What's worse is that OpenAI and the other AI companies are all intertwined. The chipmakers are invested in the datacenter operators are invested in the software guys. When the bubble implodes - and it will implode - the good will go down with the bad, and that's what makes a financial crash a true crash.
https://www.nbcnews.com/business/economy/openai-nvidia-amd-d...
Performative actions to drive up valuation and try and attract more investors absolutely feels bubbly to me.
1. Discounting products that are not only currently operating at a loss but are priced well below actual resourcing required to produce.
The fair criticism of the infra $ is where the non-VC non-bank-loan cash stream is, but there could be a lot of B2B deals and e.g. Meta, TikTok and other behemoths do tend to make plenty of money and pay their bills, and have extreme thirst for more AI capacity.
Take Oracle for example (as a whole, not just OCI) - tons of customers who are paying for AI-enhanced enterprise products.
It's still the early days, as the cost of creating software continues to approach zero the rules will change in ways which are hard to predict. The effect this will have on other white collar industries is even more challenging to reason about.
NVIDIA's stock may eventually get decimated (but the company itself will be fine, they have a relatively low employee account and insane margins), the Coreweaves of the world are definitely leveraged plays on compute and may indeed end up being DotCom style busts, but a key difference is that the driving forces at the very top - the Microsofts and Amazons of the world - have huge free cash flows, real compute demand growth beyond the AI space, and fortress balance sheets.
There is a commonly held belief that there is a level of compute (vaguely referred to as AGI) that would be extremely valuable and those companies may continue to rationally fund AI research as R&D though if the VC and loan funding dries up there will probably be serious fights with the accounting departments. It is good to point out that companies with huge war chests do seem poised to continue investing in this even if VC/etc dries up due to the lack of end-user profitability - it'll be an interesting shift but probably not as disastrous as the dot-com bubble burst was.
"continues " is inaccurate. The cost of creating software is nowhere near approaching zero
In Sam's dreams, perhaps.
Or maybe not enough money soon enough, and at this scale that could be more of a disaster than it had to be.
So far it's not looking like a business boom much at all compared to the massive investment boom which is undeniable, and that's where a good amount of remaining prosperity is emanating from.
If you were a financial person wouldn't you figure there were a lot bigger bonuses by getting involved with the amount of cash flow being invested rather than the amount resulting from profits being made in AI right now?
How much is dumb money, though? That's the real question which remains highly relevant post dotcom bust.
It wouldn't surprise me if much of the $1tn most doesn't turn up and the bubble bursts before 1/10th or that becomes real.
There's nVidia that we know (primarily graphics cards) and more like an investment firm "nVidia" these days. The stocks have grown so much that they are trying to turn their fortunes around (to sustain growth) by investing everywhere.
nVidia has invested in so many companies in the ecosystem and beyond.
If this means that compute is considerably cheaper for OpenAI, it's a win for them too. But that remains to be seen.
I can only imagine what could grow out of an oversupply of rack-space and electrical power generation, post-crash.