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There are certainly many parallels with our current situation. But railroads were a much bigger segment of the economy then. AI's growth is benefitting a narrow

by glimshe 2mo ago

There are certainly many parallels with our current situation. But railroads were a much bigger segment of the economy then. AI's growth is benefitting a narrower set of people, so I find unlikely that the inevitable collapse of AI investment alone, absent other factors, could wreck the global economy the same way.

mrngld 2mo ago
I think the risk is a little different. It's not that data centers are being built and then unused -- the fact that OpenAI, Anthropic and pretty much everyone has to put a lot of effort into getting enough compute tells you the demand is there for inference. And it's useful, increasingly so outside of coding. The risk is in the financial world. The worlds central banks printed money because they thought inflation was tamed, but it wasn't, we just don't measure stratospheric stock and bond valuations as "inflation". I mean, euro-zone bond yields went negative -- but no, that's not inflation-like price mania at all! A big correction in financial markets towards some semblance of reality could amount to a psychological shock on consumers, a big negative wealth effect. And a hit at the ballot box, hence no major political parties calling for raising rates (or sound money). They rather juice the markets for as much of their careers as possible.
- htrp 2mo ago
  Better question is at what rate is there demand for what amount of inference?
inigyou 2mo ago
Are you accounting for the entire electricity sector relying on AI payments that won't come, and the entire world relying on computer parts that are no longer produced except for AI companies?
- bryanlarsen 2mo ago
  Do you think token demand is going to drop after the collapse? I seriously doubt it. IMO the collapse will come because the insane profits that OpenAI/Anthropic valuations depend on will collapse due to margin collapse from competition from Open Weight / Chinese models. IOW, a reduction in price of tokens. Which will increase demands for tokens, and the electricity needed to generate them. This might result in bankruptcy of some of the holding companies holding data center debt, but with that debt discharged in bankruptcy the data centers will be quite profitable and keep operating. Training demand will also collapse after a crash, but training is now a minority of data center demand. IOW, those electric bills are going to continue to get paid. I wouldn't want to hold OpenAI/Anthropic stock or data center debt though.
  - inigyou 2mo ago
    What do tokens do that's useful?

by glimshe 2mo ago

mrngld 2mo ago

I think the risk is a little different. It's not that data centers are being built and then unused -- the fact that OpenAI, Anthropic and pretty much everyone has to put a lot of effort into getting enough compute tells you the demand is there for inference. And it's useful, increasingly so outside of coding. The risk is in the financial world. The worlds central banks printed money because they thought inflation was tamed, but it wasn't, we just don't measure stratospheric stock and bond valuations as "inflation". I mean, euro-zone bond yields went negative -- but no, that's not inflation-like price mania at all! A big correction in financial markets towards some semblance of reality could amount to a psychological shock on consumers, a big negative wealth effect. And a hit at the ballot box, hence no major political parties calling for raising rates (or sound money). They rather juice the markets for as much of their careers as possible.

htrp 2mo ago
Better question is at what rate is there demand for what amount of inference?

inigyou 2mo ago

Are you accounting for the entire electricity sector relying on AI payments that won't come, and the entire world relying on computer parts that are no longer produced except for AI companies?

bryanlarsen 2mo ago
Do you think token demand is going to drop after the collapse? I seriously doubt it. IMO the collapse will come because the insane profits that OpenAI/Anthropic valuations depend on will collapse due to margin collapse from competition from Open Weight / Chinese models. IOW, a reduction in price of tokens. Which will increase demands for tokens, and the electricity needed to generate them. This might result in bankruptcy of some of the holding companies holding data center debt, but with that debt discharged in bankruptcy the data centers will be quite profitable and keep operating. Training demand will also collapse after a crash, but training is now a minority of data center demand. IOW, those electric bills are going to continue to get paid. I wouldn't want to hold OpenAI/Anthropic stock or data center debt though.
- inigyou 2mo ago
  What do tokens do that's useful?