I think the scepticism around whether the AI firms can provide the return on investment for their capital expenditure plan is completely understandable.
It reminds me of a mini-story within Michael Lewis' Flash Boys - there was a massive project to drill through the solid granite of Pennsylvania mountains in order to lay a new fiber-optic cable so that High-Frequency-trading firms could use it to get their data quicker between Chicago and New York. It was done at huge cost, I think around $300m. The Fiber-optic cable could transmit data between the locations in around 13.1ms - 13.5ms.
However, an alternative option of Microwave towers was setup and installed to transmit data between the same locations. The Microwave Tower could do the same, but around 8.5ms-9ms, ~30% faster. And it didn't cost anywhere near as much.
I worry that not only are those current capital expenditure plans wildly unaffordable, but also that the risk of an innovation rendering all that infrastructure obsolete can't be ruled out. It's a massive gamble.
> risk of an innovation rendering all that infrastructure obsolete can't be ruled out. It's a massive gamble.
It's not just a gamble on technology - it's a gamble on the company too!
You own a company's stock - not a technology's!
In the dot com era, it was the realization that the wrong companies were picked that popped the bubble. Turns out pets.com was never gonna be the billion dollar business. It was that book store Amazon instead. And it was the Google search engine not the other one. And browser A not browser B... And so on... When the expected winner shifts away from one company towards a position where people want to sit on cash and wait and see, you suddenly get a massive rush to the exits and poor pets.com needs to throw in the towel.
We're gonna find out in the next couple of years who the pets.coms are.
What would the equivalent be in AI? A dirt cheap inference chip for consumer hardware? 2T sized networks on a cell phone so we don't need data centers?
Your analogy required no technological innovation, just a good look at solution space. Where's the microwave tower for AI that everyone is missing?
A breakthrough in grokking/regularization, quantized or sparse training methods, quantum optimization, or more efficient architecture could reduce infrastructure needs. Although any of these could simply advance the parrot frontier without solving the prisoner’s dillema driving infrastructure spend at ai firms.
Whenever the stock market goes down there is a default, likely algorithmically produced headline that says "This is the worst its been since the last time it was this bad which was X ago". Meaningless.
The worst rainy second Tuesday of the month since 2023…
I see the same thing in sports broadcasting. “No 24 year old rookie player has started the season with this many at bats from the left side of the plate against visiting teams since…”
That made me laugh, they must get bombarded with stats at any time they can just pick and choose from. I bet to some degree it's also about filling the air with something to say.
I kind of look forward to AI written/approved headlines because we'll get more funny gems from the AI not getting the implications of out of scope context.
Exactly, the headline sort of paradoxically reflects the desire for news, and not news itself.
But still, the actual stock market behavior right now is PROBABLY (!!) more reflective of random motion than it is of a fundamental shift in investor behavior.
It will go back up when Meta borrows from Amazon to buy capacity from Oracle who buys silicon from Broadcom to fund GPUs from nVidia to let OpenAI enhance their app to make Facebook posts.
I can't think of an industry[1] more deserving of being left high and dry and less able to garner public sympathy than NYC banking and we let them get a bailout.
But everyone hates CA, hates big tech, etc, etc, so maybe the political stars align and this will be the ones who finally set the "no bailout" precedent.
[1] Well actually I can now that I think about it and it's the beltway bandits but that's beside the point.
By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"
For sure. People seem to think that you can just do all the market moving announcements that Altman has done and then say "Oops I don't have the money". Crashing into reality will bring a lot of pain.
The problem with that story is the dates. If you sold in 1998 when PG realized the ponzi characteristic of the market[1] you'd have lost ("lost") a ton of money. The nasdaq composite in June of 1998 was about $1800. It reached a peak of $5000 (!!!!) just before the crash.
The advice is correct, but in practice it's only helpful if you can time the crash, which you can't. Cycle-driven run-ups in advance of bubble burst events can be shockingly long.
[1] Which is roughly where we are right now with the AI bubble.
> By 2026, Nvidia was the beneficiary of a de facto Ponzi scheme. Investors were excited about AI. One reason they were excited was Nvidia's revenue growth. So they invested in new AI startups and cloud hyperscalers. The startups and hyperscalers then used the money to buy Nvidia chips. Which caused yet more revenue growth for Nvidia, and further convinced investors AI was worth investing in.
Fixed this for anyone still not processing the bubble.
Yeah, there's still room to fall given how inflated it is. How much did those deal announcements add to market caps? And OpenAI can't pay for it so that will need to be taken off the top.
Readit News
It reminds me of a mini-story within Michael Lewis' Flash Boys - there was a massive project to drill through the solid granite of Pennsylvania mountains in order to lay a new fiber-optic cable so that High-Frequency-trading firms could use it to get their data quicker between Chicago and New York. It was done at huge cost, I think around $300m. The Fiber-optic cable could transmit data between the locations in around 13.1ms - 13.5ms.
However, an alternative option of Microwave towers was setup and installed to transmit data between the same locations. The Microwave Tower could do the same, but around 8.5ms-9ms, ~30% faster. And it didn't cost anywhere near as much.
I worry that not only are those current capital expenditure plans wildly unaffordable, but also that the risk of an innovation rendering all that infrastructure obsolete can't be ruled out. It's a massive gamble.
It's not just a gamble on technology - it's a gamble on the company too!
You own a company's stock - not a technology's!
In the dot com era, it was the realization that the wrong companies were picked that popped the bubble. Turns out pets.com was never gonna be the billion dollar business. It was that book store Amazon instead. And it was the Google search engine not the other one. And browser A not browser B... And so on... When the expected winner shifts away from one company towards a position where people want to sit on cash and wait and see, you suddenly get a massive rush to the exits and poor pets.com needs to throw in the towel.
We're gonna find out in the next couple of years who the pets.coms are.
Hermes: You invest this penny like you wanted.
Dwight: Thanks, Dad. I'm gonna take this and buy five shares of Amazon.com.
Hermes: A risk-taker? That's my boy!
In today's shares Amazon peaked at $5/share in December 1999 (adjusting for splits etc) but by early 2003 had collapsed to about $1.
Certainly enough to joke about it as a cartoon writer.
Today of course it's $250 a share.
Your analogy required no technological innovation, just a good look at solution space. Where's the microwave tower for AI that everyone is missing?
The "AI" firms have no such certainty that "AI" translates to revenues that will exceed their expenditures
All they have is endless speculation
I see the same thing in sports broadcasting. “No 24 year old rookie player has started the season with this many at bats from the left side of the plate against visiting teams since…”
I'm not sure that they intended to give that impression...
Deleted Comment
Everyone wants to know, so it's always news. Even though it usually isn't.
But still, the actual stock market behavior right now is PROBABLY (!!) more reflective of random motion than it is of a fundamental shift in investor behavior.
Unless it isn't.
Too big to fAIl
Edit: People are literally being forced out of the country by cost of living https://www.wsj.com/personal-finance/retirement/middle-class...
But everyone hates CA, hates big tech, etc, etc, so maybe the political stars align and this will be the ones who finally set the "no bailout" precedent.
[1] Well actually I can now that I think about it and it's the beltway bandits but that's beside the point.
While acknowledging being in a bubble the quote was "While the music is playing, you have to get up and dance".
Deleted Comment
By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"
Это к вопросу о эпицикле Оракла-Нвидии.
The advice is correct, but in practice it's only helpful if you can time the crash, which you can't. Cycle-driven run-ups in advance of bubble burst events can be shockingly long.
[1] Which is roughly where we are right now with the AI bubble.
Fixed this for anyone still not processing the bubble.
At the end of the day it's still all about timing the market, which is hard to impossible no matter the conditions.