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Well, how workable are they? Let's say a kid's lemonade stand increases its revenue from $1/month to $100/month in three months. Clearly that 100x revenue incr
by crote 2mo ago
Well, how workable are they?
Let's say a kid's lemonade stand increases its revenue from $1/month to $100/month in three months. Clearly that 100x revenue increase per quarter is sustainable, so it predicts a $100M revenue a year from now, raises money at a $1B valuation, and signs a contract to buy $10M in industrial lemon squeezing machines. The squeezer manufacturer then predicts that it'll see a $500M revenue from all the other lemonade companies, raises money, and spends $1B on expanding its factories. Meanwhile, the kid is actually losing money because they are selling gold-leaf lemonade for $1 / glass while it costs $100 / glass to produce.
But the lemonade stand is making money! Worst-case scenario they'll just renegotiate the squeezer contract and slow down their growth, right? If the lemonade business goes bust they'll just sell hundreds of millions of dollars of squeezers to lime juice stands, right? The government will declare lemonade a "resource critical for national defense" and bail out the industry, right?
Yeah, sure, AI isn't 100% bullshit. There is indeed some money there, it won't be a complete collapse. But the numbers we are seeing are absolutely insane. We're already at "AI is bigger than the entire internet" levels of investments! Either we are collectively burning hundreds of billions of dollars on pure hype, or somehow every single company on the planet is hiding a secret 10x AI-boosted productivity increase.
- pu_pe 2mo agoBe careful that you are not basing your argument on whether you personally like lemonade. If a kid's lemonade stand increased its revenue from $1B/year to $100B/year in two years, we would be paying serious attention to their product. People seem to love that lemonade! At this level of increased demand, maybe it's ok to let this kid borrow $1T over 5 years, because even if his growth slows down to 2x/year instead of 10x/year, he will still be covering that investment. That's hopeful and risky, but not at all insane in my view.
- crote 2mo agoAnd what's going to happen to those hundreds of billions of investments in equipment that won't be needed until well after it has become obsolete and uneconomical to operate? What happens to the stock price of a company that missed its revenue targets by a factor of 5? Making extreme growth predictions and not realizing them is fine for small startups. Not so much when it comes to trillion-dollar companies - especially when they have taken on massive loans to pay for it. A 2x-instead-of-10x result? That's an economy-killing crash.
- pu_pe 2mo ago> What happens to the stock price of a company that missed its revenue targets by a factor of 5? It depends. Tesla is a good example of how those things are not as clear cut as you might think. The world is starving for more AI compute. Nvidia's GPUs are selling for 2x or 3x their former price, RAM prices increased even more, all because demand is huge right now. If anything buying those chips at bulk discount and then selling them right back to consumers would already be profitable.