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Comment by lukeschlather | Hacker News Reader

This seems like a total category error. The Railroads are the only example that actually seems comparable, in being an infrastructure build out that's mostly done by a variety of private companies. Examples of things that would be worth comparing to the datacenter boom are factory construction and utilities (electrification in the first half of the 20th century, running water, gas pipes.)

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For some reason this reminds me of people at work who walk up and say we did x bazillion things in n time, and then pause and expect us to express shock at how amazing that is and how much more productive they are than other teams. So what. Without a proper comparison to something equivalent I can't evaluate whether it's exceptional. I could treat each molecule as a thing and tell people how incredibly many things I eat on average per minute, but if I explain no one would find this to be exceptional.

50 story points!!!

The only thing that matters

"Rice is great if you're really hungry and want to eat two thousand of something" - Mitch Hedberg

Also, if you have huge amounts of fresh water and a tropical climate... you can get three harvests per year. Unlike most staple crops.

Fwiw, Railroads were the reason for some of the biggest bank collapses in history. Panic of 1873 was literally called "The Great Depression" (until a greater depression hit). 20 years later was the Panic of 1893. Both were due to over-investment and a bubble bursting, and they took out tons of banks and businesses.

We're seeing exactly the same thing with AI, as there is massive investment creating a bubble without a payoff. We know that the value will lower over time due to how software and hardware both gets more efficient and cheaper. And so far there's no evidence that all this investment has generated more profit for the users of AI. It's just a matter of time until people realize and the bubble bursts.

And when the bubble does burst, what's going to happen? Most of the investment is from private capital, not banks. We don't know where all that private capital is coming from, so we don't know what the externalities will be when it bursts. (As just one possibility: if it takes out the balance sheets of hyperscalers and tech unicorns, and they collapse, who's standing on top of them that collapses next? About half the S&P 500 - so 30% of US households' wealth - but also every business built on top of those mega-corps, and all the people they employ) Since it's not banks failing, they probably won't be bailed out, so the fallout will be immediate and uncushioned.

> We're seeing exactly the same thing with AI, as there is massive investment creating a bubble without a payoff.
...

And so far there's no evidence that all this investment has generated more profit for the users of AI.

If you look around a bit, you will find evidence for both. Recent data finds pretty high success in GenAI adoption even as "formal ROI measurement" -- i.e. not based on "vibes" -- becomes common: https://knowledge.wharton.upenn.edu/special-report/2025-ai-a... (tl;dr: about 75% report positive RoI.)

The trustworthiness, salience and nuances of this report is worth discussing, but unfortunately reports like this gets no airtime in the HN and the media echo chamber.

Preliminary evidence, but given this weird, entirely unprecedented technology is about 3+ years old and people are still figuring it out (something that report calls out) this is significant.

75% report positive ROI (and the VPs are much more "optimistic" than the middle managers who are closer to the work) - but how much ROI? 1%? The fact that they don't quote a figure at all is pretty telling. And that's the ROI of the people buying the AI services, which are often heavily subsidized. If it costs a billion dollars to give a mid-sized company a 1% ROI, that doesn't sound sustainable.

I would love to see another report that isn't a year old with actual ROI figures...

It’s not easy to quantify because you’re basically substituting or augmenting labor. How do you quantify an ROI on employees? You can look at profit of a project they’re hired to execute. But with AI, it’s mixed with the employees, so how do you distinguish the ROI of the two? With time, we might be able to make comparisons, but outside of very specific scenarios it’s difficult to quantify.

Everyone I’ve seen try has had negative actual ROI.

All the middle managers are afraid to say anything though, so go go go.

Good questions! I have only skimmed through the report but slide 45 onwards of the full report has some vague numbers: https://ai.wharton.upenn.edu/wp-content/uploads/2025/10/2025...

Can't say why they don't report exact numbers, but it may be because a) of confidentiality and b) RoI is very context dependent and c) there is a wide spectrum of RoI by different dimensions, including some 9% even reporting negative RoI. This may make it hard to cite a single number, but the majority report "moderate" to "significant" RoI, whatever that means to them.

I'll add that I've seen mentions of similar reports from other sources like McKinsey and co. e.g. this one that claims actual revenue increase: https://www.mckinsey.com/featured-insights/week-in-charts/ge... -- I tend not to take these reports at face value, but I'm seeing multiple of them from various sources that tend to align.

As an aside, I just wanted to say, these are the kinds of discussions I was hoping to see here!

> The trustworthiness, salience and nuances of this report is worth discussing, but unfortunately reports like this gets no airtime in the HN and the media echo chamber.

It honestly just isn't that interesting. (Being most notable for people misunderstanding and misrepresenting the chart on page 46 of the report as being "ROI" rather than "ROI measurement")

In terms of ROI figures, it's really just a survey with the question "Based on internal conversations with colleagues and senior leadership, what has been the return on investment (ROI) from your organization's Gen AI initiatives to date?".

This doesn't mean much. It's not even dubiously-measured ROI data, it's not ROI data at all, it's just what the leadership thinks is true.

And that's a worrying thing to rely on, as it's well documented (and measured by the report's next question) that there's a significant discrepancy in how high level leadership and low-level leadership/ICs rate AI "ROI".

One of the main explanations of that discrepancy being Goodhart's law. A large amount of companies are simply demanding AI productivity as a "target" now, with accusations of "worker sabotage" being thrown around readily. That makes good economy-wide data on AI ROI very hard to get.

That's fair, it is survey based but it is apparently based on formal internal measurements. The full report (https://ai.wharton.upenn.edu/wp-content/uploads/2025/10/2025... -- slides 43 onwards) mentions that for 75% of them have "integrated formal ROI measurement."

There is little discussion of what that means, however, but we really can't expect concrete numbers for what is going to be sensitive business data,and given that the report tracks it across multiple industries and functions ranging from IT to operations to legal to sales, it may be hard to put into sensible numbers, or how the measurements may be flawed or biased.

Lol a bit dramatic at the end. There will be a correction in stocks that were priced in for growth related to AI.

But what I see is the two big costs for America:

1) Less money being invested into risky AI projects in general, in both public (via cash flows from operations) and private markets 2) The large tech firms who participated in large capex spend related to AI projects won't be trusted with their cash balances - aka having to return more cash and therefore less money for reinvestment

All the hype and fanfare that draws in investment at al comes with a cost - you gotta deliver. People have an asymmetric relationship between gains and losses.

Have you seen video of a slime mold searching for food? It grows like crazy in a bunch of simultaneous search paths, expending tons of energy following a rough directional gradient looking for food. Once one of the branches finds the food all of the other search paths shrivel up and die off. I think slime molds are much better analogies for these situations than bubbles.

> Most of the investment is from private capital, not banks

It's just banks investing in private equity firms. So it's still banks, just by proxy, due to 2008 regulation.

The other categorical error is that the American people paid the railroads a monumental subsidy to get the job done. We gave them almost 10% of the territory.

Given the size of some of these data centers, the incentives packages that local governments often give their developers, and the impact on the electric grid that can, in some cases, raise costs for other ratepayers, I'd say the comparison could be similar.

The one Google's putting in KC North is 500 acres [0] and there were $10 billion in taxable revenue bonds put up by the Port Authority to help with the cost.

This for a company that could pay for that in cash right now.

[0] https://fox4kc.com/news/google-confirms-its-behind-new-data-...

That's the opposite of a subsidy. KC stakes nothing of value and gets a defined revenue for the next 25 years.

Then why would Google mess with the bonds at all?

Again, they have the cash to buy that land and develop it without any further consideration beyond permits and planning.

They lock in things like tax rates and insulate their investment against political risks for the duration of its economic life.

So they're doing something most of us can't do at the expense of the budget of the local government should the tax rates need to rise.

Wonderful. I'm so happy this is happening in my community.

The problem is that once built, railroads provided economic value right off the bat.

I would love to hear about the economic value being generated by these LLMs. I think a couple years is enough time for us to start putting some actual numbers to the value provided.

Equating this buildout with LLMs is also a category error. Waymo (self-driving cars) depends on the same infrastructure, and there are a variety of other robotics programs which are actually functioning, you can see them in operation. They all require a lot of GPUs to train and run the models which operate the robotics.

What % of GPUs are running self driving software or robotics?

And what is the ROI on either of those right now?

The answers to both of those questions are pretty guarded trade secrets. Amazon and Google just to name a couple examples are very profitable companies and I would not bet on them investing all this money without real use cases where profit is likely. Amazon is adding thousands of new robots to their factories every year.

So your argument basically boils down to, the datacenter build out is not a waste of resources because if it was, these companies wouldn’t be building them.

Got it.

I mean, your argument is that Google has had increasing revenue and profit for a decade, to the point that they have $400B in revenue + profit this year, and that they are going to lose money because they plan to spend $180B on capital projects for new data centers next year, because you know their business better than they do.

Argument from authority with a little whataboutism thrown in. I’m done wasting time with you.

Lol, it's not an argument from authority.

The claim isn't "google said so". It's "google is doing so". It's a claim to incentives and rational actors, or perhaps to revealed preferences.

If you want to get on a high horse around logical fallacies, make sure to understand them, else you reveal... something else, about yourself.

Google is doing something != they are doing the rational thing.

Suggesting otherwise is defintionally argument from authority.

You know you can just admit you’re a sophist and we can move on.

That's why it's a "claim".

Learn basic english before moving onto the big words :)

It's not clear that Waymo is an improvement over existing infrastructure so much as ensuring that fewer humans benefit from each car ride (which was already pathetically low).

It’s an improvement over spending 1b/mi building public transit in HCOL car dependent areas

Yes but then you get infrastructure. Investing more in cars is just taking on more debt your grandkids will have to pay off.

Is Waymo a good example when Google has third world people sitting at a screen operating the vehicle on the other side of the world, how can it performance be trusted?

> once built, railroads provided economic value right off the bat

If they were laid on a sensible route, completed on budget and time, and savvily operated. Many railroads went bust.

"Infrastructure build out"? Everything put into these datacenters is worthless well before 10 years have gone by.

We aren't even getting infrastructure out of it, they are just powering it with gas turbines..

This isn't true and you can easily prove it to yourself by renting a Sandy Bridge CPU or a TPUv2 from Google today.

regardless, it's true that AI-related spending is the largest mobilization of capital in history

And it’s probably useless at the end of the day because everything will reduce down from a centralized location to your desktop/laptop/tablet/phone. OpenAI, Microsoft, Meta, Google, Oracle dreams of a centralized computing location will not hold up.

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