The warning signs the AI bubble is about to burst (opens in new tab)

> Given how much capital has already been committed to infrastructure development I find it very unlikely that even a Black Monday style market correction will do much to alter the medium and long term outlook for ai development and investment.

So let's bet on sunken cost fallacy? That didn't work out during the dotcom era.

When people talk about the bubble is mostly about ending the LLM hype, not making everything associated just disappear. The infrastructure, ideas and developments will stay and probably end up being a lot more useful without the noisy hype surrounding it right now.

> Given how much capital has already been committed to infrastructure development

Here’s the stupid thing about that infrastructure: This isn’t railroads. This isn’t skyscrapers. This isn’t underseas fiber optic. These are, at the end of the day, data center GPUs that can and will start failing en-masse on normal hardware timelines.

When that happens, they will all need to be replaced, at whatever rate NVIDIAs selling at - or can sell at, if there’s any geopolitical incidents. If there aren’t enough customers, capacity shrinks, and the remaining customers must foot the bill for the new system and the previous round of investment, causing a death loop wherever there isn’t profitable use feeding into the system.

A clearer comparison: It’s like if airlines had to replace their entire fleet every 3-4 years while selling $20 tickets to anywhere; and the growth metrics look incredible when everyone’s flying at that rate. So much so, that investors paid for the first fleet round calling it “infrastructure.” Meanwhile the amount of ticket sales keeps growing when everyone finds amazing use cases and new business models from the $20 tickets. Surely, this can only get better from here, and justifies even more fleet investment.

Yeah. This time it’s different.

The problem is it will create a broader economic problem in the markets.

The top 10 holdings for VTI, the "easy button" investment option. Are: NVIDIA, Microsoft, Apple, Amazon, Facebook, Broadcom, Google, Tesla, Berkshire Hathaway. They represent a third of US market value, and 60% of them are heavily hooked into AI. A panic will be a decimation for NVIDIA, and that splash zone will be broad.

I mean, every year or so there's a new NVIDIA GPU, making last years models obsolete and GPUs from 2 generations back essentially landfill. I don't think there's another large-scale investment that decays at this rate.

The infrastructure being there might also be a problem.

- If there's no breakthrough, and we're only going to make incremental gains, then its wasteful

- If there's a breakthrough, it might turn out a new AI architecture needs either lot less compute, or a different kind of it

It's exactly that: wishful thinking.

Clearly, a lot of people very desperately want AI tech to fail and disappear. And if there is such a strong demand for "tell me that AI tech will fail", then there will be hacks willing to supply.

> I’ve switched to OpenAI Plus plan and almost never use Google search anymore

A paid product is better than a free one! Who knew it could be!

NVidia is selling “shovels to gold prospectors”

One indicator there may be a bubble is when internet investors are bragging about a P/E "under 60" like it's a safe pair of hands.

But it feels like it’s about to pop!

It really is hard to stay objective as predictors all seem to point one way.

Fortunately, there are open-end put options, so the timing doesn't have to be THAT accurate.

EDIT: to be precise: I mean open-end turbo put, which have no expiration but a knock-out.

I mean a bursting bubble is what? A C-Suite pulling the valve shut or a company going under? It seems like the bubble has burst already then when Zuckerberg and Altman started decrying it earlier in the week. Now we just wait for all the smaller companies to either fold. For the larger companies the bubble will probably deflate slowly rather than burst.

There are no market indicators if the actual burst is at the whim of a human. Being that Meta can probably bleed for a while before seeing real losses after a burst. All they have to do is be the first one to stop growing while the bubble deflates.

Pretty telling how you dismiss what appears to be the majority opinion online just because it’s a majority opinion. Irrational exuberance is defined in the context of market participants. On a wealth adjusted basis commenters online make up a very small % of shareholders in AI related tech stocks. At least on HN many users are engineers meaning they are close to the metal so to speak whereas the people making investment decisions pride themselves on being detached from technical work even if they pretend to be technically competent in public.

Maybe it is 2000 in your analogy.

Ah, so we are only 5 years away from he whole thing bursting? So, the papers in '94 warning about the dangers were just pessimistic idiot outlets? See ya in 5 years then.

It would seem we’re speed running the hype cycle, so the other side might be sooner than we think.

They will keep going until VC runs out, wants to see profits or the stellar promises die out.

Time will tell, but one thing is for sure, not even the biggest players are exempt from any of the above.

Yes bubbles always have survivors. They will be hurt and also one day worth much more than they are now.

If your portfolio of 100 internet companies in 2000 included 99 that went under and AMZN, you'd still be well above water after many years of being below water.

The problem today is that essentially nobody IPO's anymore so it's basically impossible to own 100 AI companies to ensure you include the next AMZN. NVDA is likely the CSCO of AI companies, but what's the AMZN?

The internet as a platform or network survived, but most of the big players in the bubble went down. Only the veeeeery big ones survived due to enough residual funds and the smaller players that didn't have a big enough claim yet.

You have LinkedIn lunatics saying exactly this for years, AI startups are a money printer, that we're months away from AGI that gives drop in 1000x (or even infinite asymptotic) return. Adding 'AI' to your name bumps your valuation even if it is Actually Indians behind the scenes. THAT bubble needs to burst.

Article talks about "AI" as a buzzword. My understanding is that "AI" here means something much more closer to "market virtue signalling" when every product now has "AI", rather than "cutting-edge ML research".

It's the kind of "AI" I see when I walk by the TVs at Costco and see that every box that used to feature the word "smart" now has "AI" prominently written on it, even though in practice no one knows for sure what it possibly means or does. In this sense - sense of companies slapping "AI" (whatever it means to them) for the sake of having "AI" looks like a bubble/fad/hype.

I have no idea about any possible economical outcomes of that hype declining (for a better term than "bubble" "bursting"), but I'm skeptical it's gonna be anything huge. My whole life I've seen endless examples of companies realizing their "hot topic" marketing strategy stopped working (or never worked at all) and they just pivot for different strategies without any severe impacts. As long, of course, as the company had actually useful product and the issue was merely with the marketing.

The stock market has been a bubble since the 90’s but the bursts have been minimal because the elite class uses the stock market to extract wealth from normal people. Once they find something new (enshittification) they will suck all the value out of the market and leave its husk to peasants and their meager 401ks (if they even have that). I say this because there are so many millionaires in the US, and we can’t have too many people with extra wealth or it ruins things for the elite. The 0.01% must extract every penny from the 10%, too. It used to be every millionaire felt entitled to be a billionaire, but now centibillionaires feel entitled to be trillionaires and who do you think that money is stolen from?

Lol, your kind of comment was also common in 2006-2007 when warnings about a housing bubble were brewing, no one can time it but the signs are always there in retrospect.

Can you expand on that?

The reports of Meta's hiring freeze may be somewhat exaggerated

https://www.tipranks.com/news/meta-poaches-another-apple-emp...

To be fair, it would be surprising if the supply of AI researchers worth hiring (or poaching with Mega Millions comp packages) lasted that long, either.

There has to be a point of diminishing returns somewhere, and a headline-worthy hiring frenzy should be expected to hit it quickly.

That sounds less like a business plan and more like a cult.

Which cryptocurrency did you lose you shirt on?

What do I do after I have my blinkers on?