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Where are those 99$ coming from? Who is actually paying this money? Because it seems like so far everybody is losing money with no reversal of this trend in sig

by iammjm 20d ago

Where are those 99$ coming from? Who is actually paying this money? Because it seems like so far everybody is losing money with no reversal of this trend in sight

marginalia_nu 20d ago
Inflated valuations, mostly.
- petcat 20d ago
  The current valuations are only inflated until they're not. Especially if the big American labs can convince the US government to work out a joint "AI non-proliferation" agreement with China which will allow both countries to essentially carve up and techno-colonize the rest of the world without any other competition except between themselves. We're already seeing signs of this strategy from Open AI and Anthropic warning about the dangers of AI and the need for safety regulations. None of that stuff matters if China is not also on board with it.
  - marginalia_nu 20d ago
    > The current valuations are only inflated until they're not You could say that about any historically inflated valuation all the way back to the tulip mania. Either the expected profit materializes or it doesn't. > We're already seeing signs of this strategy from Open AI and Anthropic warning about the dangers of AI and the need for safety regulations I would read this as a desire to pause training to be able to present a profit in anticipation of the IPO. The major AI labs mad scramble to IPO is if anything a sign that they aren't at all confident in the valuation. If they were they would be no hurry to cash out.
fc417fc802 20d ago
And this is the actual problem. I can't see framing it as a ratio as anything other than an attempt to mislead. What do you predict will happen when the market deflates? Whether or not a segment will behave like a line of dominoes and catastrophically implode is the question. As I understand it they are risking that even if the major AI labs fail all the compute capacity that's been built out will remain in demand at sufficiently high prices.
deleted 20d ago
[deleted]
simianwords 20d ago
You do realise it’s not a fixed pie right?
- streetfighter64 20d ago
  Well, it is. Thermodynamics. Earth is pretty much a closed system, except for the sun. So for example if you invest $100 in a farm and get a return of 10%, where does that come from? The nutrients in the soil, the effort expended by the workers, and the power of the sun to turn seeds into food. All value comes either from finite resources in the ground (nuclear, oil, ...), from solar power, or from human effort (work, innovations, etc.) So can you trace back Nvidia's incredible 10000% return on investment to any of these sources? Which ones?
  - Footnote7341 20d ago
    Economic value isnt a physical resource being depleted....
    - ptx 20d ago
      But it seems this "economic value" is often created by depleting actual physical resources (e.g. people's health, clean air and water), usually resources belonging someone other than the person capturing the "value".
      - fuzzfactor 20d ago
        So many don't want to admit things like that. "Economic value" is great stuff and kind of all-encompassing. But a lot of it is mainly moving money around after wealth has already been created, sometimes generations earlier. To this day the lion's share of "creating wealth" is traceable to natural resources.
    - streetfighter64 17d ago
      Can you explain what economic value actually is, in your view? I think I gave a fairly good explanation of my viewpoint, your reply doesn't add anything as I never claimed anything remotely similar to that "economic value is a physical resource being depleted". What does that even mean?
JumpCrisscross 20d ago
> Where are those 99$ coming from? If this isn't a house of cards, AI companies' customers. The companies and individauls ponying up for a Claude subscription or compute through OpenRouter. Customer financing isn't inherently fucked. It's just highly suspect at the scale Nvidia's doing it. There was another thread where I noted that Nvidia's investments are literally monetarily significant, to the point that I expect them to start being directly referenced in the Fed's beige book [1]. [1] https://news.ycombinator.com/item?id=49673871 https://news.ycombinator.com/item?id=49673871
- polski-g 20d ago
  Demand for AI inference is infinite. It's coming from the rest of the economy.
  - swiftcoder 20d ago
    Money flowing from the rest of the economy means money no longer being spent on something else. Assuming for the moment it's not all a big circular inflationary scheme, what exactly is being cut back on to fund this infinite spend on AI inference?
    - ajb 20d ago
      Economic activity is a flow, not a stock. There might well be a bubble, but you can't prove it like that.
      - swiftcoder 20d ago
        > Economic activity is a flow, not a stock Any one actor has finite cash flow (plus their cash-on-hand buffer). Directing cashflow towards inference necessarily directs it away from something else. Either these companies are spending less on something else, or they are returning less profit.
        ajb 20d ago
jstummbillig 20d ago
> Where are those 99$ coming from? Who is actually paying this money? Companies who pay 99$ to make >99$ in return. I am not saying it works in all cases but that's the idea when a company spends money. > Because it seems like so far everybody is losing money with no reversal of this trend in sight I am not sure what you are seeing: Anthropic (as one of only two major companies that do just AI) is starting to return profits, while demand for AI is accelerating and, clearly, compute is maxed out. And I mean: On the entire planet. They are turning profits despite everything being in full buildout mode.
- edgyquant 20d ago
  Is Anthropic turning a profit? I thought that was only when considering discounted compute from spaceX
well_ackshually 20d ago
>Who is actually paying this money? You, when their circular financing scheme fails and you're the one left holding the bag as your government says "they're too important to let them fail".
- paulryanrogers 20d ago
  Also you if your retirement funds are heavily invested in AI, directly or indirectly through big caps who are.
neonstatic 20d ago
This month I spent $50 on OpenRouter credits. I find it very useful for coding assistance (not coding per se). It's $50 that I never spent before on this kind of service. That's what we call growth - it quite literally came out of nowhere.
- oblio 20d ago
  Your $50 isn't enough to sustain trillions of dollars in CapEx investments. This investment cycle - at this scale - only makes sense if within the next 5 years AI replaces something crazy like 5-10% of jobs, if not more. Not changes, replaces completely. And I'd argue the timer started in 2023.
  - brunoarueira 20d ago
    It's the marketing they were doing all the time that AI will replace developers and other jobs, then the companies started this bullshit firing thousands of people without really thinking through. It's more sane to advertise that AI will augment us and I guess if they followed this path a more sustainable growth is expected to happen!
    - joquarky 20d ago
      Their exhuberance at the thought of decimating the labor force overrode their discretion. Reminds me of this: >I went through this Ford engine plant about three years ago, when they first opened it. > There are acres and acres of machines, and here and there you will find a worker standing at a master switchboard, just watching, green and yellow lights blinking off and on, which tell the worker what is happening in the machine. >One of the management people, with a slightly gleeful tone in his voice said to me, “How are you going to collect union dues from all these machines?” >And I replied, “You know, that is not what’s bothering me. I’m troubled by the problem of how to sell automobiles to these machines - Walter Reuther, Nov. 1956 https://quoteinvestigator.com/2011/11/16/robots-buy-cars https://quoteinvestigator.com/2011/11/16/robots-buy-cars
  - saberience 20d ago

by iammjm 20d ago

Where are those 99$ coming from? Who is actually paying this money? Because it seems like so far everybody is losing money with no reversal of this trend in sight

marginalia_nu 20d ago

Inflated valuations, mostly.

petcat 20d ago
The current valuations are only inflated until they're not. Especially if the big American labs can convince the US government to work out a joint "AI non-proliferation" agreement with China which will allow both countries to essentially carve up and techno-colonize the rest of the world without any other competition except between themselves. We're already seeing signs of this strategy from Open AI and Anthropic warning about the dangers of AI and the need for safety regulations. None of that stuff matters if China is not also on board with it.
- marginalia_nu 20d ago
  > The current valuations are only inflated until they're not You could say that about any historically inflated valuation all the way back to the tulip mania. Either the expected profit materializes or it doesn't. > We're already seeing signs of this strategy from Open AI and Anthropic warning about the dangers of AI and the need for safety regulations I would read this as a desire to pause training to be able to present a profit in anticipation of the IPO. The major AI labs mad scramble to IPO is if anything a sign that they aren't at all confident in the valuation. If they were they would be no hurry to cash out.

fc417fc802 20d ago

And this is the actual problem. I can't see framing it as a ratio as anything other than an attempt to mislead. What do you predict will happen when the market deflates? Whether or not a segment will behave like a line of dominoes and catastrophically implode is the question. As I understand it they are risking that even if the major AI labs fail all the compute capacity that's been built out will remain in demand at sufficiently high prices.

deleted 20d ago

[deleted]

simianwords 20d ago

You do realise it’s not a fixed pie right?

streetfighter64 20d ago
Well, it is. Thermodynamics. Earth is pretty much a closed system, except for the sun. So for example if you invest $100 in a farm and get a return of 10%, where does that come from? The nutrients in the soil, the effort expended by the workers, and the power of the sun to turn seeds into food. All value comes either from finite resources in the ground (nuclear, oil, ...), from solar power, or from human effort (work, innovations, etc.) So can you trace back Nvidia's incredible 10000% return on investment to any of these sources? Which ones?
- Footnote7341 20d ago
  Economic value isnt a physical resource being depleted....
  - ptx 20d ago
    But it seems this "economic value" is often created by depleting actual physical resources (e.g. people's health, clean air and water), usually resources belonging someone other than the person capturing the "value".
    - fuzzfactor 20d ago
      So many don't want to admit things like that. "Economic value" is great stuff and kind of all-encompassing. But a lot of it is mainly moving money around after wealth has already been created, sometimes generations earlier. To this day the lion's share of "creating wealth" is traceable to natural resources.
  - streetfighter64 17d ago
    Can you explain what economic value actually is, in your view? I think I gave a fairly good explanation of my viewpoint, your reply doesn't add anything as I never claimed anything remotely similar to that "economic value is a physical resource being depleted". What does that even mean?

JumpCrisscross 20d ago

> Where are those 99$ coming from? If this isn't a house of cards, AI companies' customers. The companies and individauls ponying up for a Claude subscription or compute through OpenRouter. Customer financing isn't inherently fucked. It's just highly suspect at the scale Nvidia's doing it. There was another thread where I noted that Nvidia's investments are literally monetarily significant, to the point that I expect them to start being directly referenced in the Fed's beige book [1]. [1] https://news.ycombinator.com/item?id=49673871 https://news.ycombinator.com/item?id=49673871

polski-g 20d ago
Demand for AI inference is infinite. It's coming from the rest of the economy.
- swiftcoder 20d ago
  Money flowing from the rest of the economy means money no longer being spent on something else. Assuming for the moment it's not all a big circular inflationary scheme, what exactly is being cut back on to fund this infinite spend on AI inference?
  - ajb 20d ago
    Economic activity is a flow, not a stock. There might well be a bubble, but you can't prove it like that.
    - swiftcoder 20d ago
      > Economic activity is a flow, not a stock Any one actor has finite cash flow (plus their cash-on-hand buffer). Directing cashflow towards inference necessarily directs it away from something else. Either these companies are spending less on something else, or they are returning less profit.
      - ajb 20d ago

jstummbillig 20d ago

> Where are those 99$ coming from? Who is actually paying this money? Companies who pay 99$ to make >99$ in return. I am not saying it works in all cases but that's the idea when a company spends money. > Because it seems like so far everybody is losing money with no reversal of this trend in sight I am not sure what you are seeing: Anthropic (as one of only two major companies that do just AI) is starting to return profits, while demand for AI is accelerating and, clearly, compute is maxed out. And I mean: On the entire planet. They are turning profits despite everything being in full buildout mode.

edgyquant 20d ago
Is Anthropic turning a profit? I thought that was only when considering discounted compute from spaceX

well_ackshually 20d ago

>Who is actually paying this money? You, when their circular financing scheme fails and you're the one left holding the bag as your government says "they're too important to let them fail".

paulryanrogers 20d ago
Also you if your retirement funds are heavily invested in AI, directly or indirectly through big caps who are.

neonstatic 20d ago

This month I spent $50 on OpenRouter credits. I find it very useful for coding assistance (not coding per se). It's $50 that I never spent before on this kind of service. That's what we call growth - it quite literally came out of nowhere.

oblio 20d ago
Your $50 isn't enough to sustain trillions of dollars in CapEx investments. This investment cycle - at this scale - only makes sense if within the next 5 years AI replaces something crazy like 5-10% of jobs, if not more. Not changes, replaces completely. And I'd argue the timer started in 2023.
- brunoarueira 20d ago
  It's the marketing they were doing all the time that AI will replace developers and other jobs, then the companies started this bullshit firing thousands of people without really thinking through. It's more sane to advertise that AI will augment us and I guess if they followed this path a more sustainable growth is expected to happen!
  - joquarky 20d ago
    Their exhuberance at the thought of decimating the labor force overrode their discretion. Reminds me of this: >I went through this Ford engine plant about three years ago, when they first opened it. > There are acres and acres of machines, and here and there you will find a worker standing at a master switchboard, just watching, green and yellow lights blinking off and on, which tell the worker what is happening in the machine. >One of the management people, with a slightly gleeful tone in his voice said to me, “How are you going to collect union dues from all these machines?” >And I replied, “You know, that is not what’s bothering me. I’m troubled by the problem of how to sell automobiles to these machines - Walter Reuther, Nov. 1956 https://quoteinvestigator.com/2011/11/16/robots-buy-cars https://quoteinvestigator.com/2011/11/16/robots-buy-cars
- saberience 20d ago