The dot-com bubble didn’t prove the internet was a fad — it proved the internet was inevitable, but the valuations assumed adoption would happen in 2 years instead of 15–20. To me it feels like the AI inevitability will be much quicker.
> To me it feels like the AI inevitability will be much quicker.
Based on what? We're only seeing linear improvements for increasing spending. There's no new algorithm ideas on the horizon, just more and more hardware, in the hopes that if we throw enough RAM and CPU at the problem, it will suddenly become "AGI."
No one has their eye on power budgets or sustainability or durability of the system. The human brain has such a high degree of energy efficiency that I don't think people understand the realities of competing with it digitally.
The main problem "AI" seems to solve is that humans get bored with certain tasks. The language models obviously don't, but they do hallucinate, and checking for hallucinations is an exceedingly boring task. It's a coffin corner of bad ideas.
The LLM algorithms seem pretty clunky to me, like a hack designed for text translation that surprised everyone by getting quite smart. The reason the human brain is so much more energy efficient is quite likely better design/algorithms. I was watching some video comparing brain and LLM function and almost tempted to try building something myself (https://youtu.be/3SUqBUGlyh8). I'm sure there are many more competent people looking at similar things.
Internet did not have enough devices to reach people. At the height of 2002 only a fraction of people worldwide had an already expensive computer and an internet to go with it.
I ran a e-commerce startup from 2005-2010. Having access to demand is a thing.
Today everyone has access in their pockets. Go to small city in Africa, India and China, and observe how they use AI. See how perplexity has put AI answers in hundreds of millions of people's hands before Google in a matter of months.
Forgive me for saying — but "Based on what" for comparing accelerated adoption between 2005 and 2025 — is discarding many huge elephants in the room, starting with that small thing you're reading this in your hand with, and the invisible thing that's sending you this comment.
The current LLM models are too fallible and inefficient for everyday use. Energy requirements have become a major concern, bucking the trend of banking exponential computing gains through the efficiency improvements. Until recently, year-on-year global energy demands of data-centers were increasing linearly despite the exponential increase in computing power.
This has changed since the cost of equipment and infrastructure has been close to "free" for the large corporations running a cycle of funny-money investment in a bubble. This has allowed them sell access to the computing and models for just above operational energy costs (to the extent of increasing global energy prices), whilst offering free accounts to harvest data. No small competitor could possibly compete with that model.
The calculation for profitability (useful output for humans in a cost-benefit analysis) of the current setup is broken, and trades on our dreams of the future. Scaling computing forever simply does not work. It will never be profitable without further leaps forward in the technology--either more efficient models or hardware. By this time, the extent to the excessive investment in new data-centers will be clear.
The internet predated dot-coms by two or three decades and wasn't very bubbly - mostly government funded links between academic and military institutions. It was only when commerce got in there in the 90s that things started getting busy and then bubbly.
A lot of those early .com companies could have been profitable. They chose to go for rapid growth instead. Some people here probably remember discussion of users mattering more than revenue.
You see that same pattern with AI now. Products are being provided for free or nearly free, and plenty is being spent on marketing.
If technology had been the same for the past 20 years, basically none of these would have existed, or would be even close as large as today. We needed way faster cable and mobile internet, and smartphones. Probably even smaller laptops. It was possible to predict these more or less, however, it was impossible to predict when or whether people start to really utilize the internet. Even now, we needed COVID to have another shift regarding this. The general acceptance of “internet first” kind of worldview maybe would have never happened without forcing us to have.
Technology for all the above existed in rudimentary form, faster Internet, faster machines and adoption was missing. But Current bets are assuming AGI. No one knows how soon. To predict that would be foolish.
On the RHS, post hype, the second movers could work on the boring, unsexy problems in those domains nobody wanted to solve. And solve them extremely well. Then build a moat around that.
There is also a customer adoption curve of technology that lags far behind the technologist adoption curve. For example video on the Web failed a long time, until it didn't, when Youtube began to succeed. The problem became "boring" to technologists in some ways, but consumers gradually caught up.
How does this add to the discussion? Is the goal to make HN as toxic as everywhere else online? If you have something to say, say it. Otherwise this performative negativity and cynicism is boring honestly.
Blockchain the the internet seem to have stabilized. The internet as fast video capable links between computers, blockchain as a tech for speculation, gambling and some criminal stuff. AI has not and is still on the exponential bit of the S curve.
Aside from a belief that the AI adoption will happen very quickly, which maybe that’s your main point, you’re not really disagreeing with the article:
> All this means two things to us: 1)The AI revolution will indeed be one of the biggest technology shifts in history. It will spark a generation of innovations that we can’t yet even imagine. 2) It’s going to take way longer to see those changes than we think it’s going to take right now.
The internet was monumental and valuable, offering instant conveyance of media and data. AI is monumental, allowing instant access to near infinite data; but whether instant access is as valuable as instant conveyance yet alone five times the value, appears to be the question
Honestly anyone who thinks AI has intrinsic value to rival the GDP of nations is a bagholder in denial and I'll be happy to buy your puts.
"instant access to near infinite data" is Google search.
AI if it gets better will be thinking / intellectual work which is a different category.
I remember in the 90s people would say the internet will bring instant conveyance of media including video and people were like yeah right I can just about get one page of crappy text in a minute over the unreliable dial up modem. It's like that now with AI thinking.
To say whether it's a bubble, we need to know the value of the technology.
The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, is normal for any new technology.
If you add the value of the potential political power gained by controlling AI, then the value to the owners and investors is astronomical. Many of the investors have demonstrated a strong motivation to sacrifice money for political power, for example by supporting nationalism that undermines a global economy that they benefit enormously from. Somewhere, I read someone explaining their investment by saying 'it's the greatest transfer of power in (modern) history'. Also see: https://news.ycombinator.com/item?id=45983700
The implied promise was that these things were going to “revolutionize the workplace” i.e. massively automate middle class office jobs
A couple of years down the road, their useful applications still are summarizing text, transferring style to text, generating code under strict supervision, and generating images that need retouching.
That’s a lot to get out of a tool, but it’s dubious that investors were pouring trillions of dollars into these things thinking of automating away junior software engineers and low end design work.
Edit: I forgot their other niche, that of generating homework and school test answers
You forgot - cheating on job interviews, writing resumes to be repetitive, and adding an annoying flowery tone to non-native English speakers who think AI wrote something for them that isn't AI-obvious.
How many people graduate from a US software engineering degree each year? About 100k? If they (the 100k in the US) earn $100k each in the first year, before gaining the skills to earn more, that's $10 billion a year, every year. If you can capture that market for next 20 years, it's worth $200 billion.
Except… can you capture it? A junior dev is… not exactly someone you want connecting to your business-critical database without supervision, and a real human dev will get better with a predictable rate. Will LLMs get better? The makers are betting on that, but we'll only know after the model releases, and even then after we play with them for a bit to differentiate between the record performance on whichever benchmark and the actual work we want them to do.
Then there's the question of can you really keep an edge for 20 years with investments today: Sometime between 2030-2035, there's likely to be models matching 2025-SOTA performance that run on ${year}'s high-end smartphone.
(Well, unless we all die in WW3 because of Russia getting desperate from its failure to remove Ukraine's sovereignty, or because China has a hot war with Taiwan and/or the USA messing with global consumer electronics supplies, but I don't think those get priced into the market…).
The hardware also wears out really fast. And every replacement is more expensive. How long can that party keep going when none of the companies make enough revenue to cover the expenses?
> thinking of automating away junior software engineers and low end design work.
And it's really still very arguable imo if it's even doing this
Like you said, it still needs strict supervision. In my opinion it is not a good use of your supervisory time to be babysitting an LLM versus mentoring actual juniors
That's the same mistake made with every new, and eventually successful, technology - we haven't found a valuable application yet, so the technology is not valuable.
Finding the valuable application is often the hardest part. That it hasn't happened yet is meaningless. Some technologies sit on the shelf for decades.
AI seems to have a lot of potential: It may be the most valuable technology ever; it may not provide more value than it does now, or something in between. Nobody actually knows. The challenge of innovation is managing that irreduceable risk. It starts by accepting risk, accepting that you don't know. One wrong way is to deny the risk - denying uncertainty - by either saying it's worthless or that success is guaranteed.
Ok, ignoring any AGI or massive advances, let's just say an LLM can help the average office worker be 15% more productive... what do you think the economic value of that is?
Not only that, but it’s devaluing the sacred cows of the very same companies that are investing heavily.
Search is dead or dying
Social media is dead or dying
Content creation is dead or dying
If they cant make AI work, then they are left with AI at a level that continues to devalue their core business.
They have no choice. They made a deal with the devil. And the devil means to collect.
This is why I think Apple is lucky their attempt failed so bad. They dodged a bullet. They have an opportunity to guide a lost tech industry through a post AI bubble world.
The value of LLM is reliable high quality translation between all languages. The economic value of this is at least trillions of dollars per year. The cultural and humanitarian value is equally gigantic, even if it can't be measured in dollars and cents.
Alternate viewpoint - The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, might be a sign that the technology shouldn't be valued this highly at all
> That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, might be a sign that the technology shouldn't be valued this highly at all
That might be true, but it also might be true that it's tremendously valuable. The conditions you identify exist for every new technology; obviously the outcomes vary greatly.
> The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, is normal for any new technology.
The same could be said for the internet. But, and I know this will be hard for younger readers to believe, I seem to recall the value proposition of the Internet being more immediately apparent at the time.
From what I've read, people spent a long time looking for the 'killer application'. Google didn't know how to make money off its search engine. Social media didn't exist in any mass form. Internet access on phones, beyond email, didn't exist in any usable way.
Proprietary, walled garden services, with their own dial-up numbers, such as AOL and CompuServe, were seen as the future. Microsoft thought their similar service (MSN?) was the way forward and didn't integrate the Internet into Windows 95. That was after Netscape's browser was released and (relative to the time, I'm sure) very popular.
There was a recent Bezos talk about the fact that (much like the dot-com) we've overspending on infrastructure that'll bubble and implode but then we'll have all this amazing infra for companies to build off of... but the process of that overspend and implosion is essentially a massive debt erasure - a lot of people are currently propping up this market with their capital and the companies they're propping up will collapse and those obligations liquidated - and that will result in massive society-wide pain. We may end up in a better place for the next generation because of this investment - but if you're a retail investor don't expect your 401k accounts to weather that burst gracefully... and, unlike the boomers, this will largely hit Millenials and Gen Z both of whom are currently under massive financial stress.
Arguably, it's exactly this mindset creating the problem. It's not the value of the technology that matters. It's the value of the companies. If one company was the only one that had a particular valuable technology, then that would matter, but otherwise 90% of them likely end up worthless even if the sector itself doesn't.
How that washes out on net we'll have to see. I'm not gonna pretend I know more than anyone else. Just keep in mind that a major difference between now and 2000 is companies stay private a lot longer. An IPO forces you to open the books and sustain public scrutiny of the broad investor class. A still-private startup only needs to convince one funder of their value. That inevitably leads to higher variance and a greater risk of failure. That doesn't mean the whole sector is necessarily a bubble, but if it is, it can be sustained a lot longer without us knowing. A small number of people with $50 billion they need to park somewhere and no other obvious options can keep shitty ideas afloat in a way that wouldn't be possible if they had to be subjected to broader exposure. We like to believe people with $50 billion can't be wrong, but the wisdom of crowds always beats the wisdom of individual genius.
the real answer is that the applications for the military, surveillance, and population control are proven, and the pathways to scale those capacities are clear, so the money will pour in no matter what. the implication is that we had better come up with some more consumer/humanity friendly applications that create comparable value, or that is all we will get.
The value can be incredibly high... just like the value of the internet was incredibly high.. and it can still be a finanfial bubble. I feel like the people arguing against the bubble perspective are saying look the internet was actually valuable and so too will this.. and that's totally a valid perspective. The bubble is not about whether there's value but about whether or not the market will come down. All of the above can totally happen
Very useful, clearly. But valuable? In aggregate it seems clear that it is. But where does that value acrue? It seems to me the value will be thinly spread while the costs are concentrated.
It does not seem possible that any conceivable business can pay for all the announced plans for developing data centres, nor energy available to power them.
If AI systems can be developed to be trust worthy enough to act on their own, none so far (?), then I can see where the value could acrue, but as things stand?
I worry that it is not a valid perspective and that the bubble dynamics are being driven exactly by this sentiment.
We are pricing in the hollywood version of AI we don't have as if it is the internet.
I communicated with people exactly like what I am doing right now in this post on usenet in 1995. Message boards by 1997. The internet bubble wasn't based on some wild virtual reality version of the internet that hadn't been invented yet.
It is a categorically different process at work here. This bubble is far more insane and speculative since we don't have what we are pricing in. We don't even really know what we are pricing in besides some vague notation of an inevitable "AGI".
Yep. It seems somewhat inevitable to have a readjustment at some point. Both Web 2.0 (online retail) and AI are (rightfully, I believe) creating a lot of buzz and stimulating a lot of investment. It's all very new and exciting and there is bound to be a lot of hit and miss activity. Once the dust settles, the misguided bets will become more obvious and there will be a culling, just as we had during the dot com bubble.
Absolutely nothing in your list prevents the AI from being a bubble. The Internet is an absolute marvel of engineering that completely changed the life of the majority of people in the world, and yet it crashed 25 years ago, and crashed hard. Both can be true at the same time.
> To say whether it's a bubble, we need to know the value of the technology.
Not really. I mean, not only. The value of the web is immense. And yet, the dot-com bubble was indeed a bubble. What matters is the value in the short term compared to the value of the companies in the current context. Even if AI is huge 20 years from now, it can still crash dramatically tomorrow.
I was going to say that. Also the bubble can be in some areas but not in others. I think the proposed data center build out is a bubble as in not economically justified presently, but I think money spent on AI research is reasonable.
I have a noob question. How can developed economies where populations levels have plateaued continue to be expected to post positive GDPs (and therefore add net new goods and services) yoy?
Homes as assets should pass on, higher cost services of today would be replaced by lower cost which only temporarily would increase units sold(but should eventually plateau because #units/person is not going to change). No component of the GDP will move.
If the fertility rate of developed economies is less than 2.1 then there should be wealth and asset accumulation among the younger people over time. The demand for newer goods and services from the people who get richer is inelastic: most goods and service's prices dont matter to the rich they buy them any ways, and it continues to keep becoming more inelastic.
So within like a several years the demand should just collapse as wealth accumulates a lot and people work less and become more price insensitive. Immigration is set to remain low to developed nations for the next 3-5 years.
This seems to be quite evident in Japan and EU already(though in the EU if you adjust the productivity for work hours the GDP becomes same as America's).
So why do people assume developed countries would even buy this much more new stuff. 1.5 trillion$ worth of new things over the next 5 years?
GDP does not require that the goods or services were sold for money. GDP measures the market value adjusted to constant quality of all final goods and services produced. GDP can grow even with fewer workers, fewer hours, fewer buyers, and fewer units sold.
So the way I understood it, productivity, efficiency and quality gains can increase GDP year over year.
Say we are a country of 1 person. If that person can make a car in 2025, but in 2026 manages to make both a car and a house, the GDP has more than doubled. Doesn't matter that nobody paid the money for them.
Another weird thing is, say that 1 person country makes a car in 2025, and in 2026 makes a similarly priced car, if the car is higher quality, it counts as a higher GDP, because they'll measure its value as greater than last year's model, even if it sells for the same price, because the old model would now be worth less.
I have a theory (actually I wanted at some point to write more seriously about it) about how GDP also expands by consuming life itself. If you're burnt out, or don't have time to see friends and are depressed have to pay for therapy, GDP grows. If you don't have time to care for your children so you have to keep them busy with million classes, or paid for caretaking, GDP expands. If you don't have time or confidence to meet people IRL and have to pay for Tinder, GDP expands. If you don't have time to cook (even if you enjoy it) so UberEats all the time, GDP expands. When you replace public services by extractivist and more inefficient private ones (see healthcare, education) GDP often grows. The list goes on and on. The more every aspect of human existence is replace by a transaction in the market place, the more GDP grows. We replace a variety of motivations to do and to be based of human relationships and affection, by cold self-interested exchanges between strangers.
GDP is a fucked up way to look at life. It's go to way to look at whether a country is doing good, but it's consuming our environment and our own sanity in so many ways.
That's one of the reasons why I think that actually limiting the working hours (bringing it down to 30, and eventually to 20 hours a week) should be one of the main agenda points for this coming century. It's important for our environment, but also for our own sanity.
One could argue that given a sufficiently large GDP, one can make the individual choice to earn less and have more time. But that's sadly not how things work, since having more workforce available also devalues work relative to subsistence goods (e.g., you can't afford a roof without a full time job). Also, individualism is such a powerful ideology in a market driven economy. Maximizing individualism itself can help you get ahead in the marketplace, and spreads through society via marketing, private media. At some point, we even stop seeing how to behave differently than to maximize our own profit. We need democratic instruments outside of the marketplace to steer our society in a way that improves our lives, regardless of what that does to GDP.
But this only addresses the supply side. The demand side has to be buying those two cars. The 1 person country car that one or two car would need to be bought by someone else there is no GDP consumption recorded
> How can developed economies where populations levels have plateaued continue to be expected to post positive GDPs (and therefore add net new goods and services) yoy?
Think about the unsatisfied needs and desires most people have. In extremely low income areas, it may be a roof over your head or knowing where your next meal comes from. Moving up a tier, it might be the ability to send your children to education or better clothing. In wealthier areas it might be things like a better car or higher quality food even though you're not in danger of going hungry. For the extremely wealthy it might be more leisure time, art, and new experiences.
When GDP increases, broadly, those are the areas you see expand. Looking at life today in a baseline American household, the things which are mass produced are far more available and affordable than they were a century ago - in the 1930s households spent about 10-12% of their income on clothing.
Sadly, the rate of improvement for non-mass-produced items like college tuition, medical care, and especially housing has ballooned compared to median income, so life doesn't feel inexpensive, certainly, but GDP has a lot of room to grow in a lot of areas.
Why not? It has been changing forever. It was on a pretty consistent upward trend in the US since there was a US, roughly doubling since 1790, but it has started to decrease in the last few years.
Total GDP can keep rising so long as technologist can improve efficiency through robotics, inventions and scientific breakthroughs.
GDP just describes peoples amount of activity. People will always build bigger buildings or monuments (see egypt pyramids, dubai skyscrapers, cambodia angkor wat). These are actaully not inelastic as megaprojects will quickly hit real limits regardless of the amount of capital. (I can always add 10 more floors to the tallest skyscraper, or 10 feet to the longest wall, or 10 facets to the most ornate church)
There has never once in history been a point where people decieded that they where going to stop innovating or producing permanently. This is equivalent with death.
So the people with the most money at some point will decide to build things which they spend all their money on which increases GDP.
Also the actual "number" of gdp if heavily controlled by USA inflation rates. So we should always look at gdp in regards to inflation adjusted dollars to get a clearer picture.
You would just think there has got to be end to it all... technology needing to increase so much, indefinitely, the imagination falters tbh. Its like we have to become space gods by year 2500 or we are going to go bankrupt as species anyway.
Even if the populations and quantities of stuff sold by weight peak, people can still by fancier stuff - Ferraris rather than Fiestas etc. GDP just measures the amount spent basically.
Your entire premise is simply incorrect, through and through. Discard it entirely and begin again.
You have a hundred people, they have a GDP of N. Tomorrow, their productivity doubles because of a technological innovation. Your GDP is 2N.
Prices matter extensively to the rich and poor. The cost of a given compute capacity has gone from "literally the entire United States can't afford it" to "my lightbulb has this much compute because it's cheaper than choosing a dumber processor".
What happens tomorrow if eg ChatGPT 5.1 performance becomes doable for $500 of tech? $50? Swap this for grain harvesting, waste bin collection, etc if you don't like the LLM case.
Why is that an impossible question? I've moved from investing mostly in the SP500 (which is something like %25 big AI companies) to investing into other indices which are not so AI-heavy -- healthcare, infrastructure, etc. I've also put a lot into TSLS (inverse etf for tesla), because I think it is particularly overvalued. I still have a fairly high risk tolerance, but trying to reduce the amount that I'm tied to AI. I'm sure there are even better ways this could be done, but this is a fairly simple way to do roughly what I want.
Edit: Notably, you don't have to fully stop investing in the SP500. If you were previously 60% weighted towards the SP500, you can still reduce your exposure by changing that to 20%, or something like that.
I have been 'raising cash' by selling stuff in my portfolio that seems high risk and is up. I've learned from the past that I end up feeling physically unwell when the portfolio sinks and stays low for a year, some days 1-5% which make me stop looking. Now I'm reducing my risk exposure - yes, that means not literally 'cash' but either a money market fund and a tax-free bond fund. For years I had a lot of gold miners and a gold mining index which only recently popped, I thought that was a 'hedge' but now I am convinced the only hedge is cash or if you know what you are doing, options. Everything is prone to pops and crashes, from big giant index funds, to gold, to bitcoin, to large caps, all the stuff people said was supposed to be a hedge.
For this round I've bought (well, bought and sold, and now waiting to buy via an order) puts on a semiconductor ETF. Since I own some of the stocks, if it goes sky high still I win, if it crashes I win, and if nothing happens I'll have to sell it 30 days before it expires to avoid the theta decay, which starts to really bite in that last month.
No one knows anything - which is the environment I'm learning to operate it.
A very conservative investor, say a boglehead or a 'value investor' would tell you to buy in an index fund and not look, unless you know for sure what you are doing and have done insane research on a company and it's priced low. They would say, buy VTI or VOO if you don't need the money within 5 years, and stop looking at it. Oh, and DCA into it versus all at once.
It’s probably most important to take a long term view of asset allocations, stick to the plan, and be tax efficient. Once you cover that off, the tactical positions can maybe help a touch.
Diversification is the bedrock of portfolio management, meaning owning a range of assets that collectively perform acceptably under a range of scenarios. But it’s generally not sexy, not something you catch individuals bragging about - avoiding permanent loss of capital.
Think about what risk you’re willing to take, in the context of your job/career prospects, current investments etc.
These are things for you to decide. Wouldn’t trust anyone who says buy x without knowing your individual circumstances.
What I can say is there are consistent patterns for many successful investors, and the media will tend to focus on the outliers / lottery winners, which by definition are difficult to emulate / replicate. Be wary of survivorship bias and the narrative fallacy.
If you look at most stock markets over a very long timeline, on average it goes up because the economy is growing. So a very broad portfolio of stocks or ETFs.
Gold is only for very rich people if you want to have something in the case the whole economy goes to the bin.
A friend of mine who is decidedly not rich put her money in gold (via an ETF) two or three years ago and has done very well. She wasn't even trying to do well, just have something that wouldn't get eaten by inflation or crash in a hurry.
During covid you probably wanted a 70/30 split so you didn't get eaten by inflation, but I think 60/40 is probably a safer bet for the average person right now. I'd consider pulling back to 50/50 over the next 6 months to a year so you can loss harvest and skip the capital gains. I'd also consider moving money you don't expect to need anytime in the next decade into real estate.
I'm not really an investor btw, this is just my intuition. I'm curious what others here are doing.
The indices may be inflated but in this environment, treasury bonds guarantee losses (because of explicit inflationary policy. Just look at the real rate of return.) Besides, a 60/40 allocation has not made sense since the early 80s. Morgan Stanley e.g. advised a 60/20/20 with gold: https://www.reuters.com/markets/wealth/morgan-stanley-cio-fa...
> I'm not really an investor btw, this is just my intuition
Don't give advice when you don't know the subject. For a start, there are more than 2 assets. For some, certain corporate bonds look nice right now. Although indices are overpriced and carry risk due to the bubble, much of the wider market is extremely cheap. Developed and undeveloped foreign markets have also been outperforming the US. And commodities...
It’s pretty unpopular, but a properly designed whole life insurance policy is a good stable, growing asset. You can borrow against it at reasonable rates, and it makes a good rainy day fund and risk buffer. You can generally annuitize them later if you wish, providing a stress reduction in retirement which is correlated with longer life, iirc, though that could simply be due to selection bias.
I'm not sure it's sensible but I have a lot of cash at the moment. I think there'll be a bit of a crash and then it'll be good to invest in stocks bitcoin or whatever. Non crazy might be income generating boring companies like utilities.
I've always used value-tilted indexes, and am hoping that they will suffer less when the bubble pops. With that and a healthy dose of fixed income (which I chose years ago based on an assumption that the equity portion of the portfolio could drop 50% in a downturn at any time) I'm trying to stick to the plan and not try to time the market. Even though it very much feels like the bubble is near its peak (if not just past it!) I do still believe on some level that market timing is a fool's game, so I'm trying to stay convinced that the steps I've already taken are all one can rationally do.
What sort of fixed income that doesn't require much research? A broad bond fund?
What are the implications of bond prices in this dubious interest rate environment? It seems no one knows what the Fed should or wants to do, including the Fed. And if the economy is on shaky ground, won't that be bad for bonds if companies can default?
> And Coreweave, the former crypto miner turned data center service provider, unveiled in its IPO documents earlier this year that it has borrowed so much money that its debt payments represent 25 percent of its revenues.
Wow, what a sentence. It starts out bad and just gets worse.
Ok, so if that prediction is true what actions did you take?
Identify the therefore part of the prediction and enumerate the three highest priority steps.
Have you determined that the stock market will crash and bought positions accordingly? Have you sold all your nvidia stock?
What are the implications in the broader economy and what steps have you taken?
Do you have to? I'll be 45 in a few days, but even at that age, I'm still not expecting to need anything I have invested for at least 20 years, the ratio of the value of the broad overall market then to now is still likely to be a larger multiple than for any other asset class I can expose myself to. If there's really a bubble, maybe that won't be true in 5 years, but I've yet to see a downturn that didn't recover in 20. Even if your predictions are directionally correct eventually, if you're not clairvoyant, trying to time the market is still not a great idea.
I've thought about and asked this question. One potential idea: AI was sold as the "death of SaaS" and hit their share prices accordingly. If you think this is not true (at least in the near to mid-term) you could buy stock at (what you perceive as) a discount. I might look at a company like Constellation (a big vertically integrated portfolio of mature, decent revenue-generating SaaS) as a proxy for a fund focused on this strategy.
This sort of approach is pretty aggressive and definitely contrarian to the general market, but some alternatives to mitigate the coming pain (if you believe it's near) would be shifting into a more liquid position to take advantage of tightening liquidity, i.e. big companies may see their shares tank but will likely still be able to service their debt. In the meantime you'll miss out on a market that still seems pretty strong.
Recognizing a bubble and timing what will happen are two really different things. Will it pop tomorrow or 4 years from now? Will the market go up another 70% before the eventual pop?
What would it take to make money? Double or triple the pricing. Most of these companies messed on pricing initially. ChatGPT Plus/ Claude Plus (or whatever it is called) are $20/month. These should be $80 to $100/month products. Probably even more, $200.
For the most part, current AI tools do tasks for people, not their jobs. And for the most part it does rather poor quality, low-depth work (but with superhuman speed and superhuman breadth).
Readit News
Webvan → Instacart, DoorDash, Amazon Fresh
Kozmo.com → Postmates, Uber Eats, Gopuff
Boo.com (fashion) → Farfetch, Net-a-Porter, ASOS
Broadcast.com → YouTube, Netflix, Twitch
The dot-com bubble didn’t prove the internet was a fad — it proved the internet was inevitable, but the valuations assumed adoption would happen in 2 years instead of 15–20. To me it feels like the AI inevitability will be much quicker.
Based on what? We're only seeing linear improvements for increasing spending. There's no new algorithm ideas on the horizon, just more and more hardware, in the hopes that if we throw enough RAM and CPU at the problem, it will suddenly become "AGI."
No one has their eye on power budgets or sustainability or durability of the system. The human brain has such a high degree of energy efficiency that I don't think people understand the realities of competing with it digitally.
The main problem "AI" seems to solve is that humans get bored with certain tasks. The language models obviously don't, but they do hallucinate, and checking for hallucinations is an exceedingly boring task. It's a coffin corner of bad ideas.
The LLM algorithms seem pretty clunky to me, like a hack designed for text translation that surprised everyone by getting quite smart. The reason the human brain is so much more energy efficient is quite likely better design/algorithms. I was watching some video comparing brain and LLM function and almost tempted to try building something myself (https://youtu.be/3SUqBUGlyh8). I'm sure there are many more competent people looking at similar things.
Internet did not have enough devices to reach people. At the height of 2002 only a fraction of people worldwide had an already expensive computer and an internet to go with it.
I ran a e-commerce startup from 2005-2010. Having access to demand is a thing.
Today everyone has access in their pockets. Go to small city in Africa, India and China, and observe how they use AI. See how perplexity has put AI answers in hundreds of millions of people's hands before Google in a matter of months.
Forgive me for saying — but "Based on what" for comparing accelerated adoption between 2005 and 2025 — is discarding many huge elephants in the room, starting with that small thing you're reading this in your hand with, and the invisible thing that's sending you this comment.
This has changed since the cost of equipment and infrastructure has been close to "free" for the large corporations running a cycle of funny-money investment in a bubble. This has allowed them sell access to the computing and models for just above operational energy costs (to the extent of increasing global energy prices), whilst offering free accounts to harvest data. No small competitor could possibly compete with that model.
The calculation for profitability (useful output for humans in a cost-benefit analysis) of the current setup is broken, and trades on our dreams of the future. Scaling computing forever simply does not work. It will never be profitable without further leaps forward in the technology--either more efficient models or hardware. By this time, the extent to the excessive investment in new data-centers will be clear.
The internet is a medium, an interconnection of autonomous computer networks
A "web" of hyperlinked HTML pages is one use of an internet
However this internet is more than a handful of popular websites incorporated as companies
Perhaps that's why it was called the "dot-com" bubble and not the "internet" bubble
You see that same pattern with AI now. Products are being provided for free or nearly free, and plenty is being spent on marketing.
That the key to success is developing a brand and user base faster than the next person can.
And that’s where AI makes things so hard. Creating a protective moat.
There is also a customer adoption curve of technology that lags far behind the technologist adoption curve. For example video on the Web failed a long time, until it didn't, when Youtube began to succeed. The problem became "boring" to technologists in some ways, but consumers gradually caught up.
AI is accelerating "let them eat cake" at rates never seen before in history, so I imagine the violence will follow soon after
> All this means two things to us: 1)The AI revolution will indeed be one of the biggest technology shifts in history. It will spark a generation of innovations that we can’t yet even imagine. 2) It’s going to take way longer to see those changes than we think it’s going to take right now.
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Honestly anyone who thinks AI has intrinsic value to rival the GDP of nations is a bagholder in denial and I'll be happy to buy your puts.
AI if it gets better will be thinking / intellectual work which is a different category.
I remember in the 90s people would say the internet will bring instant conveyance of media including video and people were like yeah right I can just about get one page of crappy text in a minute over the unreliable dial up modem. It's like that now with AI thinking.
The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, is normal for any new technology.
If you add the value of the potential political power gained by controlling AI, then the value to the owners and investors is astronomical. Many of the investors have demonstrated a strong motivation to sacrifice money for political power, for example by supporting nationalism that undermines a global economy that they benefit enormously from. Somewhere, I read someone explaining their investment by saying 'it's the greatest transfer of power in (modern) history'. Also see: https://news.ycombinator.com/item?id=45983700
A couple of years down the road, their useful applications still are summarizing text, transferring style to text, generating code under strict supervision, and generating images that need retouching.
That’s a lot to get out of a tool, but it’s dubious that investors were pouring trillions of dollars into these things thinking of automating away junior software engineers and low end design work.
Edit: I forgot their other niche, that of generating homework and school test answers
Except… can you capture it? A junior dev is… not exactly someone you want connecting to your business-critical database without supervision, and a real human dev will get better with a predictable rate. Will LLMs get better? The makers are betting on that, but we'll only know after the model releases, and even then after we play with them for a bit to differentiate between the record performance on whichever benchmark and the actual work we want them to do.
Then there's the question of can you really keep an edge for 20 years with investments today: Sometime between 2030-2035, there's likely to be models matching 2025-SOTA performance that run on ${year}'s high-end smartphone.
(Well, unless we all die in WW3 because of Russia getting desperate from its failure to remove Ukraine's sovereignty, or because China has a hot war with Taiwan and/or the USA messing with global consumer electronics supplies, but I don't think those get priced into the market…).
The massive planetary investment is not to make more AI chats that summarize text. That's just short sighted.
And it's really still very arguable imo if it's even doing this
Like you said, it still needs strict supervision. In my opinion it is not a good use of your supervisory time to be babysitting an LLM versus mentoring actual juniors
Finding the valuable application is often the hardest part. That it hasn't happened yet is meaningless. Some technologies sit on the shelf for decades.
AI seems to have a lot of potential: It may be the most valuable technology ever; it may not provide more value than it does now, or something in between. Nobody actually knows. The challenge of innovation is managing that irreduceable risk. It starts by accepting risk, accepting that you don't know. One wrong way is to deny the risk - denying uncertainty - by either saying it's worthless or that success is guaranteed.
Promise by who? I think the bet is that it would lay off nearly everyone white collar and let AI take its place.
Search is dead or dying
Social media is dead or dying
Content creation is dead or dying
If they cant make AI work, then they are left with AI at a level that continues to devalue their core business.
They have no choice. They made a deal with the devil. And the devil means to collect.
This is why I think Apple is lucky their attempt failed so bad. They dodged a bullet. They have an opportunity to guide a lost tech industry through a post AI bubble world.
That might be true, but it also might be true that it's tremendously valuable. The conditions you identify exist for every new technology; obviously the outcomes vary greatly.
The same could be said for the internet. But, and I know this will be hard for younger readers to believe, I seem to recall the value proposition of the Internet being more immediately apparent at the time.
Proprietary, walled garden services, with their own dial-up numbers, such as AOL and CompuServe, were seen as the future. Microsoft thought their similar service (MSN?) was the way forward and didn't integrate the Internet into Windows 95. That was after Netscape's browser was released and (relative to the time, I'm sure) very popular.
The internet was amazingly valuable, but many of the early companies failed. Investing in internet companies was hardly a sure bet.
How that washes out on net we'll have to see. I'm not gonna pretend I know more than anyone else. Just keep in mind that a major difference between now and 2000 is companies stay private a lot longer. An IPO forces you to open the books and sustain public scrutiny of the broad investor class. A still-private startup only needs to convince one funder of their value. That inevitably leads to higher variance and a greater risk of failure. That doesn't mean the whole sector is necessarily a bubble, but if it is, it can be sustained a lot longer without us knowing. A small number of people with $50 billion they need to park somewhere and no other obvious options can keep shitty ideas afloat in a way that wouldn't be possible if they had to be subjected to broader exposure. We like to believe people with $50 billion can't be wrong, but the wisdom of crowds always beats the wisdom of individual genius.
Heck, AI itself taught us that same lesson!
the real answer is that the applications for the military, surveillance, and population control are proven, and the pathways to scale those capacities are clear, so the money will pour in no matter what. the implication is that we had better come up with some more consumer/humanity friendly applications that create comparable value, or that is all we will get.
Very useful, clearly. But valuable? In aggregate it seems clear that it is. But where does that value acrue? It seems to me the value will be thinly spread while the costs are concentrated.
It does not seem possible that any conceivable business can pay for all the announced plans for developing data centres, nor energy available to power them.
If AI systems can be developed to be trust worthy enough to act on their own, none so far (?), then I can see where the value could acrue, but as things stand?
We are pricing in the hollywood version of AI we don't have as if it is the internet.
I communicated with people exactly like what I am doing right now in this post on usenet in 1995. Message boards by 1997. The internet bubble wasn't based on some wild virtual reality version of the internet that hadn't been invented yet.
It is a categorically different process at work here. This bubble is far more insane and speculative since we don't have what we are pricing in. We don't even really know what we are pricing in besides some vague notation of an inevitable "AGI".
Not really. I mean, not only. The value of the web is immense. And yet, the dot-com bubble was indeed a bubble. What matters is the value in the short term compared to the value of the companies in the current context. Even if AI is huge 20 years from now, it can still crash dramatically tomorrow.
Homes as assets should pass on, higher cost services of today would be replaced by lower cost which only temporarily would increase units sold(but should eventually plateau because #units/person is not going to change). No component of the GDP will move.
If the fertility rate of developed economies is less than 2.1 then there should be wealth and asset accumulation among the younger people over time. The demand for newer goods and services from the people who get richer is inelastic: most goods and service's prices dont matter to the rich they buy them any ways, and it continues to keep becoming more inelastic.
So within like a several years the demand should just collapse as wealth accumulates a lot and people work less and become more price insensitive. Immigration is set to remain low to developed nations for the next 3-5 years.
This seems to be quite evident in Japan and EU already(though in the EU if you adjust the productivity for work hours the GDP becomes same as America's).
So why do people assume developed countries would even buy this much more new stuff. 1.5 trillion$ worth of new things over the next 5 years?
So the way I understood it, productivity, efficiency and quality gains can increase GDP year over year.
Say we are a country of 1 person. If that person can make a car in 2025, but in 2026 manages to make both a car and a house, the GDP has more than doubled. Doesn't matter that nobody paid the money for them.
Another weird thing is, say that 1 person country makes a car in 2025, and in 2026 makes a similarly priced car, if the car is higher quality, it counts as a higher GDP, because they'll measure its value as greater than last year's model, even if it sells for the same price, because the old model would now be worth less.
GDP is a fucked up way to look at life. It's go to way to look at whether a country is doing good, but it's consuming our environment and our own sanity in so many ways.
That's one of the reasons why I think that actually limiting the working hours (bringing it down to 30, and eventually to 20 hours a week) should be one of the main agenda points for this coming century. It's important for our environment, but also for our own sanity.
One could argue that given a sufficiently large GDP, one can make the individual choice to earn less and have more time. But that's sadly not how things work, since having more workforce available also devalues work relative to subsistence goods (e.g., you can't afford a roof without a full time job). Also, individualism is such a powerful ideology in a market driven economy. Maximizing individualism itself can help you get ahead in the marketplace, and spreads through society via marketing, private media. At some point, we even stop seeing how to behave differently than to maximize our own profit. We need democratic instruments outside of the marketplace to steer our society in a way that improves our lives, regardless of what that does to GDP.
Think about the unsatisfied needs and desires most people have. In extremely low income areas, it may be a roof over your head or knowing where your next meal comes from. Moving up a tier, it might be the ability to send your children to education or better clothing. In wealthier areas it might be things like a better car or higher quality food even though you're not in danger of going hungry. For the extremely wealthy it might be more leisure time, art, and new experiences.
When GDP increases, broadly, those are the areas you see expand. Looking at life today in a baseline American household, the things which are mass produced are far more available and affordable than they were a century ago - in the 1930s households spent about 10-12% of their income on clothing.
Sadly, the rate of improvement for non-mass-produced items like college tuition, medical care, and especially housing has ballooned compared to median income, so life doesn't feel inexpensive, certainly, but GDP has a lot of room to grow in a lot of areas.
Why not? It has been changing forever. It was on a pretty consistent upward trend in the US since there was a US, roughly doubling since 1790, but it has started to decrease in the last few years.
Total GDP can keep rising so long as technologist can improve efficiency through robotics, inventions and scientific breakthroughs.
GDP just describes peoples amount of activity. People will always build bigger buildings or monuments (see egypt pyramids, dubai skyscrapers, cambodia angkor wat). These are actaully not inelastic as megaprojects will quickly hit real limits regardless of the amount of capital. (I can always add 10 more floors to the tallest skyscraper, or 10 feet to the longest wall, or 10 facets to the most ornate church)
There has never once in history been a point where people decieded that they where going to stop innovating or producing permanently. This is equivalent with death.
So the people with the most money at some point will decide to build things which they spend all their money on which increases GDP.
Also the actual "number" of gdp if heavily controlled by USA inflation rates. So we should always look at gdp in regards to inflation adjusted dollars to get a clearer picture.
You have a hundred people, they have a GDP of N. Tomorrow, their productivity doubles because of a technological innovation. Your GDP is 2N.
Prices matter extensively to the rich and poor. The cost of a given compute capacity has gone from "literally the entire United States can't afford it" to "my lightbulb has this much compute because it's cheaper than choosing a dumber processor".
What happens tomorrow if eg ChatGPT 5.1 performance becomes doable for $500 of tech? $50? Swap this for grain harvesting, waste bin collection, etc if you don't like the LLM case.
The bubble would burst and the US economy would face a recession?
I'm not a real "investor" (index funds only) but I am feeling more willing to forgo gains to be more risk averse just based on my own neuroses.
Maybe I cash out and buy T-bills? Gold? Bullets? What's the non-crazy person equivalent?
Edit: Notably, you don't have to fully stop investing in the SP500. If you were previously 60% weighted towards the SP500, you can still reduce your exposure by changing that to 20%, or something like that.
For this round I've bought (well, bought and sold, and now waiting to buy via an order) puts on a semiconductor ETF. Since I own some of the stocks, if it goes sky high still I win, if it crashes I win, and if nothing happens I'll have to sell it 30 days before it expires to avoid the theta decay, which starts to really bite in that last month.
No one knows anything - which is the environment I'm learning to operate it.
A very conservative investor, say a boglehead or a 'value investor' would tell you to buy in an index fund and not look, unless you know for sure what you are doing and have done insane research on a company and it's priced low. They would say, buy VTI or VOO if you don't need the money within 5 years, and stop looking at it. Oh, and DCA into it versus all at once.
Diversification is the bedrock of portfolio management, meaning owning a range of assets that collectively perform acceptably under a range of scenarios. But it’s generally not sexy, not something you catch individuals bragging about - avoiding permanent loss of capital.
Think about what risk you’re willing to take, in the context of your job/career prospects, current investments etc.
These are things for you to decide. Wouldn’t trust anyone who says buy x without knowing your individual circumstances.
What I can say is there are consistent patterns for many successful investors, and the media will tend to focus on the outliers / lottery winners, which by definition are difficult to emulate / replicate. Be wary of survivorship bias and the narrative fallacy.
Gold is only for very rich people if you want to have something in the case the whole economy goes to the bin.
Bullets if you are paranoid.
I'm not really an investor btw, this is just my intuition. I'm curious what others here are doing.
> I'm not really an investor btw, this is just my intuition
Don't give advice when you don't know the subject. For a start, there are more than 2 assets. For some, certain corporate bonds look nice right now. Although indices are overpriced and carry risk due to the bubble, much of the wider market is extremely cheap. Developed and undeveloped foreign markets have also been outperforming the US. And commodities...
Particularly as it seems contagion is more AB’s more likely. That the implosion won’t be limited to the mag 7.
What are the implications of bond prices in this dubious interest rate environment? It seems no one knows what the Fed should or wants to do, including the Fed. And if the economy is on shaky ground, won't that be bad for bonds if companies can default?
I'd say ex-US international value stocks, especially EU, are a better hedge.
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Wow, what a sentence. It starts out bad and just gets worse.
Identify the therefore part of the prediction and enumerate the three highest priority steps.
Have you determined that the stock market will crash and bought positions accordingly? Have you sold all your nvidia stock? What are the implications in the broader economy and what steps have you taken?
This sort of approach is pretty aggressive and definitely contrarian to the general market, but some alternatives to mitigate the coming pain (if you believe it's near) would be shifting into a more liquid position to take advantage of tightening liquidity, i.e. big companies may see their shares tank but will likely still be able to service their debt. In the meantime you'll miss out on a market that still seems pretty strong.
AI literally does people's jobs for them. There's not much imagination required.
It's also not doing peoples' jobs for them, for the most part. AI's supporters do very loudly proclaim this, though.
From what I can tell at this point it's a solution looking for a problem. Incredibly impressive, not so useful