9 ms·

Apple Will 'Watch Everything Burn' When the AI Bubble Bursts

254 points by thm 3mo ago

bananamogul 3mo ago
I don't know if Ed Zitron is right about allhis analysis, but it's nice to have an alternative, well-argued narrative to the gushing torrent of AI company propaganda.
- Legend2440 3mo ago
  Is it though? He's more of a gushing torrent of anti-AI propaganda. He has an agenda too, it's just the opposite one.
  - deleted 3mo ago
    [deleted]
  - mossTechnician 3mo ago
    What specifically is that agenda?
  - dan_gee 3mo ago
    A resolute anti-AI perspective is a breath of fresh air compared to the middle-of-the-road "AI made me 10x more productive BUT"-style comments. My professional opinion is that LLM technology doesn't work very well for software development and I'm not interested in hemming and hawing over its supposed benefits any longer.
    - anthonyrstevens 3mo ago
      >> LLM technology doesn't work very well for software development This comment is so obviously false (in my experience) I'm wondering what sort of niche environment you're working in
      - dan_gee 3mo ago
        Just my personal experience. I'm not really interested in giving up more personal details in this forum, apologies for that.
        kingstnap 3mo ago
        I'm generally pretty accepting of trust me bro style arguments where we some claims presented without evidence. Especially for AI, sure some model just rm -rf ed your home directy bro sounds bad. It works fine for online discourse. This is less agreeable. You kind of just made statements without even having claims (even without requirement of evidence or details) to back them up. This is like the illusion of contribution.
        twister2920 3mo ago
        this whole argument is illusory. nobody is arguing in good faith based on repeatable experiments. this debate is 100% based on how this technology makes one feel, and whether one is speculating for or against future economic returns from the technology
      - whateveracct 3mo ago
        remember, how useful LLMs are is inversely proportional to your skills. i have yet to have an LLM beat me. i am forced to try regularly so i don't look like an AI anti at a company that is very much SV pilled
        Barbing 3mo ago
        I don’t think people like Linus Torvalds or Stephen Wolfram feel like language models beat them, just they’ve managed to find specific cases where flawed brainless workhorses serve their needs.
      - sjsdaiuasgdia 3mo ago
        Like so many things in life, It Depends (tm). Some developers work better with LLMs in their workflows than others. Some problems are easier for LLMs to generate a reasonable solution for than others. Some folks prompt minimally and see what the vibes bring. Others start with a detailed architecture and implementation plan. The individual results will depend quite a lot on the person, the problem, and the approach. It's not a guaranteed winning formula for everyone.
    - rpdillon 3mo ago
      Talking with a friend of mine who's been in development for some time and I had been talking a little bit about the skill required to wield AI effectively and that people were expecting it to be something that required less skill than it does. He said his version of this observation is "your agents are only as good as you are." I think he's right, and the key is to practice and build the skill.
      - twister2920 3mo ago
        > agents are only as good as you are that doesn't sound like a net benefit at all. I think mostly people just enjoy playing with these toys, and good developers are still good with them, bad developers still bad
        rpdillon 3mo ago
        I think there is a distinction between whether or not they require skill and whether or not they are a net benefit.
  - whateveracct 3mo ago
    his agenda is less existential and backed by less money and power than Sam A and Dario's
    - eej71 3mo ago
      While that's true - it does not impute Ed's position with greater accuracy or authority. I don't know if Ed is wrong, but I get this vague sense that he is being led on by his emotions. I am sympathetic to some of his criticisms that the enthusiasm and financial commitment has run far ahead what can be delivered. But I don't quite share his intensity over the doom and gloom. There probably will be a correction. It will probably sting. But I don't expect it to be the near wipe-out that Ed's passionate voice seems to steer towards.
- tptacek 3mo ago
  There are good sources of well-argued AI skepticism, and then there's Ed Zitron.
  - ofjcihen 3mo ago
    At this point I have yet to hear a solid argument against his arguments that use half as much evidence as he does. That isn’t to say that he’s right, that’s just to say that while he gets creative in his phrasing numbers don’t lie and I haven’t seen anyone else present competing numbers that make sense. If anyone has them to the degree with which he provides them then please, by all means, I’m interested.
    - hparadiz 3mo ago
      [flagged]
      - dragontamer 3mo ago
        I thought Ed Zitrons argument was just corroborated by Nikkei last Friday with the new report that 1.6 Trillion in SPVs accounts for off-books debt, on top of the $1.4 Trillion of on-books debt that's in these AI companies? The main argument of Ed Zitron is just that. Huge huge amounts of debt that's due "soonish". Every SPV is different but we are fast approaching the point where this all starts to become real. Now I dunno why Ed Zitron feels the need to write 10,000++++ word articles that only says "more leverage than people expect", but that's really the crux of things.
        tptacek 3mo ago
        If that's all Zitron wrote, I don't think he'd be as polarizing (or as dunked on). But he goes way, way past that.
        ghjkghjkghj 3mo ago
        I don't understand how that affects what he has written here? How does his data not make sense?
- awakeasleep 3mo ago
  Read a little more of what he's written before you praise him, so you don't end up looking as dumb as I did. Ed may be right about some of his claims, but he is 100% a crank, and he makes so many incoherent claims I'd say that if he's right, it's in the nature of a broken clock.
  - dan_gee 3mo ago
    Can you elaborate on what happened that made you look dumb?
  - deleted 3mo ago
    [deleted]
  - Fricken 3mo ago
    [flagged]
    - JumpCrisscross 3mo ago
      > Show us on the doll where Zitron touched you Comment read sensibly until this bit.
      - deleted 3mo ago
        [deleted]
      - deleted 3mo ago
        [deleted]
  - Jackpillar 3mo ago
    Let me guess, you disagree with his views on the utility of Ai (which he's pretty bad about) and you use that as cover and/or to negate his real journalism that is based in facts (Ai being an unprecedented & unrecoupable bubble littered with unprofitable companies thats likely to crash our economy unless these Ai conglomerates cozy up lawmakers to situate themselves for a bail out)
    - 3mo ago
- solenoid0937 3mo ago
  The entire internet is full of anti-AI discussion and a straight up disbelief in any chance of success. Implying there is a "gushing torrent" of pro AI narrative is bizarrely out of touch. We both know this isn't true.
  - karahime 3mo ago
    It is rather sad, actually.
  - whateveracct 3mo ago
    that's an organic thing the pro-AI side on the other hand has poured billions into ads and marketing and CEOs are forcing it on people due to a combo of FOMO, personal investments in AI (CEO, board, investor), etc
  - sodapopcan 3mo ago
    While I don't really care one way or another, Zitron isn't arguing AI as a technology is going to fail and go away, but that the numbers of the American companies make no sense and there is a good chance they, or at least some of them, will go away. He does argue that there are large amounts of people who just don't care enough about "AI," and this is likely true. The thing to keep in mind though is that he is not talking about software developers here. What is evident about some of the comments in this thread (and HN comments in general) is that many people on this site seems to think that whenever anyone says anything along the lines of "AI doesn't work for me" that they automatically assume they are talking about "in software development" when they aren't.
  - parpfish 3mo ago
    I think AI discourse is revealing some new contours to the information bubbles that we all live in. folks in the US have been pretty aware that bubbles based on political opinions -- we're all surrounded by news from "our side" yet we know the other side exists in some other bubble. but for AI, we're all either surrounded by pro- or anti- opinions and its a little shocking to learn that theres a parallel internet with the opposite stance. especially shocking when you find somebody that lives in teh same political bubble but opposite AI bubble.
- skwirl 3mo ago
  The vast majority of what I see out there is relentlessly negative about AI. It is kind of absurd to call this the "alternative" unless the implication is that the rest of AI skeptical writing is not "well-argued."
- serchinastico 3mo ago
  I find it weird/funny you are getting so many hate responses towards Ed, still no counter-arguments at all. When asked why he is wrong, they vanish. From the outside it looks like a coordinated campaign to try to discredit him. Happy to read why is he wrong, and change my mind, as long as the arguments provide the same level of analysis he provides.
- budsniffer952 3mo ago
  75% of comments on every article you read about AI on hacker news is talking about the bubble. But everyone thinks the bubble talk is contrarian.
- kpennell 3mo ago
  Cal Newport is another great person to follow on this and I think he understands the CS fundamentals much better.
maxdo 3mo ago
I'm so tired of this shallow analysis claiming vendors are losing tons of money on subscriptions. How do you even judge that? Users go on vacation, they slack off, they spend the day talking to each other. There are very few people who are really effective at burning tokens. how do you know the ratio? do you have insides? No :) The biggest target is enterprise, and the economics for an LLM vendor look like this: price per token = R&D + inference + infra investments. When you buy a subscription, you are quite often buying a year ahead. That lets the vendor predict future infra investments against hard commitments, and sell expensive per token pricing to everyone else. And when a hard commitment sits unused because the user is busy, they sell it twice. It is loyalty in exchange for predictability, in exchange for the promise to always deliver SOTA to users. Vendors control the harness. Tomorrow they simply roll out a router where reading the code and doing the final edits goes to a cheaper model, and their math suddenly becomes very sexy. Isn't that hard to predict that their economic model is very easy to tune? and this is just first baby steps. I personally pay per token ( do not have subs for work ). I did have once a $25k/mo worth of tokens, since i knew it was free so i was doing crazy experiments. Now , 2 month later, my bill was barely $1.5k since i moved into different stage with project. I do have team members who burn $500-600. pre router, pre optimization. I switched recently to grok 4.5 and cursor router and my bill will go even further down. It rotates 4-5 different vendor models cheap and expensive too, depends on the task. Routers will flip entire LLM economy upside down.
- superbyte 3mo ago
  Doesn't sound like you've read any of Zitron's analysis
- pinkyboy 3mo ago
  It's fascinating that you simultaneously argue that margins will expand... while posting about personal behavior all of which points toward commoditization and intense price competition.
  - maxdo 3mo ago
    What’s wrong here ? You push the router , you keep same subscription price , customers are as happy or even more happy because router will make process faster, the costs will go down . The market size will increase several times . If you have properties of the market where your costs will go down , the size of the market will increase and you are top contender. How is that a bubble or a bad market ? Sure you have risks of underperforming and lose the competition, but how is that different from any business in the world ?
Zababa 3mo ago
>At their very core, Large Language Models' costs run contrary to basically every model of selling software. >Consumers and enterprises alike have been trained to pay a monthly fee for a service, and while these services might have limits or strictures, basically nobody buying software expects to have a metered service, let alone one that's both metered and with hard to measure costs. Has Ed Zitron not heard about the cloud? Unpredictable AWS bills?
- zabriel_goss 3mo ago
  Enterprise certainly wouldn't fit. This argument seems to be targeted at the consumer market, which Apple deals in. Consumers are not paying varying Disney+ subscription prices based on how much they watch. So many points are still interesting. Though, I'm not convinced the consumer market is the primary target for AI firms.
- thewebguyd 3mo ago
  Unpredictable AWS bills are a supply-side problem. He's talking about consumer behavior, and consumers of software do not expect a metered service. But most consumer's aren't paying per token for access to models, so unless that changes and the labs start charging API pricing to everyone, it's kind of a moot point.
scrlk 3mo ago
> While people get some sort of benefit out of AI-generated code, these tools actually end up making them slower Curious that he references a METR study from July 2025, before the leap in model and harness performance towards the end of 2025/early 2026.
- solenoid0937 3mo ago
  Welcome to Ed Zitron. There is a reason this man doesn't heavily short the same companies he criticizes. Be wary of anyone that won't put their money where their mouth is.
  - twister2920 3mo ago
    > There is a reason this man doesn't heavily short the same companies he criticizes yes, because in order to take a short position you have to predict exactly when the bubble is going to pop, which is different from predicting that at some point it will
    - d4ng 3mo ago
      Not quite. You could buy a long-dated put if implied vol and current rates are amenable. This protects you against the underlying going up significantly. You might also predict that it won’t go up too much, and just short the underlying with a stop loss.
      - KaiserPro 3mo ago
        > You could buy a long-dated put What leveraged? yeahnah thats not going to be profitable.
    - solenoid0937 3mo ago
      > you have to predict exactly when the bubble is going to pop Not true.
      - 3mo ago
ryeights 3mo ago
You’ll note that Mr. Zitron’s analysis is based on unfounded assertions (API prices are the ‘real costs’ of tokens, and model providers are margin negative on subscriptions) and outdated figures (OpenAI negative profit in 2025, ignoring at least Anthropic’s recent turn to profitability.) Just more wishful thinking from our favorite AI skeptic
- LetsGetTechnicl 3mo ago
  Isn't Anthrophic's "recent turn to profitability" just one specific quarter according to non-GAAP practices? How real is that?
simonw 3mo ago
One big difference I have with Ed Zitron is I look at companies suddenly getting worried that they're spending millions of dollars on tokens and think "wow those AI vendors are going to make SO MUCH MONEY". The best price for a product is what I call the "suck air through your teeth" price. You want your customers to suck air through their teeth... and then pay the full amount anyway. Uber set their per-developer token allowance to $1500 per developer per tool. That suggests to me that they think they can get at least that much ROI out of AI tooling. Selling $1500/employee/month plans to companies is a great business to be in.
- jayd16 3mo ago
  Well hold on. "They" also thought tokenmaxxing was a good idea, until they didn't. Whether companies pay will come down to the bottom line once the hype around the country club dies down a bit and for that it's still TBD on the actual product cost impact.
  - simonw 3mo ago
    Yeah, tokenmaxxing was obviously stupid. Setting a limit is what happens when the adults in the room stop being stupid.
    - satvikpendem 3mo ago
      Not sure about that. As I replied elsewhere, it's a forcing function: > People misunderstand the point of the tokenmaxxing time period, it was to force people to use AI so as to not have them stuck in their way, as some people are, and then to evaluate how it can help the company. https://news.ycombinator.com/item?id=49047448#49047826 https://news.ycombinator.com/item?id=49047448#49047826
      - simonw 3mo ago
        I expect everyone understood that. The obvious second effect is that if you have a leaderboard people will compete to top it, by running dumb loops or whatever. That impacts how much you can learn, and costs you more money than you wanted to spend.
havaloc 3mo ago
This bubble too will pop, and life will go on. Costs will slowly drop down, just like the dot com days, but some useful things will be come out of this.
roryirvine 3mo ago
IBM stood on the sidelines of the dot com boom; their share price still halved in the resulting bust. HSBC didn't engage in the unwise practices that led to the great financial crisis; their share price still dropped by 75% in 2008. If the AI bubble does burst chaotically, then I'd expect all tech stocks to decline to at least some extent and for even the strongest survivors to remain in the doldrums for years (in the cases listed above, the share price of both IBM and HSBC remained flat for almost a decade).
- Danox 3mo ago
  IBM is still around hanging on the lights are on, but they are a tech backwater in comparison to their past and I don’t think they’re gonna be coming back. They are just going through the long fade out. Similar to Xerox and Kodak.
epistasis 3mo ago
> If Anthropic and OpenAI believed customers would actually pay the real cost of AI tokens, they wouldn't have to give away 20 to 40 times the amount of tokens to subscribers. One logical gap in the SemiAnalysis 40x cost of tokens versus subscription: I don't know anybody actually maxing out their account limits. Sure, if you're somehow always running stuff, you can max it out, but subscriptions like this allow people to max sometimes (or always), while others never come close to the max. What is the average usage of subscribers? Only Anthropic and OpenAI know, as far as I can tell.
- wilg 3mo ago
  I max out Claude Code and Codex subs both every week without fail and I’m doing a lot of work but it’s not insane.
- telotortium 3mo ago
  Also enterprises have to pay per-token.
- namrog84 3mo ago
  Just to counterpoint the adjacent replier. I have claude, chatgpt, and gemini subs and rarely even use even close to 50%. I code c++ everyday. But im not full in on agentic workflows which is probably why. I mostly do fairly targeted things to my various code bases.
- ChrisMarshallNY 3mo ago
  I'm of the opinion that the market will need to expand, horizontally. That's what's happening, with low-cost LLMs. I already know lots of "regular folks" that are totally hooked on LLMs (mostly ChatGPT, at the "regular mensch" level). They usually use the free tier, but a lot of them are doing the $20/month Pro tier. If anyone is in my age group, they remember when ATMs were free. It was the "heroin dealer" business model. It worked out well (for the banks). The Chinese did it with manufacturing. Getting people hooked on subsidized junk, is an age-old (and highly effective) business model. Think of all the shops that will soon be composed of people that simply can't even get out of bed, if their LLM is not available. If the LLM dealer starts raising the price, there's no choice. I suspect many of the valuations are taking this into account. > "Junk is the ideal product... the ultimate merchandise. No sales talk necessary. The client will crawl through a sewer and beg to buy." -William Burroughs
sajithdilshan 3mo ago
This is quite a short sighted analysis. I do think the valuations are quite and they would need to meet the reality, but don’t think there’s gonna be a crash or we’d ever go back to pre-AI era. It would more or less would be a correction to valuations. The future of AI would be on-device models which are as powerful as current frontier models and also I can imagine companies have their own deployments of inference of open weighted models for most of the use cases and use the frontier models for extremely niche or higher intelligence tasks. As an example I use Claude code heavily for every day development and Opus 4.8 was already good enough for my use cases and never used Fable. Also note that I use AI as a tool to help with my work and I do not offload everything I have to do to AI in a single prompt
- AussieWog93 3mo ago
  Seriously, you should try Fable. It picks up on subtleties that Opus misses.
  - sajithdilshan 3mo ago
    I have heard good things about it, but I truly don’t have a use case for it to justify the inference cost. It’s double the price of Opus
- d4ng 3mo ago
  Why is on-device AI the future? What is your reasoning behind this? Look at the proportion of things we compute on someone else’s computer relative to what we compute on our own device. Why would this change for LLMs?
  - adolph 3mo ago
    I think the reasoning is similar to why Amazon notification emails are very generic: user data is used for various purposes that a growing number of users and 3rd parties have concerns about. In addition to on-device, Apple is making efforts to secure computations that need to occur off-device, see: https://security.apple.com/documentation/private-cloud-compute https://security.apple.com/documentation/private-cloud-compu...
59percentmore 3mo ago
His read on the Apple Vision Pro (both the circumstances of its creation and its path forward) are incorrect in quite the discouraging manner for me. AVP wasn't released early (late, if anything), and it wasn't a dud because of Tim Cook's disinterest. I also think it's irresponsible to not broach the obvious implication of "PC components becoming prohibitively expensive" + "untold amounts of compute sitting in compute warehouses with nothing to do because the AI companies that used to own them folded". You probably won't even notice when everything in Best Buy becomes a thin client.
- ghaff 3mo ago
  Tim Cook was probably mostly disinterested because it didn't seem like a real business opportunity. Wherever AVP fell on the VR/AR spectrum, VR (while having other opportunities) was mostly a niche for high-end gamers and AR, whatever the possibilities in some future idealized form with fashionable glasses that give you lots of information about what/who you're looking at is a long way from reality.
  - 59percentmore 3mo ago
    I think it's the opposite. None of the players in XR wanted to be Apple'd, least of all Apple. That is, create a base product that someone else would refine in order to drink their milkshake. Apple delayed the AVP multiple times hoping to avoid getting sniped by Meta and Google et al., each time requiring a partial rebuild as the underlying tech advanced. They would have loved to have been able to get something out when Robert Scoble was initially raving in the late 2010s, but everyone was on the same page about not wanting to sink billions into development only to have to cede the market to someone responding to your strategy. So, instead, they all dragged their feet. If XR companies had been as "reckless" with their product strategies as mobile companies in the 90s and 2000s, AVP would have had its iPod moment 6 years ago and we'd be hurtling towards the facephone. The market suffered because of the entrenchment of incumbents with all-too-clear memories.
    - whywhywhywhy 3mo ago
meangenehackman 3mo ago
Apple's greatest accomplishment is convincing its customers that they're all geniuses.
- Danox 3mo ago
  The largest acquisition in Apples history is only $3 billion dollars it is no surprise they didn’t fall for Sammy or give Google more than $1 billion refund. A legitimate criticism will be Apple not fixing their memory problem in the next 2 to 4 years…
sssilver 3mo ago
I will never understand the decision-making process that led to "Let's build an awesome VR headset that can't do gaming". I would love to replace my monitor with Apple Vision Pro for programming and productivity. I would gladly pay $1000 for that. But at $4000 it really needs to put me in a Microsoft Flight Simulator cockpit.
- nilkn 3mo ago
  For me, the economics are the exact opposite. I'd pay $1000 for a good gaming VR headset, but not $4000 -- because gaming is just a hobby that isn't really worth that much to me. Gaming VR headsets have been around for well over a decade, I've "been there, done that", and it's just not something that's worth that much money to me. However, I have no problem paying $3500+ for something that creates a new category of productivity and entertainment experiences for me. Besides that, I actually disagree that the Vision Pro is not good for gaming. It's not good for traditional VR gaming, but using apps like Portal it's phenomenal for, e.g., playing existing PS5 games on a massive virtual screen, which in many ways I actually enjoy more than VR gaming, which is far too limited in comparison.
  - bigyabai 3mo ago
    The market spoke. The overwhelming majority of people don't want to pay $4,000 for a tethered AR experience. You're the minority. Conversely; the grandparent comment is still right, Apple could have made this a real VR headset without compromising any part of the AR experience. Apple knew that Hololens was a total failure, they saw the pushback on Google Glass, they should have known that people would feel like an idiot buying one of those headsets. Instead of trying to recoup the missed opportunity, Apple doubles down and pretends that those experiences are beneath them. Anyone with a $300 headset can stream games to it. AVP isn't unique for that, it's was already outsold by the Index and it's eschatologically destined to be outsold by user-respecting headsets like the Steam Frame. It's downright impossible to imagine a world where Vision Pro outsells the Quest.
    - nilkn 3mo ago
jandrewrogers 3mo ago
That article is a bit incoherent. I think it is pretty clear at this point that Apple has gone all-in on being the ideal edge silicon for AI. This leverages their core competencies, requires only modest investment, and will likely pay out no matter how the AI market eventually shakes out. They are in one of the only parts of the obvious future AI market where there isn't really a fight for greenfield turf with other big companies. Staying in their lane is arguably the optimal business decision for Apple and they lose nothing by it.
- fassssst 3mo ago
  Not really. Their new Siri is powered by Gemini.
- nunez 3mo ago
  They've been investing in NPUs for a long long time. Since the first iPad Pro at least (2018). Apple Silicon is a natural fit for tensor/matrix operations due to unified memory, so if anything them going "all in" on that has been a nice side effect.
  - _davide_ 3mo ago
    > Apple Silicon is a natural fit for tensor/matrix operations due to unified memory, This is a common misconception. This is NOT true: memory designed for CPU performs horribly for GPU tasks. Mac/Strix Halo/NVIDIA Spark are performing horribly compared to a desktop video card with GDDR. I spent quite a few weekends optimizing ROCM kernels for strix halo, i WISH I had GDDR instead of high-frequency CPU RAM; the bandwidth would be SO MUCH better. I'm quantizing weights not to make computation faster, not because I'm out of memory, but because memory cannot move fast enough to be processed and it's cheaper to load quantized version, convert into bf16 compute, and discard; This happens every single time a token is generated for the whole model over and over.
    - TimByte 3mo ago
      The whole point of Apple silicon isnt speed, it is capacity. You can grab a Mac Studio with 192 gb of unified memory and shove a model in there that would otherwise require building a rig with multiple rtx 4090 s. For local dev just being able to fit the weights in memory is often way more important than token generation speed
satellites 3mo ago
Maybe a dumb question, but isn't the idea that the efficiency of the models will improve with time, such that you won't be burning hundreds of dollars of tokens for most queries? Fable is great, but Opus can handle most coding tasks for a fraction of the cost, and Sonnet is good enough for average questions or word processing tasks.
- ar_lan 3mo ago
  In my experience Sonnet is actually pretty good at coding tasks, at least with Go.
austin-cheney 3mo ago
That fabled line one must cross to achieve profit is ridiculously out of alignment with the current valuations on AI. Its why SPCX is falling like a meteor, currently at $111 per share. The people who are going to end up making the most money on this are creditors and future businesses. When the AI bubble does pop there will be a massive glut of data centers and hardware available. Both Apple and Microsoft are realigning their entire businesses to brace for this. When the AI bubble pops businesses that sell hardware, like Apple and Microsoft, will face an immediate price shock because they have had to raise prices to account for more expensive hardware. That shock will be short lived and prices will fall accordingly with disruption to supply chain but otherwise minimal disruption to margins. I look forward to the bubble popping because when retail hardware becomes cheap again all kinds of new business opportunities will open in the self-hosted service market.
- goldenshale 3mo ago
  I've never heard a compelling thesis for why this is a bubble that will pop. From my perspective AI adoption is just getting started, and every organization I see that starts on the journey only ramps up tokens dramatically. Even just sticking with current model capabilities we have years of business automation, personal automation, and so much more to saturate data centers. As the models improve that only makes more sense. Rather than Apple watching anything burn I think they are going to end up looking like nitwits who missed the boat.
  - austin-cheney 3mo ago
    I think people wish AI would succeed, especially in software, but this appears to be the only argument made. Numerically, AI still costs far more than it returns in value. Its a subscription service. Even if everybody is told they must adopt early and heavily eventually AI has to qualify its expenses to its customers or they aren't going to keep using it. Think Netflix. If you believe the money spent on Netflix over the course of a year is less than the entertainment you receive back you will likely continue to pay for it. If you believe the money spent on all entertainment subscriptions exceeds the value returned you will likely start cancelling some, or all, of the subscriptions. AI is not immune from economics or human behavior. When customer company budgets get tight the money spent on AI subscriptions might be reallocated or reduced to prevent reductions in head count.
kiaansaraiya 3mo ago
There is a difference between "AI is overvalued" and "AI isn't valuable". We've seen entire industries deliver real tech progress while still going through harsh valuation resets.
sailfast 3mo ago
Needs an ( “says Ed Zitron”) title change haha. This is an interview with Ed Zitron.
lenerdenator 3mo ago
Watch everything burn? Hell no. They'll pick up companies in trouble at bargain-basement prices.
achow 3mo ago
> ..because the entire AI bubble is a result of everybody running out of hypergrowth ideas, mostly because we're flat out of new interfaces. Really? I thought the AI bubble happened because something genuinely novel had been invented. People immediately saw practical uses for it, and then it took on a life of its own - funding, superfunding, $trillions becoming part of day to day lingo.. etc. AI is not in the same class as Vision Pro, which Ed Zitron is comparing it to. I personally found the overall tone to be a bit hyperbolic.
cmiles8 3mo ago
Apple looks better and better as every day passes. Other players going deeply into debt to build out massive infrastructure, VCs pumping up the model ecosystem that is now a total commodity. Apple’s just been sitting there with solid cashflow waiting for all this to implode and then have on-device models with their own chips. Apple will own the end device while the rest of the world is fighting over a pure commodity. It will burn hard and Apple will laugh all the way to the bank.
- throwaway63467 3mo ago
  Isn’t Apple potentially under a lot of pressure due to the DRAM prices as well as having to compete with AI for fab capacity? Before all the price hikes their products were already priced at the top of the market so I would assume that memory getting more expensive will impact their sales or margin quite a bit as they can’t subsidize hardware like AI companies do (they can of course eat into their own margins a bit which I think they already do). So not sure if what happens right now is great for them, if the memory market collapses it will of course be good.
  - quickthrowman 3mo ago
    Everyone is paying more for RAM these days, I expect Apple to maintain their margins.
  - cmiles8 3mo ago
    Yes it does impact all hardware makers and they raised prices as a result. But again remember the financial reality here… DRAM is in short supply because of the demand for models propped up by VC subsidies and infrastructure providers going deeply into debt to buy all this stuff just as folks are realizing we’re on track to over build capacity. So yes Apple gets impacted a bit in the short term but in the long term they’ll gleefully watch it all burn.
  - alpha_squared 3mo ago
    > Isn’t Apple potentially under a lot of pressure due to the DRAM prices as well as having to compete with AI for fab capacity? I'd qualify this with for now. It's not entirely clear what happens in the event the AI industry implodes, but I do think there will be a glut of memory and hardware up for grabs. It very well could crash the consumer hardware market as a result. The AI obsession and investment has burrowed so deeply across the US economy that I can't think of a single industry that won't be impacted, including agriculture.
mgrunwald_ 3mo ago
Apple failed in their efforts to build their own models, but they got lucky. China is doing all the R&D for free and the whole thing turned out to be unprofitable anyway.
- sd2ff 3mo ago
  ??? LOL WHAT. Actually the right framing is Apple hedged the risk by maintaining good relations with China. They did not need to take any of the risk.
  - mgrunwald_ 3mo ago
    But they actually took some of the risk trying to develop models for Apple Intelligence, and that attempt ended up as a meme. Do you really believe that was a strategic play?
pinkmuffinere 3mo ago
I totally think the AI companies are very overvalued, I feel that's obvious. But I don't understand why apple should have such a high run in the last year. Sure, it avoided the pitfall of overinvesting in AI -- but what did it do for positive development? Avoiding waste isn't (imo) enough to warrant increased price. What's going on, what's the bull case for apple?
fny 3mo ago
Unless Apple figures out AI software execution and opens up their walled garden a bit, their hardware edge won't matter. In 2020 I could write audio apps that worked incredibly well on a Pixel: despite LLMs! I still can get Siri to put tasks in the right todo app 70% of the time. I updated to iOS 27 beta hoping something had changed, but nope: the biggest change is a massive black orb search bar.
FLeXMurphy 3mo ago
Trigger warning: Ed Zitron is asked for his take.
fg137 3mo ago
I don't agree with many of Ed Zitron's opinions, but it is so enjoyable to listen to Better Offline and hear him ranting about AI. At least the logic is very coherent within itself, and it's not pretentious. It is a breath of fresh air compared to slop I see on LinkedIn and sometimes here.
mark_l_watson 3mo ago
I more or less agree. When Apple starts using Chinese and expanded South Korean production memory chips, their hardware pricing problem will go away. I am running new betas for macOS/iOS/iPadOS and Siri is actually useful for a much wider set of use cases. I asked Siri last week what models it was using and one of those listed was Gemini which is confusing because I enabled free use of OpenAI in the settings. Regardless, Siri is much more useful than it used to be.
LetsGetTechnicl 3mo ago
And people said that Apple was going to get left behind by not going full throttle on AI. Seems like they took the right approach
juancn 3mo ago
AI companies are a lot more like traditional manufacturing companies. They can only subsidize you so far, because they may not be even be covering their variable cost at this point. There's no software multiplier (build once — pay the cost once — sell many times). Traditional SaaS is in a middle ground, there are operational costs associated with providing services, but per request they're usually negligible. AI? I don't know, but it's not looking great from where I sit, unless there's a significant breakthrough in inference efficiency.
- plaidfuji 3mo ago
  I think the manufacturing analogy is apt. If you consider both the need for minimal COGS and the large R&D expense, it’s kind of like… biomanufacturing. You spend a lot on R&D to develop your bug, which at the end of the day is just a very complicated sequence (DNA vs model parameters), and then you expend a ton of capex (or rent someone else’s capital equipment) to produce a relatively commoditized product (a drug, a protein, food…) at as large scale and low cost as you can. But that also makes the case for government subsidization + bailout, if you accept it as a capability critical to national security, but one that may not be profitable to run within the US on its own merits.
rbanffy 3mo ago
I kind of look forward to Oracle's demise. Maybe they sell the remains of Solaris and SPARC to someone who'll make something useful out of that IP, maybe even a nice product. I sincerely hope, when all this madness ends, there will be enough data centre surplus gear we'll all be able to soup up our homelabs.
CMay 3mo ago
Ctrl+F: "national security". Didn't see national security mentioned a single time in all the current comments or in the article. Speculations about profit are great and there are many companies that will largely be irrelevant across all the major metrics which will not be in a good position, but there are always these people lost on the profit picture of anything. Does anyone realistically believe that all of these smart people are rushing into AI to maximize profit? No, they're rushing into it, because it's important and awesome. The potential value, not simply measured in dollars, is enormous. Despite China aggressively training on western outputs, their cloud services can't be trusted and their open weight models are too large for most people to run. Running any of these open weight models through proxies or 3rd party services isn't really expected to be more secure or more private than any of the big companies. If you aren't running it locally then it's irrelevant and most people cannot do that for any sufficiently big model at a usable performance. Ctrl+F: "web search" Almost nobody talking about the giant shift in web search. Web search also remains a hugely profitable business and AI is becoming the new web search. It is the default now for many people and that will likely continue to increase. Is anyone going to argue that web search is unprofitable? No. Nobody. AI will get better and more efficient as needed. You'll have your efficient to run models and your expensive models, branched as needed. This is the biggest shake up we've seen in search in decades, but even with that, Google remains dominant. Bing made AI search their default and it actually hurt them in my opinion, because it was very bad and mostly wrong. Google added AI search, but it's been a lot more accurate and grounded. Keep in mind that Google search remains the default for a lot of devices. You don't even have to install ChatGPT or Claude on your phone, because Google is already there and people are getting used to Google AI results. When I talk to random people, do you think they tell me they're using ChatGPT or Claude? Basically never. They talk about Google Gemini or Google AI. Gamers have an ok chance of saying they use ChatGPT. Programmers have a good chance of saying they're using Claude or ChatGPT. Anyone else it's almost universally Google Gemini or just Google AI. You do a basic Google search and you're already within the potential flow of an AI conversation. Making money is important so that you can increase the amount of reinvestment into the product, not strictly to maximize profit. From the situation a lot of these AI companies are in, acceleration should still be more important than profit and whether they can focus on acceleration may depend on their investment picture. OpenAI and Anthropic are going to need a long term reinvestment strategy that accounts for Google having the potential to outpace them and become good enough that nobody bothers launching or loading a separate app anymore. Keeping smart people using your product is an important aspect of it all since you want your product to become smarter too. Maybe Apple will simply pay for these services the way it does for Google search, but if they want to maintain their privacy philosophy they will either be dependent on models from these companies or have to roll their own. Either way, AI is sufficiently complex and capable that there will remain many ways for companies to specialize and provide profitable value to people for decades to come. It adheres to physics. It takes energy. It takes time. User experience is important, but the more that private user and company data gets used the more that trust will continue to be relevant too. I think some of these analysts are too caught up in a few numbers here and there to understand what is happening. Are OpenAI, Anthropic and Google simply going to explode and cry "oh no, we were dumb"? That feels like the picture this guy is painting and it feels a little naive. That also ignores the fact that they are basically developing the smartest AI that can theoretically help them navigate their business into the future.
Barbing 3mo ago
This post has been pushed from the first to the third page (rank 89, 221 points, +5hr).
TimByte 3mo ago
[flagged]
wookmaster 3mo ago
Apple certainly landed ahead of the game here but AMD is catching up quickly with their integrated memory architecture.

254 points by thm 3mo ago

I don't know if Ed Zitron is right about allhis analysis, but it's nice to have an alternative, well-argued narrative to the gushing torrent of AI company propaganda.

Legend2440 3mo ago
Is it though? He's more of a gushing torrent of anti-AI propaganda. He has an agenda too, it's just the opposite one.
- deleted 3mo ago
  [deleted]
- mossTechnician 3mo ago
  What specifically is that agenda?
- dan_gee 3mo ago
  A resolute anti-AI perspective is a breath of fresh air compared to the middle-of-the-road "AI made me 10x more productive BUT"-style comments. My professional opinion is that LLM technology doesn't work very well for software development and I'm not interested in hemming and hawing over its supposed benefits any longer.
  - anthonyrstevens 3mo ago
    >> LLM technology doesn't work very well for software development This comment is so obviously false (in my experience) I'm wondering what sort of niche environment you're working in
    - dan_gee 3mo ago
      Just my personal experience. I'm not really interested in giving up more personal details in this forum, apologies for that.
      - kingstnap 3mo ago
        I'm generally pretty accepting of trust me bro style arguments where we some claims presented without evidence. Especially for AI, sure some model just rm -rf ed your home directy bro sounds bad. It works fine for online discourse. This is less agreeable. You kind of just made statements without even having claims (even without requirement of evidence or details) to back them up. This is like the illusion of contribution.
        twister2920 3mo ago
        this whole argument is illusory. nobody is arguing in good faith based on repeatable experiments. this debate is 100% based on how this technology makes one feel, and whether one is speculating for or against future economic returns from the technology
    - whateveracct 3mo ago
      remember, how useful LLMs are is inversely proportional to your skills. i have yet to have an LLM beat me. i am forced to try regularly so i don't look like an AI anti at a company that is very much SV pilled
      - Barbing 3mo ago
        I don’t think people like Linus Torvalds or Stephen Wolfram feel like language models beat them, just they’ve managed to find specific cases where flawed brainless workhorses serve their needs.
    - sjsdaiuasgdia 3mo ago
      Like so many things in life, It Depends (tm). Some developers work better with LLMs in their workflows than others. Some problems are easier for LLMs to generate a reasonable solution for than others. Some folks prompt minimally and see what the vibes bring. Others start with a detailed architecture and implementation plan. The individual results will depend quite a lot on the person, the problem, and the approach. It's not a guaranteed winning formula for everyone.
  - rpdillon 3mo ago
    Talking with a friend of mine who's been in development for some time and I had been talking a little bit about the skill required to wield AI effectively and that people were expecting it to be something that required less skill than it does. He said his version of this observation is "your agents are only as good as you are." I think he's right, and the key is to practice and build the skill.
    - twister2920 3mo ago
      > agents are only as good as you are that doesn't sound like a net benefit at all. I think mostly people just enjoy playing with these toys, and good developers are still good with them, bad developers still bad
      - rpdillon 3mo ago
        I think there is a distinction between whether or not they require skill and whether or not they are a net benefit.
- whateveracct 3mo ago
  his agenda is less existential and backed by less money and power than Sam A and Dario's
  - eej71 3mo ago
    While that's true - it does not impute Ed's position with greater accuracy or authority. I don't know if Ed is wrong, but I get this vague sense that he is being led on by his emotions. I am sympathetic to some of his criticisms that the enthusiasm and financial commitment has run far ahead what can be delivered. But I don't quite share his intensity over the doom and gloom. There probably will be a correction. It will probably sting. But I don't expect it to be the near wipe-out that Ed's passionate voice seems to steer towards.
tptacek 3mo ago
There are good sources of well-argued AI skepticism, and then there's Ed Zitron.
- ofjcihen 3mo ago
  At this point I have yet to hear a solid argument against his arguments that use half as much evidence as he does. That isn’t to say that he’s right, that’s just to say that while he gets creative in his phrasing numbers don’t lie and I haven’t seen anyone else present competing numbers that make sense. If anyone has them to the degree with which he provides them then please, by all means, I’m interested.
  - hparadiz 3mo ago
    [flagged]
    - dragontamer 3mo ago
      I thought Ed Zitrons argument was just corroborated by Nikkei last Friday with the new report that 1.6 Trillion in SPVs accounts for off-books debt, on top of the $1.4 Trillion of on-books debt that's in these AI companies? The main argument of Ed Zitron is just that. Huge huge amounts of debt that's due "soonish". Every SPV is different but we are fast approaching the point where this all starts to become real. Now I dunno why Ed Zitron feels the need to write 10,000++++ word articles that only says "more leverage than people expect", but that's really the crux of things.
      - tptacek 3mo ago
        If that's all Zitron wrote, I don't think he'd be as polarizing (or as dunked on). But he goes way, way past that.
        ghjkghjkghj 3mo ago
        I don't understand how that affects what he has written here? How does his data not make sense?
awakeasleep 3mo ago
Read a little more of what he's written before you praise him, so you don't end up looking as dumb as I did. Ed may be right about some of his claims, but he is 100% a crank, and he makes so many incoherent claims I'd say that if he's right, it's in the nature of a broken clock.
- dan_gee 3mo ago
  Can you elaborate on what happened that made you look dumb?
- deleted 3mo ago
  [deleted]
- Fricken 3mo ago
  [flagged]
  - JumpCrisscross 3mo ago
    > Show us on the doll where Zitron touched you Comment read sensibly until this bit.
    - deleted 3mo ago
      [deleted]
    - deleted 3mo ago
      [deleted]
- Jackpillar 3mo ago
  Let me guess, you disagree with his views on the utility of Ai (which he's pretty bad about) and you use that as cover and/or to negate his real journalism that is based in facts (Ai being an unprecedented & unrecoupable bubble littered with unprofitable companies thats likely to crash our economy unless these Ai conglomerates cozy up lawmakers to situate themselves for a bail out)
  - 3mo ago
solenoid0937 3mo ago
The entire internet is full of anti-AI discussion and a straight up disbelief in any chance of success. Implying there is a "gushing torrent" of pro AI narrative is bizarrely out of touch. We both know this isn't true.
- karahime 3mo ago
  It is rather sad, actually.
- whateveracct 3mo ago
  that's an organic thing the pro-AI side on the other hand has poured billions into ads and marketing and CEOs are forcing it on people due to a combo of FOMO, personal investments in AI (CEO, board, investor), etc
- sodapopcan 3mo ago
  While I don't really care one way or another, Zitron isn't arguing AI as a technology is going to fail and go away, but that the numbers of the American companies make no sense and there is a good chance they, or at least some of them, will go away. He does argue that there are large amounts of people who just don't care enough about "AI," and this is likely true. The thing to keep in mind though is that he is not talking about software developers here. What is evident about some of the comments in this thread (and HN comments in general) is that many people on this site seems to think that whenever anyone says anything along the lines of "AI doesn't work for me" that they automatically assume they are talking about "in software development" when they aren't.
- parpfish 3mo ago
  I think AI discourse is revealing some new contours to the information bubbles that we all live in. folks in the US have been pretty aware that bubbles based on political opinions -- we're all surrounded by news from "our side" yet we know the other side exists in some other bubble. but for AI, we're all either surrounded by pro- or anti- opinions and its a little shocking to learn that theres a parallel internet with the opposite stance. especially shocking when you find somebody that lives in teh same political bubble but opposite AI bubble.
skwirl 3mo ago
The vast majority of what I see out there is relentlessly negative about AI. It is kind of absurd to call this the "alternative" unless the implication is that the rest of AI skeptical writing is not "well-argued."
serchinastico 3mo ago
I find it weird/funny you are getting so many hate responses towards Ed, still no counter-arguments at all. When asked why he is wrong, they vanish. From the outside it looks like a coordinated campaign to try to discredit him. Happy to read why is he wrong, and change my mind, as long as the arguments provide the same level of analysis he provides.
budsniffer952 3mo ago
75% of comments on every article you read about AI on hacker news is talking about the bubble. But everyone thinks the bubble talk is contrarian.
kpennell 3mo ago
Cal Newport is another great person to follow on this and I think he understands the CS fundamentals much better.

maxdo 3mo ago

I'm so tired of this shallow analysis claiming vendors are losing tons of money on subscriptions. How do you even judge that? Users go on vacation, they slack off, they spend the day talking to each other. There are very few people who are really effective at burning tokens. how do you know the ratio? do you have insides? No :) The biggest target is enterprise, and the economics for an LLM vendor look like this: price per token = R&D + inference + infra investments. When you buy a subscription, you are quite often buying a year ahead. That lets the vendor predict future infra investments against hard commitments, and sell expensive per token pricing to everyone else. And when a hard commitment sits unused because the user is busy, they sell it twice. It is loyalty in exchange for predictability, in exchange for the promise to always deliver SOTA to users. Vendors control the harness. Tomorrow they simply roll out a router where reading the code and doing the final edits goes to a cheaper model, and their math suddenly becomes very sexy. Isn't that hard to predict that their economic model is very easy to tune? and this is just first baby steps. I personally pay per token ( do not have subs for work ). I did have once a $25k/mo worth of tokens, since i knew it was free so i was doing crazy experiments. Now , 2 month later, my bill was barely $1.5k since i moved into different stage with project. I do have team members who burn $500-600. pre router, pre optimization. I switched recently to grok 4.5 and cursor router and my bill will go even further down. It rotates 4-5 different vendor models cheap and expensive too, depends on the task. Routers will flip entire LLM economy upside down.

superbyte 3mo ago
Doesn't sound like you've read any of Zitron's analysis
pinkyboy 3mo ago
It's fascinating that you simultaneously argue that margins will expand... while posting about personal behavior all of which points toward commoditization and intense price competition.
- maxdo 3mo ago
  What’s wrong here ? You push the router , you keep same subscription price , customers are as happy or even more happy because router will make process faster, the costs will go down . The market size will increase several times . If you have properties of the market where your costs will go down , the size of the market will increase and you are top contender. How is that a bubble or a bad market ? Sure you have risks of underperforming and lose the competition, but how is that different from any business in the world ?

Zababa 3mo ago

>At their very core, Large Language Models' costs run contrary to basically every model of selling software. >Consumers and enterprises alike have been trained to pay a monthly fee for a service, and while these services might have limits or strictures, basically nobody buying software expects to have a metered service, let alone one that's both metered and with hard to measure costs. Has Ed Zitron not heard about the cloud? Unpredictable AWS bills?

zabriel_goss 3mo ago
Enterprise certainly wouldn't fit. This argument seems to be targeted at the consumer market, which Apple deals in. Consumers are not paying varying Disney+ subscription prices based on how much they watch. So many points are still interesting. Though, I'm not convinced the consumer market is the primary target for AI firms.
thewebguyd 3mo ago
Unpredictable AWS bills are a supply-side problem. He's talking about consumer behavior, and consumers of software do not expect a metered service. But most consumer's aren't paying per token for access to models, so unless that changes and the labs start charging API pricing to everyone, it's kind of a moot point.

scrlk 3mo ago

> While people get some sort of benefit out of AI-generated code, these tools actually end up making them slower Curious that he references a METR study from July 2025, before the leap in model and harness performance towards the end of 2025/early 2026.

solenoid0937 3mo ago
Welcome to Ed Zitron. There is a reason this man doesn't heavily short the same companies he criticizes. Be wary of anyone that won't put their money where their mouth is.
- twister2920 3mo ago
  > There is a reason this man doesn't heavily short the same companies he criticizes yes, because in order to take a short position you have to predict exactly when the bubble is going to pop, which is different from predicting that at some point it will
  - d4ng 3mo ago
    Not quite. You could buy a long-dated put if implied vol and current rates are amenable. This protects you against the underlying going up significantly. You might also predict that it won’t go up too much, and just short the underlying with a stop loss.
    - KaiserPro 3mo ago
      > You could buy a long-dated put What leveraged? yeahnah thats not going to be profitable.
  - solenoid0937 3mo ago
    > you have to predict exactly when the bubble is going to pop Not true.
    - 3mo ago

ryeights 3mo ago

You’ll note that Mr. Zitron’s analysis is based on unfounded assertions (API prices are the ‘real costs’ of tokens, and model providers are margin negative on subscriptions) and outdated figures (OpenAI negative profit in 2025, ignoring at least Anthropic’s recent turn to profitability.) Just more wishful thinking from our favorite AI skeptic

LetsGetTechnicl 3mo ago
Isn't Anthrophic's "recent turn to profitability" just one specific quarter according to non-GAAP practices? How real is that?

simonw 3mo ago

One big difference I have with Ed Zitron is I look at companies suddenly getting worried that they're spending millions of dollars on tokens and think "wow those AI vendors are going to make SO MUCH MONEY". The best price for a product is what I call the "suck air through your teeth" price. You want your customers to suck air through their teeth... and then pay the full amount anyway. Uber set their per-developer token allowance to $1500 per developer per tool. That suggests to me that they think they can get at least that much ROI out of AI tooling. Selling $1500/employee/month plans to companies is a great business to be in.

jayd16 3mo ago
Well hold on. "They" also thought tokenmaxxing was a good idea, until they didn't. Whether companies pay will come down to the bottom line once the hype around the country club dies down a bit and for that it's still TBD on the actual product cost impact.
- simonw 3mo ago
  Yeah, tokenmaxxing was obviously stupid. Setting a limit is what happens when the adults in the room stop being stupid.
  - satvikpendem 3mo ago
    Not sure about that. As I replied elsewhere, it's a forcing function: > People misunderstand the point of the tokenmaxxing time period, it was to force people to use AI so as to not have them stuck in their way, as some people are, and then to evaluate how it can help the company. https://news.ycombinator.com/item?id=49047448#49047826 https://news.ycombinator.com/item?id=49047448#49047826
    - simonw 3mo ago
      I expect everyone understood that. The obvious second effect is that if you have a leaderboard people will compete to top it, by running dumb loops or whatever. That impacts how much you can learn, and costs you more money than you wanted to spend.

havaloc 3mo ago

This bubble too will pop, and life will go on. Costs will slowly drop down, just like the dot com days, but some useful things will be come out of this.

roryirvine 3mo ago

IBM stood on the sidelines of the dot com boom; their share price still halved in the resulting bust. HSBC didn't engage in the unwise practices that led to the great financial crisis; their share price still dropped by 75% in 2008. If the AI bubble does burst chaotically, then I'd expect all tech stocks to decline to at least some extent and for even the strongest survivors to remain in the doldrums for years (in the cases listed above, the share price of both IBM and HSBC remained flat for almost a decade).

Danox 3mo ago
IBM is still around hanging on the lights are on, but they are a tech backwater in comparison to their past and I don’t think they’re gonna be coming back. They are just going through the long fade out. Similar to Xerox and Kodak.

epistasis 3mo ago

> If Anthropic and OpenAI believed customers would actually pay the real cost of AI tokens, they wouldn't have to give away 20 to 40 times the amount of tokens to subscribers. One logical gap in the SemiAnalysis 40x cost of tokens versus subscription: I don't know anybody actually maxing out their account limits. Sure, if you're somehow always running stuff, you can max it out, but subscriptions like this allow people to max sometimes (or always), while others never come close to the max. What is the average usage of subscribers? Only Anthropic and OpenAI know, as far as I can tell.

wilg 3mo ago
I max out Claude Code and Codex subs both every week without fail and I’m doing a lot of work but it’s not insane.
telotortium 3mo ago
Also enterprises have to pay per-token.
namrog84 3mo ago
Just to counterpoint the adjacent replier. I have claude, chatgpt, and gemini subs and rarely even use even close to 50%. I code c++ everyday. But im not full in on agentic workflows which is probably why. I mostly do fairly targeted things to my various code bases.
ChrisMarshallNY 3mo ago
I'm of the opinion that the market will need to expand, horizontally. That's what's happening, with low-cost LLMs. I already know lots of "regular folks" that are totally hooked on LLMs (mostly ChatGPT, at the "regular mensch" level). They usually use the free tier, but a lot of them are doing the $20/month Pro tier. If anyone is in my age group, they remember when ATMs were free. It was the "heroin dealer" business model. It worked out well (for the banks). The Chinese did it with manufacturing. Getting people hooked on subsidized junk, is an age-old (and highly effective) business model. Think of all the shops that will soon be composed of people that simply can't even get out of bed, if their LLM is not available. If the LLM dealer starts raising the price, there's no choice. I suspect many of the valuations are taking this into account. > "Junk is the ideal product... the ultimate merchandise. No sales talk necessary. The client will crawl through a sewer and beg to buy." -William Burroughs

sajithdilshan 3mo ago

This is quite a short sighted analysis. I do think the valuations are quite and they would need to meet the reality, but don’t think there’s gonna be a crash or we’d ever go back to pre-AI era. It would more or less would be a correction to valuations. The future of AI would be on-device models which are as powerful as current frontier models and also I can imagine companies have their own deployments of inference of open weighted models for most of the use cases and use the frontier models for extremely niche or higher intelligence tasks. As an example I use Claude code heavily for every day development and Opus 4.8 was already good enough for my use cases and never used Fable. Also note that I use AI as a tool to help with my work and I do not offload everything I have to do to AI in a single prompt

AussieWog93 3mo ago
Seriously, you should try Fable. It picks up on subtleties that Opus misses.
- sajithdilshan 3mo ago
  I have heard good things about it, but I truly don’t have a use case for it to justify the inference cost. It’s double the price of Opus
d4ng 3mo ago
Why is on-device AI the future? What is your reasoning behind this? Look at the proportion of things we compute on someone else’s computer relative to what we compute on our own device. Why would this change for LLMs?
- adolph 3mo ago
  I think the reasoning is similar to why Amazon notification emails are very generic: user data is used for various purposes that a growing number of users and 3rd parties have concerns about. In addition to on-device, Apple is making efforts to secure computations that need to occur off-device, see: https://security.apple.com/documentation/private-cloud-compute https://security.apple.com/documentation/private-cloud-compu...

59percentmore 3mo ago

His read on the Apple Vision Pro (both the circumstances of its creation and its path forward) are incorrect in quite the discouraging manner for me. AVP wasn't released early (late, if anything), and it wasn't a dud because of Tim Cook's disinterest. I also think it's irresponsible to not broach the obvious implication of "PC components becoming prohibitively expensive" + "untold amounts of compute sitting in compute warehouses with nothing to do because the AI companies that used to own them folded". You probably won't even notice when everything in Best Buy becomes a thin client.

ghaff 3mo ago
Tim Cook was probably mostly disinterested because it didn't seem like a real business opportunity. Wherever AVP fell on the VR/AR spectrum, VR (while having other opportunities) was mostly a niche for high-end gamers and AR, whatever the possibilities in some future idealized form with fashionable glasses that give you lots of information about what/who you're looking at is a long way from reality.
- 59percentmore 3mo ago
  I think it's the opposite. None of the players in XR wanted to be Apple'd, least of all Apple. That is, create a base product that someone else would refine in order to drink their milkshake. Apple delayed the AVP multiple times hoping to avoid getting sniped by Meta and Google et al., each time requiring a partial rebuild as the underlying tech advanced. They would have loved to have been able to get something out when Robert Scoble was initially raving in the late 2010s, but everyone was on the same page about not wanting to sink billions into development only to have to cede the market to someone responding to your strategy. So, instead, they all dragged their feet. If XR companies had been as "reckless" with their product strategies as mobile companies in the 90s and 2000s, AVP would have had its iPod moment 6 years ago and we'd be hurtling towards the facephone. The market suffered because of the entrenchment of incumbents with all-too-clear memories.
  - whywhywhywhy 3mo ago

meangenehackman 3mo ago

Apple's greatest accomplishment is convincing its customers that they're all geniuses.

Danox 3mo ago
The largest acquisition in Apples history is only $3 billion dollars it is no surprise they didn’t fall for Sammy or give Google more than $1 billion refund. A legitimate criticism will be Apple not fixing their memory problem in the next 2 to 4 years…

sssilver 3mo ago

I will never understand the decision-making process that led to "Let's build an awesome VR headset that can't do gaming". I would love to replace my monitor with Apple Vision Pro for programming and productivity. I would gladly pay $1000 for that. But at $4000 it really needs to put me in a Microsoft Flight Simulator cockpit.

nilkn 3mo ago
For me, the economics are the exact opposite. I'd pay $1000 for a good gaming VR headset, but not $4000 -- because gaming is just a hobby that isn't really worth that much to me. Gaming VR headsets have been around for well over a decade, I've "been there, done that", and it's just not something that's worth that much money to me. However, I have no problem paying $3500+ for something that creates a new category of productivity and entertainment experiences for me. Besides that, I actually disagree that the Vision Pro is not good for gaming. It's not good for traditional VR gaming, but using apps like Portal it's phenomenal for, e.g., playing existing PS5 games on a massive virtual screen, which in many ways I actually enjoy more than VR gaming, which is far too limited in comparison.
- bigyabai 3mo ago
  The market spoke. The overwhelming majority of people don't want to pay $4,000 for a tethered AR experience. You're the minority. Conversely; the grandparent comment is still right, Apple could have made this a real VR headset without compromising any part of the AR experience. Apple knew that Hololens was a total failure, they saw the pushback on Google Glass, they should have known that people would feel like an idiot buying one of those headsets. Instead of trying to recoup the missed opportunity, Apple doubles down and pretends that those experiences are beneath them. Anyone with a $300 headset can stream games to it. AVP isn't unique for that, it's was already outsold by the Index and it's eschatologically destined to be outsold by user-respecting headsets like the Steam Frame. It's downright impossible to imagine a world where Vision Pro outsells the Quest.
  - nilkn 3mo ago

jandrewrogers 3mo ago

That article is a bit incoherent. I think it is pretty clear at this point that Apple has gone all-in on being the ideal edge silicon for AI. This leverages their core competencies, requires only modest investment, and will likely pay out no matter how the AI market eventually shakes out. They are in one of the only parts of the obvious future AI market where there isn't really a fight for greenfield turf with other big companies. Staying in their lane is arguably the optimal business decision for Apple and they lose nothing by it.

fassssst 3mo ago
Not really. Their new Siri is powered by Gemini.
nunez 3mo ago
They've been investing in NPUs for a long long time. Since the first iPad Pro at least (2018). Apple Silicon is a natural fit for tensor/matrix operations due to unified memory, so if anything them going "all in" on that has been a nice side effect.
- _davide_ 3mo ago
  > Apple Silicon is a natural fit for tensor/matrix operations due to unified memory, This is a common misconception. This is NOT true: memory designed for CPU performs horribly for GPU tasks. Mac/Strix Halo/NVIDIA Spark are performing horribly compared to a desktop video card with GDDR. I spent quite a few weekends optimizing ROCM kernels for strix halo, i WISH I had GDDR instead of high-frequency CPU RAM; the bandwidth would be SO MUCH better. I'm quantizing weights not to make computation faster, not because I'm out of memory, but because memory cannot move fast enough to be processed and it's cheaper to load quantized version, convert into bf16 compute, and discard; This happens every single time a token is generated for the whole model over and over.
  - TimByte 3mo ago
    The whole point of Apple silicon isnt speed, it is capacity. You can grab a Mac Studio with 192 gb of unified memory and shove a model in there that would otherwise require building a rig with multiple rtx 4090 s. For local dev just being able to fit the weights in memory is often way more important than token generation speed

satellites 3mo ago

Maybe a dumb question, but isn't the idea that the efficiency of the models will improve with time, such that you won't be burning hundreds of dollars of tokens for most queries? Fable is great, but Opus can handle most coding tasks for a fraction of the cost, and Sonnet is good enough for average questions or word processing tasks.

ar_lan 3mo ago
In my experience Sonnet is actually pretty good at coding tasks, at least with Go.

austin-cheney 3mo ago

That fabled line one must cross to achieve profit is ridiculously out of alignment with the current valuations on AI. Its why SPCX is falling like a meteor, currently at $111 per share. The people who are going to end up making the most money on this are creditors and future businesses. When the AI bubble does pop there will be a massive glut of data centers and hardware available. Both Apple and Microsoft are realigning their entire businesses to brace for this. When the AI bubble pops businesses that sell hardware, like Apple and Microsoft, will face an immediate price shock because they have had to raise prices to account for more expensive hardware. That shock will be short lived and prices will fall accordingly with disruption to supply chain but otherwise minimal disruption to margins. I look forward to the bubble popping because when retail hardware becomes cheap again all kinds of new business opportunities will open in the self-hosted service market.

goldenshale 3mo ago
I've never heard a compelling thesis for why this is a bubble that will pop. From my perspective AI adoption is just getting started, and every organization I see that starts on the journey only ramps up tokens dramatically. Even just sticking with current model capabilities we have years of business automation, personal automation, and so much more to saturate data centers. As the models improve that only makes more sense. Rather than Apple watching anything burn I think they are going to end up looking like nitwits who missed the boat.
- austin-cheney 3mo ago
  I think people wish AI would succeed, especially in software, but this appears to be the only argument made. Numerically, AI still costs far more than it returns in value. Its a subscription service. Even if everybody is told they must adopt early and heavily eventually AI has to qualify its expenses to its customers or they aren't going to keep using it. Think Netflix. If you believe the money spent on Netflix over the course of a year is less than the entertainment you receive back you will likely continue to pay for it. If you believe the money spent on all entertainment subscriptions exceeds the value returned you will likely start cancelling some, or all, of the subscriptions. AI is not immune from economics or human behavior. When customer company budgets get tight the money spent on AI subscriptions might be reallocated or reduced to prevent reductions in head count.

kiaansaraiya 3mo ago

There is a difference between "AI is overvalued" and "AI isn't valuable". We've seen entire industries deliver real tech progress while still going through harsh valuation resets.

sailfast 3mo ago

Needs an ( “says Ed Zitron”) title change haha. This is an interview with Ed Zitron.

lenerdenator 3mo ago

Watch everything burn? Hell no. They'll pick up companies in trouble at bargain-basement prices.

achow 3mo ago

> ..because the entire AI bubble is a result of everybody running out of hypergrowth ideas, mostly because we're flat out of new interfaces. Really? I thought the AI bubble happened because something genuinely novel had been invented. People immediately saw practical uses for it, and then it took on a life of its own - funding, superfunding, $trillions becoming part of day to day lingo.. etc. AI is not in the same class as Vision Pro, which Ed Zitron is comparing it to. I personally found the overall tone to be a bit hyperbolic.

cmiles8 3mo ago

Apple looks better and better as every day passes. Other players going deeply into debt to build out massive infrastructure, VCs pumping up the model ecosystem that is now a total commodity. Apple’s just been sitting there with solid cashflow waiting for all this to implode and then have on-device models with their own chips. Apple will own the end device while the rest of the world is fighting over a pure commodity. It will burn hard and Apple will laugh all the way to the bank.

throwaway63467 3mo ago
Isn’t Apple potentially under a lot of pressure due to the DRAM prices as well as having to compete with AI for fab capacity? Before all the price hikes their products were already priced at the top of the market so I would assume that memory getting more expensive will impact their sales or margin quite a bit as they can’t subsidize hardware like AI companies do (they can of course eat into their own margins a bit which I think they already do). So not sure if what happens right now is great for them, if the memory market collapses it will of course be good.
- quickthrowman 3mo ago
  Everyone is paying more for RAM these days, I expect Apple to maintain their margins.
- cmiles8 3mo ago
  Yes it does impact all hardware makers and they raised prices as a result. But again remember the financial reality here… DRAM is in short supply because of the demand for models propped up by VC subsidies and infrastructure providers going deeply into debt to buy all this stuff just as folks are realizing we’re on track to over build capacity. So yes Apple gets impacted a bit in the short term but in the long term they’ll gleefully watch it all burn.
- alpha_squared 3mo ago
  > Isn’t Apple potentially under a lot of pressure due to the DRAM prices as well as having to compete with AI for fab capacity? I'd qualify this with for now. It's not entirely clear what happens in the event the AI industry implodes, but I do think there will be a glut of memory and hardware up for grabs. It very well could crash the consumer hardware market as a result. The AI obsession and investment has burrowed so deeply across the US economy that I can't think of a single industry that won't be impacted, including agriculture.

mgrunwald_ 3mo ago

Apple failed in their efforts to build their own models, but they got lucky. China is doing all the R&D for free and the whole thing turned out to be unprofitable anyway.

sd2ff 3mo ago
??? LOL WHAT. Actually the right framing is Apple hedged the risk by maintaining good relations with China. They did not need to take any of the risk.
- mgrunwald_ 3mo ago
  But they actually took some of the risk trying to develop models for Apple Intelligence, and that attempt ended up as a meme. Do you really believe that was a strategic play?

pinkmuffinere 3mo ago

I totally think the AI companies are very overvalued, I feel that's obvious. But I don't understand why apple should have such a high run in the last year. Sure, it avoided the pitfall of overinvesting in AI -- but what did it do for positive development? Avoiding waste isn't (imo) enough to warrant increased price. What's going on, what's the bull case for apple?

fny 3mo ago

Unless Apple figures out AI software execution and opens up their walled garden a bit, their hardware edge won't matter. In 2020 I could write audio apps that worked incredibly well on a Pixel: despite LLMs! I still can get Siri to put tasks in the right todo app 70% of the time. I updated to iOS 27 beta hoping something had changed, but nope: the biggest change is a massive black orb search bar.

FLeXMurphy 3mo ago

Trigger warning: Ed Zitron is asked for his take.

fg137 3mo ago

I don't agree with many of Ed Zitron's opinions, but it is so enjoyable to listen to Better Offline and hear him ranting about AI. At least the logic is very coherent within itself, and it's not pretentious. It is a breath of fresh air compared to slop I see on LinkedIn and sometimes here.

mark_l_watson 3mo ago

I more or less agree. When Apple starts using Chinese and expanded South Korean production memory chips, their hardware pricing problem will go away. I am running new betas for macOS/iOS/iPadOS and Siri is actually useful for a much wider set of use cases. I asked Siri last week what models it was using and one of those listed was Gemini which is confusing because I enabled free use of OpenAI in the settings. Regardless, Siri is much more useful than it used to be.

LetsGetTechnicl 3mo ago

And people said that Apple was going to get left behind by not going full throttle on AI. Seems like they took the right approach

juancn 3mo ago

AI companies are a lot more like traditional manufacturing companies. They can only subsidize you so far, because they may not be even be covering their variable cost at this point. There's no software multiplier (build once — pay the cost once — sell many times). Traditional SaaS is in a middle ground, there are operational costs associated with providing services, but per request they're usually negligible. AI? I don't know, but it's not looking great from where I sit, unless there's a significant breakthrough in inference efficiency.

plaidfuji 3mo ago
I think the manufacturing analogy is apt. If you consider both the need for minimal COGS and the large R&D expense, it’s kind of like… biomanufacturing. You spend a lot on R&D to develop your bug, which at the end of the day is just a very complicated sequence (DNA vs model parameters), and then you expend a ton of capex (or rent someone else’s capital equipment) to produce a relatively commoditized product (a drug, a protein, food…) at as large scale and low cost as you can. But that also makes the case for government subsidization + bailout, if you accept it as a capability critical to national security, but one that may not be profitable to run within the US on its own merits.

rbanffy 3mo ago

I kind of look forward to Oracle's demise. Maybe they sell the remains of Solaris and SPARC to someone who'll make something useful out of that IP, maybe even a nice product. I sincerely hope, when all this madness ends, there will be enough data centre surplus gear we'll all be able to soup up our homelabs.

CMay 3mo ago

Ctrl+F: "national security". Didn't see national security mentioned a single time in all the current comments or in the article. Speculations about profit are great and there are many companies that will largely be irrelevant across all the major metrics which will not be in a good position, but there are always these people lost on the profit picture of anything. Does anyone realistically believe that all of these smart people are rushing into AI to maximize profit? No, they're rushing into it, because it's important and awesome. The potential value, not simply measured in dollars, is enormous. Despite China aggressively training on western outputs, their cloud services can't be trusted and their open weight models are too large for most people to run. Running any of these open weight models through proxies or 3rd party services isn't really expected to be more secure or more private than any of the big companies. If you aren't running it locally then it's irrelevant and most people cannot do that for any sufficiently big model at a usable performance. Ctrl+F: "web search" Almost nobody talking about the giant shift in web search. Web search also remains a hugely profitable business and AI is becoming the new web search. It is the default now for many people and that will likely continue to increase. Is anyone going to argue that web search is unprofitable? No. Nobody. AI will get better and more efficient as needed. You'll have your efficient to run models and your expensive models, branched as needed. This is the biggest shake up we've seen in search in decades, but even with that, Google remains dominant. Bing made AI search their default and it actually hurt them in my opinion, because it was very bad and mostly wrong. Google added AI search, but it's been a lot more accurate and grounded. Keep in mind that Google search remains the default for a lot of devices. You don't even have to install ChatGPT or Claude on your phone, because Google is already there and people are getting used to Google AI results. When I talk to random people, do you think they tell me they're using ChatGPT or Claude? Basically never. They talk about Google Gemini or Google AI. Gamers have an ok chance of saying they use ChatGPT. Programmers have a good chance of saying they're using Claude or ChatGPT. Anyone else it's almost universally Google Gemini or just Google AI. You do a basic Google search and you're already within the potential flow of an AI conversation. Making money is important so that you can increase the amount of reinvestment into the product, not strictly to maximize profit. From the situation a lot of these AI companies are in, acceleration should still be more important than profit and whether they can focus on acceleration may depend on their investment picture. OpenAI and Anthropic are going to need a long term reinvestment strategy that accounts for Google having the potential to outpace them and become good enough that nobody bothers launching or loading a separate app anymore. Keeping smart people using your product is an important aspect of it all since you want your product to become smarter too. Maybe Apple will simply pay for these services the way it does for Google search, but if they want to maintain their privacy philosophy they will either be dependent on models from these companies or have to roll their own. Either way, AI is sufficiently complex and capable that there will remain many ways for companies to specialize and provide profitable value to people for decades to come. It adheres to physics. It takes energy. It takes time. User experience is important, but the more that private user and company data gets used the more that trust will continue to be relevant too. I think some of these analysts are too caught up in a few numbers here and there to understand what is happening. Are OpenAI, Anthropic and Google simply going to explode and cry "oh no, we were dumb"? That feels like the picture this guy is painting and it feels a little naive. That also ignores the fact that they are basically developing the smartest AI that can theoretically help them navigate their business into the future.

Barbing 3mo ago

This post has been pushed from the first to the third page (rank 89, 221 points, +5hr).

TimByte 3mo ago

[flagged]

wookmaster 3mo ago

Apple certainly landed ahead of the game here but AMD is catching up quickly with their integrated memory architecture.