The > 100 P/E ratios we are already seeing can't be justified by something as quotidian as the exceptionally good productivity tools you're talking about.
What are you basing this on?
IT outsourcing is a $500+ billion industry. If OpenAI et al can run even a 10% margin, that business alone justifies their valuation.
Nobody knows how things like coding assistants or other AI applications will pan out. Maybe it'll be Oracle selling Meta-licenced solutions that gets the lion's share of the market. Maybe custom coding goes away for many business applications as off-the-shelf solutions get smarter.
A future where all that AI (or some hypothetical AGI) changes is work being done by humans to the same work being done by machines seems way too linear.
The big one being I'm not assuming AGI. Low-level coding tasks, the kind frequently outsourced, are within the realm of being competitive with offshoring with known methods. My point is we don't need to assume AGI for these valuations to make sense.
If there is one domain where we're seeing tangible progress from AI, it's in working towards this goal. Difficult projects aren't in scope. But most tech, especially most tech branded IT, is not difficult. Everyone doesn't need an inventory or customer-complaint system designed from scratch. Current AI is good at cutting through that cruft.
LLMs are in my opinion hamstrung at the starting gate in regards to replacing software teams, as they would need to be able to understand complex business requirements perfectly, which we know they cannot. Humans can't either. It takes a business requirements/integration logic/code generation pipeline and I think the industry is focused on code generation and not that integration step.
I think there needs to be a re-imaging of how software is built by and for interaction with AI if it were to ever take over from human software teams, rather than trying to get AI to reflect what humans do.
Are they good enough to replace a human yet? Questionable[0], but they are improving.
[0] You wouldn't believe how low the outsourcing contractors' quality can go. Easily surpassed by current AI systems :) That's a very low bar tho.
That's literally Zucc's entire play, in 5 years this stuff is going to be so abundant you'll get access to good enough models for pennies and he'll win because he can slap ads on it, and openAI sits there on its gargantuan research costs.
Once massively useful AI has been achieved, or it's been determined that LLMs are it, then it becomes a race to the bottom as GOOG/MSFT/AMZN/META/etc design/deploy more specialized accelerators to deliver this final form solution as cheaply as possible.
Most other businesses trying to actually use LLMs are the riskier ones, including OpenAI, IMO (though OpenAI is perhaps the least risky due to brand recognition).