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These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.
by paxys 3mo ago
These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.
- hahahaa 3mo agoToo big to fail now, so everything is fine.
- rkozik1989 3mo agoThey've literally rated the debt as too big to fail in order to get foreign sovereign wealth funds (mostly gulf states) to agree to put up the money for loans. This has been happening this entire time.
- hahahaa 3mo agoWow. So plain. No "AAA" euphemisms this time round eh!
- toomuchtodo 3mo agoThe top will be when Jim Cramer loudly proclaims there is no problem at Oracle and gives a buy rating. https://www.youtube.com/watch?v=gUkbdjetlY8 https://www.youtube.com/watch?v=gUkbdjetlY8
- mynameisjonny_ 3mo ago> Everyone is in too deep to now admit that there’s a problem I'm not sure how to square this with the dramatic improvement in LLM capabilities in the last 8-9 months. If anything, it makes the earlier investments look prescient?
- ForHackernews 3mo agoNo, because the LLMs will keep getting more efficient and capable. Distillation and quantization will mean firms spending trillions on giant data centres are left holding the bag. I suspect Apple ends up laughing all the way to the bank. https://github.com/microsoft/BitNet https://github.com/microsoft/BitNet
- InsideOutSanta 3mo agoEveryone who initially failed at this stumbled backward into victory.
- skybrian 3mo agoI suppose there is some limit, but it’s a bit hard to believe that Google won’t find a good use for more data centers.
- InsideOutSanta 3mo agoThe problem is that the dramatic improvement in capabilities is not translating to a dramatic increase in revenue.
- DiscourseFan 3mo agoThe technology is too hard to capitalize on. It’s far more democratic than, say, an iPhone, or a search engine. Anyone can download a model to their computer and start toying with it, how do you profit off of that? Even if everyone was constantly tokenmaxxing (which we cannot, since the process gets fucked up if you let it run entirely on its own), it probably still wouldn’t be marginally profitable.
- erwald 3mo ago"Anthropic and OpenAI generate a lot of revenue with relatively few employees – an estimated $9M and $5.5M in revenue per employee (RPE), respectively. If either company were to go public, it would have a higher RPE than any public tech company on Forbes’ Global 2000 list." https://epoch.ai/data-insights/revenue-per-employee-ai-companies https://epoch.ai/data-insights/revenue-per-employee-ai-compa...
- toomuchtodo 3mo agoThis assumes they do not have to increase prices to be profitable, and that they will continue to have customers when customers can switch to open models at similar performance. As an analogy, Uber could crank up rates after the VC growth play was over to stoke revenue and profits because they have a duopoly with Lyft. LLM consumers can switch to Kimi models fairly trivially today, and whatever the frontier open model landscape looks like later. Model training and development is expensive, self hosted inference on open models not so much. https://www.wheresyoured.at/the-openai-bubble/ https://www.wheresyoured.at/the-openai-bubble/ has the math. (a component of my work is currently building scaffolding so our organization can swap out commercial inference providers for on prem inference infra to derisk against the eventual rug pull when the math gets icky for LLM providers, while consuming as much subsidized tokens as we can until then, when it makes sense to use tokens for work)
- grey-area 3mo agoFor certain values of ‘dramatic improvement’. Is lots more important work being done with LLMs? Not much sign of it yet, they’ve been helpful for experts at times (e.g. vuln research or maths research) but that hardly justifies the vast sums for Google investors.
- throwaway27448 3mo agoPresumably at some point you need a measurable productivity return yea? Maybe organizations are not built around skill and aptitude so much as liability, which LLMs cannot provide barring (very welcome and also very unlikely) legislation in the US.
- budsniffer952 3mo ago>Presumably at some point you need a measurable productivity return yea? At what point? This technology is brand new. Did you think we were going to double productivity in 3 years? Capacity is being built. It's hard to build data centres, there are no chips, there is no memory, it's hard to get talent, we don't have the energy to power the facilities. No one knows where this is going. We are scratching the surface. There is an absolute boom happening, and yet every day I have log onto Hacker News and read this nonsense about everything falling apart. Are we living in the same universe??? So-called "technologists" saying, "meh, it's not that cool". Okay. Guess what? You're not Michael Burry. Nobody cares or will care that you "called it". Look around this place: you aren't even slightly contrarian.
- TheOtherHobbes 3mo ago"We would be profitable if we had the resources but we don't," isn't the smackdown argument you seem to believe it is. There used to be a thing where successful tech companies were profitable right out of the gate, and very successful companies doubled those profits for years, and companies who bought and used the tech could point to clear, actioned, benefits and cost savings. Now it's all "This will be really, really profitable one day, probably, if the omens align and we can deal with all of the problems."
- WarmWash 3mo agoThe infamous 2025 MIT study that found almost all AI pilots in companies were failing, also found that virtually every worker was using AI many times a week if not daily. Turns out people just use their personal AI accounts rather than company ones. Which would make sense if you want to claim the work the AI does as your own.
- vrganj 3mo agoI'm not sure I've seen what I would call dramatic improvement since maybe GPT4? Sure, things got better. But I'd call it iterative more than revolutionary. I still wouldn't trust any of the models to do anything meaningful unattended. They all still do dumb shit all the time. Plus, even if they were genuinely dramatically better, the businesses sure as hell aren't. They're burning money left and right, they have no moat, Chinese open models are basically equivalent these days. What's the path to profitability, or hell, break-even? How do you envision this being anything but a giant money pit?
- budsniffer952 3mo ago[flagged]
- dgellow 3mo agoIt doesn’t matter… are those companies using AI getting a positive ROI? So far there is no signs it is the case, unless you’re yourself selling AI stuff
- budsniffer952 3mo ago>are those companies using AI getting a positive ROI? Yes. >So far there is no signs it is the case How could you possibly know this?
- weakfish 3mo agoHow could you? Can _someone_ in this thread _please_ provide a source?
- TheOtherHobbes 3mo agoBecause there are almost no "We used AI to save money, improve our services, and gain more customers" success stories. There's a lot of "We fired a lot of people because we're sheep and now we're having to hire some of them back" stories. And a lot of "A few engineers are doing a lot more, but we're not quite sure how to turn that into actual money" stories. And even more "We told everyone to tokenmaxx, and they did, and then we realised it was costing too much, so we stopped," stories. But there really hasn't been a deluge of "AI has cut costs and increased profits while also improving quality" stories. There has been a small outbreak of vibe-startups offering fairly generic services - mostly marketing and adjacent - who are doing okay, possibly. But established tech? Doubt.
- finnthehuman 3mo ago> not sure how to square this with the dramatic improvement in LLM capabilities A good tech demo doesn’t matter to the business if the products don’t become profitable at the scale the investment chased.
- epolanski 3mo agoIt's an internet/railroad issue again. Tech is real, impact is gigantic, long term winners hard to predict, capex spending hard to recoup soon, if ever. And differently than internet or rails, you don't build once and maintain later, but enter a loop of ever increased spending to keep on top of the arms race and ever exploding usage.
- spiderfarmer 3mo ago[flagged]
- dgellow 3mo agoCannot hear what you’re saying with all those alarms blaring non stop since a year. Someone should do something about them, maybe turn them off, I don’t know
- Izmaki 3mo agoSink rate! Sink rate! Pull up! Pull up! Too low; terrain. Too low; terrain. Wind shear! Stall! Stall!
- vrganj 3mo agoWhat would be the best thing to do with ones investments considering these alarms? Say you had some money in cash rn, what should one do? Wait for a crash and buy stuff up cheap? Put it in some safe category? This stuff is stressing me out and I do believe it's gonna come crashing down sooner or later, but I don't know enough about investments to know how to best come out unscathed.
- bognition 3mo agoDiversify! Historically, the average length of a recession has been 12-24 months. So set up a system whereby you won’t screw’s yourself over by selling when things are low, but instead you can weather the storm. Build a rainy day fund. Determine how much cash you will need if you are out of a job and how long you think that will last, allocate some portion of that amount into low risk bonds. Russ way if you need cash you aren’t selling investments at a big loss. If you have enough liquidity put some in real estate as a forced savings vehicle as it’s harder to liquidate than stocks. Then just sit out any coming storm.
- vrganj 3mo agoBut diversify into what? If we assume this takes down the US economy and bonds, what then? International bonds/stocks? Won't those also be too entangled? Precious metals?
- WarmWash 3mo agoThose gold guys have been decrying the collapse the US economy for 25 years now, so you'll be in good company.
- SoftTalker 3mo agoIf there's a big AI bust, there will be no escaping it. Like 2008, the entire economy will slow down. This time it might even end in a war. A well diversified portfolio e.g. index funds will weather the storm and recover. Build your emergency fund first if you don't have one. 6-12 months of salary in cash or CDs. Then dollar-cost average into well diversified equities. Don't watch them day-to-day. You're concerned about their value in 20-30 years, not tomorrow.
- Aurornis 3mo agoThe alarms in this case are that the profits and margins won’t be as high as we’ve come to expect from cloud companies. Other than Oracle’s questionable spending spree, these big tech companies are still in very good financial positions. The enormous R&D and infrastructure spends are just feeling unusual to investors who got comparable with the unusually high margins and low costs for SaaS companies. Now they have to put a lot of that money back into the business like more normal companies.
- epolanski 3mo agoAlso all these companies went from buybacks to dilution and debts again.
- minraws 3mo agoIf the margins aren't as high then there will be a repricing for all the massive cloud companies, which means several trillions worth of valuations to be cut from the companies. AWS/Azure/GCP/Oracle/SpaceX/etc neoclouds... are worth a combined 10+Trillion. That going down by 50-70% is going to be insane.
- benoau 3mo agoThat would only happen if they need to invest like this forever, otherwise it's just a short-term dent in their margins while they re-calibrate.
- LunaSea 3mo agoWhy? GPUs are replaced every 3 to 5 years. This is going to be an ongoing operational cost forever. It will probably increase more if larger models require bigger VRAM sizes.
- benoau 3mo agoThat cost has always been there and allowed for their lucrative margins. It's the upfront cost of building/populating their datacenters (many more than before) that is eating those margins.
- miltonlost 3mo agoMy company is remaking its career ladder to emphasize agentic coding just in time for this.
- saberience 3mo agoWhat problem? What alarms? I see everyone around me doing way more work, of way more depth, than they ever did before using AI models. I see my company and friends of mine all paying large sums of money to Anthropic, Google, OpenAI to use AI models, and do more work than we did before. So Google is investing in infrastructure which is HIGHLY in demand, there is much more demand than supply, and then they are making money from this infrastructure... That's a good thing for Google, and as an investor in Google, I am glad they are making these investments.
- lezojeda 3mo ago[dead]
- ignoramous 3mo agoI see eventuality here as job cuts or salary cuts. Don't think that day is far when "software people" are paid as if they were taxi drivers.
- bluefirebrand 3mo agoYou're probably right but honestly why would anyone stay in software if that happens?
- sleepyguy 3mo agoSergey Brin said he would rather Google go bankrupt instead of losing the AI race. That is where the bar was set.