stop it.
- phillipcarter 5mo ago
  Two of the things you’ve listed are some of the most profitable activities in our economy.
  - timacles 5mo ago
    I mean, that says a lot about the kind of crisis out current economy is in. How much longer can the United States Be a world leader when it’s primary function is social media and advertising
    - phillipcarter 5mo ago
      Advertising is huge because it's backed by a ton of very real products that people go and buy. It matters because people don't automatically have awareness of things they could find useful. And writing code is one of the most economically productive activities you can do. Why is it controversial that a technology is good at this?
      - hakfoo 5mo ago
        That value for advertising goes negative on a marginal basis. The first time (or few times) you saw an advert, you were informed of the product's existence. I now know the Hyundai Elantra exists and could potentially be suitable for my vehicle needs. Mission accomplished. The next 10,000 times it's just fighting over share of a finite market. I am not expecting to buy another car for another few years, so reminding me that I can choose an Elantra instead of a Corolla at all times is just vapourising cash. In fact, there's a chance that you do something obnoxious in your ad and actively burn brand reputation. You could argue it's a take on the "everyone uses a different 5% of the features" problem-- that advertisement is going to be within the first "informational" window for someone, but maybe there are more efficient ways to not blast it at uninterested audiences. One other angle might be asking if we still need some markets to be competitive in the first place. You don't need ads if it's a "when you need X, you'll know where to find it" sort of product. If we nationalized the insurance industry alone, we'd probably eliminate a detectable percentage of ad volume.
dgellow 5mo ago
A few things, I think you’re missing the point here - most tasks do not require the latest frontier models, even if they are a magnitude more intelligent (we don’t actually know if that will be the case). Current Gemini flash is cheap, fast, and pretty capable with good guidance for most tasks - now that companies pay API costs instead of a subscription they will be setting restrictions on token use to not have their budget explode (like Uber in this submission), that’s a strong incentive to NOT use expensive models, and limit their thinking budget - there is competitive pressure from China and others who can offer very decent performances at a fraction of the token price - the price of tokens for the frontier models is likely to go up, but the price to access older models is what depreciates! The overall price per token is going down now that we are in a new world where companies understand that token maxing is one of the stupidest concept ever created by humankind.
PunchyHamster 5mo ago
The cost of power cost increase alone on industry gonna erase all gains from it. You can't consider it in vacuum. AI takes limited resources. So far it winded up cost on near every consumer electronics that runs an OS, and it winded up cost of energy that is used by the entire industry and every single customer It's not just the cost of datacenters, it's cost of infrastructure (that given current direction of US govt will just be paid from people's fucking taxes and bills..) and cost of other industries turning outright unprofitable "thanks" to demands of AI

jiggawatts 5mo ago

The $1T number seems more promises than reality, which is closer to the $300B to $500B level. Still a big number, but between a third and a half of the value used in the popular media.

flextheruler 5mo ago

These are similar numbers to the dotcom bubble. With GDP growth and the percentage of productivity AI contributes staying the same in this scenario this requires regular gains in revenue or growth. If things just stumble, like with most datacenters going unbuilt the bubble will pop.

timacles 5mo ago

I'm surprised people think LLMs, a thing which mainly excels at advertising, spam and writing code is going to generate that much economic activity.

ashdksnndck 5mo ago
Companies whose main core competency is writing code were already making up a big chunk of the economy before AI. Also, less wealthy companies were constrained in their use of software by the inability to afford the salaries of talented programmers (and ripoff practices from software consulting companies who in theory could help). Lowering the cost of building software systems ought to unblock a good amount of economic activity as the technology diffuses.
- bunderbunder 5mo ago
  Those companies are certainly writing more code. But It isn’t clear that they are increasing their economic productivity. It could even conceivably have the opposite effect by fueling a race to the bottom. e.g. an interesting possible canary in this coal mine is that there’s been a 200% increase in the rate of new apps appearing on Apple’s App Store, but it has not been accompanied by a 200% increase in the rate at which people are buying apps.
  - therealdrag0 5mo ago
    That’s great for consumers.
    - bryanrasmussen 5mo ago
      If the quality of all apps remains high, but if there is an increase of low quality apps it may not necessarily be great for consumers as it becomes difficult to distinguish which are the good and bad quality apps, making it risky to purchase apps.
    - lelanthran 5mo ago
      A lower signal/noise ratio is never better for consumers.
    - bandrami 5mo ago
      Not necessarily. European grocery shoppers report higher satisfaction with the shopping experience than American grocery shoppers do.
  - andwur 5mo ago
    The AI pundits often seem to apply the logic that code output is directly proportional to revenue and/or profit, and as such it follows that an AI usage increase leads to more code which leads to more revenue. I don't believe this aligns with the reality of any major company, unless your business is in the literal sense "selling code" your revenue and profit is tangential to the quantity of code you produce. Google is a good example of this: most of their revenue and profit comes from their ad network, which is disconnected from their development productivity and instead heavily reliant on network effects and time in market. If I was a new competitor with infinite AI funds to throw at whatever problem I choose, I can't simply capture their market by developing an exact copy of Google's ad platform. In the same way, Google can't substantially grow their ad network by coding "more" or "better", they still need more customers and consumers to interact with their network to see any increase in revenue. So it doesn't directly follow that a productivity increase will inherently follow an AI usage increase.
lesostep 5mo ago
But what if it kills current ad-tech as we know it (paying to show ads on random sites without any way to verify that the site is legit), and the flow of ad money for legitimate goods turns back to journalism, magazines and other publications? That would be half a trillion[1] redirected to regular people just from Google Ads. [1] snatched my number from here: https://pixis.ai/blog/2025-google-advertising-benchmarks-for-every-industry/ https://pixis.ai/blog/2025-google-advertising-benchmarks-for...
- ZeroGravitas 5mo ago
  The other day I watched a YouTube video on a work machine with no history and got 2 AI generated video ads for scam products before the video played. An AI generated man talking about his product building journey to make a pressure washer hose that didn't need power (in the AI video it didn't even have a water supply connected!) that was going to be banned in a week because it was too powerful so buy now. I've seen AI slop before and scam ads before but the combination of the two gave me some real tingly spider-sense that things are going to get worse and that some unethical people will make a lot of money from it so be in no hurry to stop it.
phillipcarter 5mo ago
Two of the things you’ve listed are some of the most profitable activities in our economy.
- timacles 5mo ago
  I mean, that says a lot about the kind of crisis out current economy is in. How much longer can the United States Be a world leader when it’s primary function is social media and advertising
  - phillipcarter 5mo ago
    Advertising is huge because it's backed by a ton of very real products that people go and buy. It matters because people don't automatically have awareness of things they could find useful. And writing code is one of the most economically productive activities you can do. Why is it controversial that a technology is good at this?
    - hakfoo 5mo ago
      That value for advertising goes negative on a marginal basis. The first time (or few times) you saw an advert, you were informed of the product's existence. I now know the Hyundai Elantra exists and could potentially be suitable for my vehicle needs. Mission accomplished. The next 10,000 times it's just fighting over share of a finite market. I am not expecting to buy another car for another few years, so reminding me that I can choose an Elantra instead of a Corolla at all times is just vapourising cash. In fact, there's a chance that you do something obnoxious in your ad and actively burn brand reputation. You could argue it's a take on the "everyone uses a different 5% of the features" problem-- that advertisement is going to be within the first "informational" window for someone, but maybe there are more efficient ways to not blast it at uninterested audiences. One other angle might be asking if we still need some markets to be competitive in the first place. You don't need ads if it's a "when you need X, you'll know where to find it" sort of product. If we nationalized the insurance industry alone, we'd probably eliminate a detectable percentage of ad volume.

dgellow 5mo ago

A few things, I think you’re missing the point here - most tasks do not require the latest frontier models, even if they are a magnitude more intelligent (we don’t actually know if that will be the case). Current Gemini flash is cheap, fast, and pretty capable with good guidance for most tasks - now that companies pay API costs instead of a subscription they will be setting restrictions on token use to not have their budget explode (like Uber in this submission), that’s a strong incentive to NOT use expensive models, and limit their thinking budget - there is competitive pressure from China and others who can offer very decent performances at a fraction of the token price - the price of tokens for the frontier models is likely to go up, but the price to access older models is what depreciates! The overall price per token is going down now that we are in a new world where companies understand that token maxing is one of the stupidest concept ever created by humankind.

PunchyHamster 5mo ago

The cost of power cost increase alone on industry gonna erase all gains from it. You can't consider it in vacuum. AI takes limited resources. So far it winded up cost on near every consumer electronics that runs an OS, and it winded up cost of energy that is used by the entire industry and every single customer It's not just the cost of datacenters, it's cost of infrastructure (that given current direction of US govt will just be paid from people's fucking taxes and bills..) and cost of other industries turning outright unprofitable "thanks" to demands of AI