7d ago

5 Signs the AI Bubble is About to Burst

Technology @lemmy.zip

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126 comments

If the last 5 years has taught me anything, it is that stock prices are completely divorced from the realities of the fundamentals of business. It is a clown economy and more like a casino then an honest measure of what a stock is worth. Especially with tech.
AI is way overhyped, to a level we perhaps have never seen before, but I would not expect the stock prices too reflect that.
Look at Tesla. The intrinsic value was no more than 10 billion before he started sieg heiling on national TV and alienated half of the western world.
What will continue to drive the stock prices is the support or acquiescence of governments to it. Do you the United States and the rest that follow.
- but I would not expect the stock prices too reflect that.
  Agreed. One rule of the stock market is that while it might theoretically rely on sound fundamentals, it can stay irrational longer than you (or anyone) can stay solvent. It will inevitably fall screaming towards reality eventually, but there's no guarantee it will happen within any reasonable timeframe and expecting it to is dangerous. It's a rigged casino, the house always wins, and when they don't their goons will grab you when you try to leave. At this point the billionaires own pretty much the entire house, and their goons are running the world's largest military and police state. "Invest" at your own risk.
  
  I think there is a fundamental difference now, the government has bailed out stocks twice in 2008 and 2020. Moved Heaven and Earth with the fed and indirect injections of capital to prevent the rich from losing money. So these stock prices reflect tax dollars billing them out in the downturn.
  
  Serious question. With inflation absolutely exploding everywhere, stock market being what you just described here, and property ownership being virtually impossible due to big corpos gulping everything up: how is anyone supposed to prevent their money from melting away nowadays?
- Look at Tesla. The intrinsic value was no more than 10 billion before he started sieg heiling on national TV and alienated half of the western world.
  My conspiracy theory is that Musk gave multiple investors billions of his personal cash to invest in Tesla stock at key moments. He tells his straw purchasers when to buy hundreds of millions worth of stock in order to pump the price and kill those who short the stock. This scares the shorters out of the market and ultimately removes a natural source of downward pressure on the price. They sell off what they purchase all at once relatively slowly so they can then do it again.
  
  I had a similar sort of thought but figured it was an automated thing, where they would buy or sell to manipulate the market price with the fund removed from the owners of stock.
  Something like that could have made a fortune as the stock price was gaining and as such been able to manipulate the shit out of the stock price and fuck short Sellers and everything.
  
  But he invested a billion of his own money....or 0.01% of the TSLA market cap
  No one in STEM takes Musk seriously.
- The price isn't based on what the company is worth, it's based on what people think the company will be worth in the future. Clearly, a lot of people believe that truly autonomous vehicles are just around the corner, and AI is going to revolutionise everything.
  They're most likely wrong, but it will take a long time for the market to accept that.
  
  No rational person would think that Tesla would command the majority of that market of autonomous vehicles, robots, or whatever. Especially not after their Flagship truck turned out to suck in like 20 different ways.
  
  it’s based on what people think the company will be worth in the future
  Not a single person in their right mind thinks that Tesla will ever be worth its current $1.3T market cap. Stock price is based on whether the market movers (not you or I) think that the price will be higher or lower a few weeks/months from now, that's it. The actual intrinsic value/worth of the company makes no difference.
  
  You’re correct about how the stock price works, but I’d go even further to add that it’s also based on what a small percentage of very wealthy people/funds want it to be at the time. The markets are so insanely easy to manipulate by them.
  As for the rest, it’s almost certain that you’re the one that’s wrong - autonomous vehicles are absolutely the future. They could essentially end road fatalities, as well as allow commute time to be included as work hours as people could work while being driven to work, passive income via auto-taxi etc.
  AI/LLM/etc, there’s zero doubt here that it is going to - if it hasn’t already, which I’d argue it already has - revolutionise the world. It’s already completely changing many industries beyond belief, and its uses and “intelligence” is already growing exponentially. It’s just the cool thing to hate by anti-capitalists/lefties because of various reasons, and make no mistake - the anti-AI people, and the people who think it’s just a fad or that it’s overrated, will be looked at like the people who thought of cars in the same way.
  What we have now is like the DOS of AI and self driving cars compared to the Windows XP/7/11 versions that are coming, but the detractors are acting like it’s the finished product and will never improve. It’s here to stay, and what we have now is only scratching the surface.
- It's gambling on who might stumble on AGI, not building anything.

Fuck Sabrine Hoffsteader. She's an idiot and you should get your news from someone else. Stupid grifter
- Was really disappointed when she came out to be transphobic.
- Do you have some Information about this?
  
  The facts are:
  She has a PhD in theoretical physics. She could not find meaningful employment in particle physics. Unless somebody can correct me, she's produced little if anything substantive to the field.
  In the last several years she has engaged in attacks against the public trust for science. She engages the conspiratorial-minded viewers who're looking for any reason to disavow scientific knowledge.
  One example was putting on scripted theatrics while reading a self-penned letter fraudulently claimed was from a prominent scientist, who's identity and details of course must be kept totally secret. Reading out this "bombshell letter" was a transparent children's play, where the held-anonymous writer magically agreed with every one of her endless, bleating refrains, that most scientific research is "bullshit".
  Then her support for Eric Weinstein who is a complete grifting con-man with an "entertainment" publishing that he fraudulently describes as both a "paper" and a credible physical theory. It was literally released on April 1 and directly in it, it tells you it is a work of fiction meant for entertainment, and like all good science (/s) may not be used, incorporated into other works, or improved upon. It's a complete piece of hogwash, and every credible physicist from here to Mars has described as not fit to wipe fecal matter; not a theory, not even science.
  Then there's all the Theil money.
  Check out Professor Dave on YT, he just fucking obliterates her.
  Edit
  First https://youtu.be/70vYj1KPyT4
  Second and better https://youtu.be/nJjPH3TQif0
  Third and best, 3.5 hours of clobbering with qualified physicists https://youtu.be/oipI5TQ54tA
  
  She is a transphobe and peter thiel fangirl. She is against renewables and thinks that 'mainstream science' is just a money making scam. All around dumb removed who chugged the kool aid.
- Just from the thumbnail alone I was hesitant to check out the video. I'm glad I found this comment.
- Regardless of her personal opinions, she's right on this.

six rounds of funding without making any money should be proof enough, an industry can't be entirely made of unicorns.

I used to like Sabine but she's a hack.
- Can you elaborate?
  
  TLDR she's educated but had some clashes with academia and basically leans into an anti-establishment slant on everything. She's kind of like an enlightened centrist but for science and conspiracy. She's no broken clock, but she's wrong on enough things that you can't really take her at her word.
  She also doesn't really say a lot for how long she takes to say it.

And then AI will just go away and everything will go back to normal again, yes? It'll suddenly stop working and so people will stop using it for all the things they're currently using it for.
- consider the Dot Com Bubble: the internet obviously didn't disappear but that doesn't mean there weren't serious economic consequences.
  
  ELI5. Because I was actually 5 when that happened.
- people will stop using it for all the things they're currently using it for
  They will when AI companies can no longer afford to eat their own costs and start charging users a non-subsidized price. How many people would keep using AI if it cost $1 per query? $5? $20?
  OpenAI lost $5 billion last year. Billion, with a B. Even their premium customers lose them money on every query, and eventually the faucet of VC cash propping this whole thing up is gonna run dry when investors inevitably realize that there's no profitable business model to justify this technology. At that point, AI firms will have no choice but to pass their costs on to the customer, and there's no way the customer is going to stick around when they realize how expensive this technology actually is in practice.
  
  There are free open models you can go and download right now, that are better than SOTA 12-18 months ago, and that cost you less to run on a gaming PC than playing COD does. Even if openai, anthropic et al disappeared without a trace tomorrow AI wouldnt go away.
  
  I remember this happening with Uber too. All that VC money dried up, their prices skyrocketed, people stopped using them, and they went bankrupt. A tale as old as time.
  
  I run local LLMs and they cost me $0 per query. I don't plan to charge myself more than that at any point, even if the AI bubble bursts.
- Yes, just like the internet died after the dotcom bust.
  
  The dot-com bubble didn't build the internet. The internet still would have been built up if pension funds were not buying toiletpaper.com for millions of dollars. Bubbles, pretty much by definition, are specifically about the part of the economy where huge sums are invested into things that are not worth anything (i.e., full of air).
  LLMs would still be developed without a trillion-dollar bubble. Slower, sure, but all the crazy investment isn't about developing tech, it's about speculating on who will stumble on AGI and suddenly be able to run companies with 1% of the workforce of traditional companies. It's gambling. When the gamblers figure out that a casino doesn't pay out, they all leave at once.
- I mean, even NFTs are still technically around, the tech didn't go away, it just stayed as it's own niche since grifters stopped trying to push it to normal people. I think the same will happen to AI since even if everyone that used chat gpt paid it's monthly fee, they would still lose money.
  
  OpenAI has an enormous debt burden from having developed this tech in the first place. If OpenAI went bankrupt the models would be sold off to companies that didn't have that burden, so I doubt they'd "go away."
  As I mentioned elsewhere in this thread I use local LLMs on my own personal computer and the cost of actually running inference is negligible.
- I highly doubt it will, but I would not be sad if it did.
- Absolutely not. AI tech will continue to be pushed by C-suites convinced they can surplus a fraction of their workforce eventually. The change will be that most of the investments in AI companies will disappear overnight and most will go belly-up. It will erase a significant fraction of everyone's pension funds, and federal governments around the world will pour public funds into propping up the larger companies so that they don't go under too. Heads they win, tails you lose.
- Naw, it'll just be "software" and not "magic thinking machine". Chatbots and "virtual assistants" existed before, just no one was using them because they're a) cringe, b) faster and more efficient to do it yourself.

NVIDIA is already paying podcasters and YT channels to cover Isaac and Jetson, so I guess the shovel seller is already seeing itself out.

Number 1 reason is the people selling it are far more excited by it than the people having to use it.

With Shiller PE at 40x, only fools are investing into the market right now. History will be the judge again in due time. It's a repeat of the 1920s.
- https://www.multpl.com/shiller-pe
  dayam
- Where do you invest then? Because keeping all cash sounds bad at the moment too.
  
  I've committed a substantial amount into copper in my retirement account.
  As far as spare cash, I'm just investing it into my 2 houses.
  
  There are plenty of profitable companies with lower PE ratios.
- Yeah, but how much higher will it go before it falls. Also, what are you doing with $$ you would otherwise be investing?

writes this while sitting in a meeting where the boss is excited about all the fancy AI tool that are being sold to him [send help]
- I know the feeling...

I enjoyed Sabine’s analysis in another video that continuing to make increasingly larger models with more compute is about as effective as continuing to make larger and larger particle accelerators. Come on, bro, this million km Gigantic Hadron Collider will finally get us to the TOE. Just one more trillion, bro.
- Every particle accelerator that has been built has paid for itself in research value. There's basically nothing that comes out of AI research except the need for a bigger model.
  The comparison is poor. Particle accelerators are science, LLMs do not produce science.
  That's not to say that we couldn't build LLMS that would be useful for scientific purposes but we're not. That is not the function or the goal of the people building these things.
  
  Not really my area of expertise, but this article lays out her perspective on this for anyone who isn’t aware: https://www.scientificamerican.com/article/the-world-doesnt-need-a-new-gigantic-particle-collider/
  TL;DR - Many times the cost of the LHC and unlike the LHC, the gains are likely to be incremental instead of revolutionary. The same funding could do much more good elsewhere.
  To your point, agreed that even small, incremental gains for science are more valuable than what we are likely to get from AI.
- Hasn't Sabine been getting in some hot water about promoting academic skepticism and making authoritative claims on fields well outside of her expertise?
  
  Personal experience as some of her views have come across my viewing habits is she is as full of shit at the next one. She passes off conjecture as fact.
  
  She has also peddled transphobic talking points
- Except that’s not at all what they’re doing. Most of the impact studies are already outdated, and the models are shrinking and becoming more efficient.
  Used to love Sabine, but the channel’s been taken over by sloppy clickbait.
- Every step towards the next generation of colliders needs to be deeply justified about the falsifiables it will check and their interest to the current knowledge before being able to see a cent for it, and the expected energies of the TOE are well known to not be reachable with current means and technology, that's not what they are promising ever, but what they do they fulfill, often, beyond predictions, to not mention the huge return basic research has always had in the long term to humanity... nope, I am afraid that I do not find it a good analogy at all. EDIT: but, yes, such strategy of making it bigger does not work anymore, so collider proposals go usually in other directions...

I'm actually planning to move my retirement into a money market because of the bubble and stock prices ballooning at a speed that just makes me anxious.
I'm waiting until the new year, though, so as not to miss dividends and because Christmas is coming, and with it, likely elevated spending in the US economy.
But I fully expect it to burst and think it'll be uglier than 2000.
- I agree, but it is nearly impossible for a normal investor to be certain that the current stock price ISN'T the lowest it'll ever be. The bullshitters have an incentive to keep up the lies a few years longer, just look at the housing bubble, and when it burst, it might burst down to the current level or even higher, if that happens in a couple of years.
  I was right once when I sold my ETFs before the Ukraine crisis unfolded, but I realise now that I was stupid-lucky-right. Will never do that again.
  Also, I fully expect that some AI usage will withstand a critical review, and will prevail, just like the dot-com.
  Then, there is the risk that the unexpected breakthrough DOES come, and the ai-super-senior can fix all the vibe-coded nonsense. I don't see it in the next 5 years, but both unexpected breakthroughs as well as unexpected plateaus have happened in the past.
  
  It's true.
  No one can time the market. If I opt to move into a money market at the end of the year, I'm likely giving up some short-term gain, but the flip side is that if this bubble does burst then I can buy back those shares at a massive discount, and profit over the long-term on the market recovering.
  It's all a risk. Everyone has to evaluate the info we have and make the best choice according to their risk tolerance.
  What really gives me the heebie jeebies are two things:
  -The tremendous greed and valuation of so many of these companies, many of which haven't delivered anything except bold promises. LLM's can do simple things well, but its output can't be trusted without human validation, and that's after training on all of the accumulated knowledge of humankind, which is why I tend to think that this bubble is eventually going to pop in dramatic fashion. I also don't think we the public have yet seen the extent of the negative effects of using LLM's, such as the emerging observations of their effect on people's cognitive abilities and how they're able to manipulate.
  -The absolutely massive gains in the market over the past two years. My own retirement has had legitimate gains over the past two years that are above and beyond what ponzi schemes promise to deliver, and that's simply unsustainable over the long term, so the question for me becomes when to take the profit and hold for a major event.
  Anyway, that's my reasoning around the choices I plan to make. I am not a financial adviser, so don't take any of this as suggestions for what to do with your investments. This is just what makes sense to me.

I work in finance (IT side) if the bubble is gonna burst all the ppl making money off of it haven't got the memo and I trust their collective intelligence over this woman.
- All the people making money off of it are trying to maximize profit, as always.
  As soon as they see the downward trend they'll dump.
  Or sink.
  
  Of which there's no sign of. I agree it's a bubble. I don't see it popping yet in my day to day.
- Good thing financiers have such a good track record of creating rational and sustainable markets. The Great Depression and 2008 will never happen again, collective intelligence when trying to earn all the money is the only sound basis of trust.
  Also, fuck Sabine.

I don’t know what to feel about “AI is gonna burst” is the new clickbait title for… like a few months now.
- The "what" is inevitable, the "when" is the real unknown. Governments and financiers can delay things for an impressive amount of time but the other shoe must inevitably drop, and often it's all the worse for the amount of time it was held off.
- It's what lots of people really want to have happen, so headlines that say it's going to happen are going to be extremely popular.
  
  Man... I don't know if want is the right word here. I want AI to go away, but I'm not sure I want the bubble to burst. I've heard estimates that something like 20% of all VC money went to AI in 2024. That's a shitload of cash, and if the bubble bursts (which I believe it eventually will) and all that invested money vanishes, the economy is going to crater. Maybe a few rich assholes will be ruined in the aftermath, but the ensuing recession is going to hurt the people at the bottom the most... just like it always does.
  It's hard to look forward to that, even when you hate AI with a searing passion.

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