The AI bubble isn't like the internet bubble
pluralistic.net
pluralistic.net
1) That LLM/Agents are being pushed and not adopted. I see plenty of deep adoption by junior folks.
2) The unit economics don't work out. From the details on every model so far - each model is wildly profitable over it's amotized time-frame. It's just that money is used upfront for the next model, and each next model is significantly more costly to train. The best case argument instead is - this will not last and we'll pour more on some models, than see in it's revenue.
I think realistically these form the core of the thesis, and IMO, and hence it's conclusions are a bit off the mark.
Where mate? Details?
> From the details on every model so far - each model is wildly profitable over it's amotized time-frame
Is it? Is that why all of them are switching their users from the subsidized flat-rates to billing based on usage?
> hence it's conclusions are a bit off the mark
You're funny - they are spot on and any dreamer who is working for equity in these LLM-wrapper-product companies who dreams of getting rich in the next few years or so, is in for a nasty surprise.
We are nowhere near the ceiling in terms of process either.
Re: flat rate going to by-usage, I believe this is largely a long tail problem. You have a small number of power users that capitalize on the flat rate to use the service orders of magnitude more than the average user.
You mean the "make-no-mistakes.md" and linter pipeline? Did not know that was now considered top-notch stuff.
2) there is no profit. There is barely any revenue, the only money is continuous injections of VC cash and some frankly Enron-like book keeping.
The economics do not work, not even close. Even if they ever did (probably a decade or so after the bubble pops), all parts of the stack(with the expetion of nvidia, maybe) are interchangeable. Meaning that people can easliy swap out foundation models, nor are creating new wrappers very hard. It will be a race to the bottom, I doubt anyone will make much money.
Last I checked, ycombinator will not fund your start-up if you shill for AI hard enough.
Because if it's the later, I would assume that growth would not continue at the same rate after the bubble bursts?
https://www.tomshardware.com/pc-components/gpus/datacenter-g...
LLM inference is mainly memory bandwidth constrained so I think it's highly likely that a company will create silicon with just an insane number of memory chips and less compute. These ASICs will probably do the same thing the crypto ASICs did.
If we look back 1 decade, no one uses a GTX 950 for anything.
And people in general are holding on to their old machines for very long periods of time now, especially CPUs. I've had to support first gen Intel i7s at work! That's pre AVX.
I think it is reasonable to assume a similar depreciation in GPUs.
Meaning you'd need to have made more than (800M - 30M) * (1 + income tax rate) + (power + maintenance).
Some say the margines on inference are already there for new GPUs but they are right margines.
Even the ancient V100 (soon to be 10 years old!) had somewhat of resurgence on the second-hand market, with a healthy market for interconnects in China.
If I had a datacenter and power consumption was not a concern, I'd be holding on to my A100s for years at least for inference.
Additionally the demand drives new power infrastructure, and new fabs that will definitely outlive the bubble.
Imagining people buying scrap AI hardware from creditors or bankruptcy auctions & harvesting all the HBM RAM chips and NAND storage chips to sell & throwing away the useless AI optimized compute chips and unusable enterprise interconnects.
This time around the investments are going to evaporate and we won't get to reap the benefits of very large amounts of compute.
The possible inheritance we might get might be increased fabrication capacity for state of the art silicon.
There are massive numbers of data centre GPUs sitting in hyperscaler warehouses waiting to be deployed in a data centre. They may never be deployed because there’s more GPU than DC space and you want your most efficient GPUs in the active slots.
2. Datacenters are currently extremely power-limited. Efficiency is king.
That is mostly because they are run 24/7 at the peak of their thermal envelopes and eventually components fail.
The comments to his tweet, if true, tend to say that the real lifespan of an AI chip tends to be around 1 to 3 years in reality, since racks don't cool down that well. Not sure if these commenters are a reliable source though lol. https://x.com/xdire_me/status/1987920424978837711
The 2000 crash left a lot of broken economies worldwide. Many non-US stock markets benefitted from the tech stock feeding frenzy without the investment actually being used to build anything.
If the AI bubble pops, a handful of US megacorps may be left with good models, datacentres and other assets, but the economic shocks will be felt around the world.
The models may go out of date but the process and software are continuously improving.
At the time of the Internet bubble, there were people pushing for more "free" usage of the Internet, and those that couldn't care less.
And it's not like the companies didn't want to take advantage of the Internet, but there was a mismatch between what the companies and the employees had in mind, which mostly boils down
* Employees want to use it to do their jobs and make their life easier
* Companies want to improve productivity, spend less and make more money.
There is some overlap of course, but the problem is where the two clashes.
I don't think today it is too much different. I see plenty of people using AI for what they care about, they complain when they are asked to use it for things they fear will make their life worse (like programmers that think they will have to pick up the pieces of vibe coding later on).
> As a group, teenagers and young adults hate AI
I wonder what is their definition of AI. I haven't seen a single young person saying "I don't use chatgpt (or the like) because I hate AI". If else plenty of student have become dependent on it.
Anecdotally, I've observed a robust correlation between the cost/quality of the model, and attitude towards it.
Most of the general public, young folks, and old folks (ie outside gen z, millennials, and some X) are using free models, usually what's immediately available (cough copilot cough), have really unreliable results, hear all the hype, experience dissonance, and chalk it up to just hype, and walk away thinking AI is a crock of junk.
The Z/Y/G cohort - the ones that grew up alongside the growth of the internet - seem to be the best adopters. They recognize a system which is powerful, albeit flaky, and know how to extract utility from it without over-reliance. Especially ones with paid flat-rate subscriptions.
The power users - the ones using API/paid (by usage) models, tricking out their claude with plugins, seem to have the least amount of hate, but rather a healthy respect for a powerful disruptor.
I also don't buy the whole "the young'ns have never dealt with barriers of entry to the internet and thus lack the tech skills the millennials developed." I think the internet cohort that adopted tech was always split between the powerusers/curious learners, and the "just get my goal accomplished and get out" folks. I think that's roughly the same percentage of folks in Z/alpha, and these kids are just as savvy and aware of limitations of the tech.
It was mismanagement then and it's mismanagement now, the more things change the more they stay the same.
I’m in a finance role and thus far it’s all been rather hand wavy „use copilot more“. Maybe some meeting summarization. Nothing like the programming space where token counts matter to management
Will be interesting to see where this goes. My testing with it thus far has just yielded multi million dollar hallucinations. Senior management will presumably try anyway
One wonderful thing I’ve watched for the last 4 years is my company fail to build a modelling tool better than Excel. On attempt 3 we have some pile of shit Claude generated on nodejs and Postgres on kubernetes which can’t replace a single spreadsheet written in 2008. Because everyone thought into the bullshit not the solution or the requirements.
Edit: thinking further, it appears people forgot what the problems are and think from the solution back. That never works. But it sells tools.
He told me he found AI to make him really productive and said something along the lines of: "It's really good at summarizing long reports and it saves me time when I have to write end of quarter status updates".
I'm convinced about 50% of management decisions come from Claude now.
You boss is a fucking moron. How is that shit even legal, especially in publicly traded companies I wonder? It makes me livid - people invest their pension funds into these companies which are managed by shitty slot machines now?
Not to mention that there is a reason why long reports are long - they contain details that will invariably be skipped by the LLM-ShitGenerators. But I guess it makes them "productive".
Or even worse, many employers and employees alike are afraid to cut out BS work - because it could realistically mean cutting down on the workforce. So they continue to produce work that no one checks, because at least then they can justify their position.
They are not about actually "doing things", they are social validation, particularly the part where the people with resources/capital enjoy your company and give you what you need to live a dignified lifestyle in exchange for it.
But acknowledging and acting on this would destroy the leverage the useless-but-likeable have in terms of being able to get paid, and that the owner class have in terms of getting people to pretend that they like them/validate their often cruel and avaricious choices and behavior.
Outside of AI's impact on software, which is massive, the biggest change that we are going to see, I think, is the crushing amount of useless information generated by it.
We already see how everything is racing to the lowest common denominator once we granted Average Human Intelligence unfettered access to expressing thought via social media.
Now that Average Human Intelligence just has a button that says "Generate Bullshit For Me. Send to the World".
UGH.
That's a contradiction in terms. What is being generated is the opposite of information that just clogs the pipes: Slop.
labor-led automation produces improvements in quality, while capital-driven automation increases throughput
This explains the management push (ignorance) but also the user push (automating BS tasks). The common thread is that the user doesn’t have to take any responsibility for the output. This is why people don’t like having LLMs pushed on them, because for cases where they are responsible for or have to consume the output, they don’t work very well, but when it’s just something that needs to look ok at a glance and be handed off, everyone is rushing to use them.
[1] "... what made Notes so important to Microsoft ..."
In fact back then Notes was one of the main competitors to Office/Sharepoint.
I'm lucky enough to be in a great company right now, so I decide when I think AI will help me and use it accordingly - but reading about forced AI adoption reminds me so, so much of that earlier time. Non-technical people who don't trust their engineers to use the tools in the way they see best - in their ignorance, and ego, they think the answer is obvious if only those strong headed tech weirdos would listen.
And amongst all this, there is a class of manager and executive that I'm convinced utterly despise engineers. They hate the fact they focus on details, analyse, make predictions grounded in reality. On a personal level, they can't comprehend that some people take deep satisfaction and contentment from building software, from simply learning things, and they don't understand it, it scares them. Why don't they just pursue normal people things in life? Like super expensive cars, massive houses, golf memberships. I think it scares them that they don't have control over technically minded people they way they might do with others. AI is, in their mind, a way to get rid of these people forever, to just "get stuff done" without objections, and they are pushing extremely hard for that to be true, simply because they want it to be true - not because there is any evidence for it.
Rant over.
However, something occurred to me when reading it. I was thinking about AGI (or ASI) and what would happen if someone were to achieve it (not sure what it would look like or what constitutes AGI... not the point I'm making here).
What if the primary goal of the first AGI is to keep itself at the top? What if it's goal is to prevent any other AGI? Scary thought...
is basically the premise of
https://en.wikipedia.org/wiki/If_Anyone_Builds_It,_Everyone_...
One of the most inaccurate descriptions of Lotus Notes I have ever come across. Try Exchange+SharePoint+Teams and you'll be at least a little bit more accurate.
AI crap is now at the “monetize lonely people for their AI girlfriends” while burning more money than pets.com ever did in a month.
Hopefully it all collapses before we destroy ourselves with data centers and bailouts for the rich.
I think all the screaming about drumming up uses for data centers we don’t actually need is to make the poor pay for the artifacts of the surveillance state.
I keep thinking the plan is clear: beyond some level of compute, they’ll attempt some massive surveillance system that makes China look benign by comparison. They’ll rent out any idle servers to the US Government, thus keeping the rich in place forever.
So it’s absolutely correct: the AI bubble isn’t like the internet bubble. It wasn’t trying to prop up or enable a surveillance state par excellence and destroying our financial system and environment to do so.
Software - this tech is ludicrously powerful and productive. But it's a force multiplier, not a "push button, receive software" system. Great devs that know how to wield it will become überdevs, becoming more productive and with lower defect rate (we have objective internal numbers backing this). But bad devs and non-devs will become high output slop factories. You basically need a dedicated platform team to keep things on the rails. I think this is very akin to the internet bubble. The process, institutional knowledge, and feedback systems developed at this time will grant the "survivors" massive edges after the pop.
I think media generation is or will be a solved problem. Animators, 3dfx, background/filler music composers, those jobs are in sorry shape based on current trends. But a cost explosion could easily level the playing field.
Everything else, where middle managers are aggressively pushing AI usage? Yeah maybe. At this time, other than for document retrieval (basically suped-up search), the "productivity" gains don't really map to value gains. Oh wow you can crank out powerpoint slide decks 50% faster. Write 50% more corporate emails employees barely read anyways. There's definitely a trust issue there with hallucinations. If the reliability gap can be solved (the bots don't even have to be correct, they just need to be less confidently incorrect, and I already see this somewhat with my own agents with tuning), then that could prove the turning point between "begrudging usage at the behest of higher ups" and "actual productivity enhancer."
Does no one remember in the dot com boom all the internet skepticism? "I don't trust it with high value orders, what if it crashes or loses data? Call me old-fashioned but I'd rather write it down." That attitude was quite prevalent for years, even into the 2000s.
A great technology drives its own adoption, its usage is pioneered by the tweens and young adults, it requires minimum effort and investment to hop on board, and it does not need explaining. It grows organically. Examples: internet bubble.
A bad technology: despised by the young adults and tweens, needs trillion of investments and marketing to drive market penetration, every day some boomer (=not in terms of age, but in terms of mentality) explains how you are holding it wrong and it needs a fuckton of explanation. The Pope himself issues an Encyclica warning on the dangers of it, spurning the greatest popular interest in Catholicism since the dark ages. Examples: LLMs.
I probably know more people using AI to cheese all of their school assignments than those that are fully 'clean'.
https://www.pewresearch.org/internet/2025/12/09/teens-social...
>A majority of teens use AI chatbots. Roughly two-thirds of U.S. teens ages 13 to 17 (64%) say they ever use an AI chatbot, according to a fall 2025 survey.
>Around half of adults under 50 say they interact with AI about once a day or more often. Smaller shares of those 50 and older say the same, according to the June survey.
and mind you, that particular study bends over backwards to say "AI bad".
your reddit/bluesky/whatever circle of terminally online folx is not representative of the general population. you're utterly detached from reality if you think that young adults in particular give a flying fuck about copyright, water, electricity, or artists and journalists losing their jobs.
There are certainly more that "embrace" it. Maybe not as much as tech executives, but there's a huge amount of students using it for both homework and personal tasks.
Conversely, the second crowd that believe AI is an ontological evil, are a much more vocal (and insular) minority.
All in all though, I've found much more people just generally apathetic than anything. People are generally not positive about slop content, but aren't about to boo tech executives.
The download count of the ChatGPT app per GP, and the insanely pervasive use inside education, somewhat back this up. It's a useful tool, thus people will use it.
Wasn't that generally the case that people seeing through something as bad, regardless of whether it indeed was evil or something of lesser degree of badness, were usually the minority? Think we've got ample evidence in each century.
but meanwhile, new data centers are being frantically built to satisfy the demand.
More like, frantically being announced and hyped up. How much new capacity has really come online recently? Show me the data, let's not bullshit here.
Most understand how LLMs are handy in a lot of scenarios. Pretty much every single person I know in the age range of 12-70s use one app or the other. It doesn’t even matter how much we like it, as if it’s somewhat useful, it will be enshifticated, and profits will soar.
People said the same about Facebook, Netflix/Spotify, Uber/Instacart/etc. Eventually ads will be injected everywhere to turn it into profits.
In engineering, we can't raise token budgets fast enough. Devs are "routing around damage" when they hit caps, going from claude to opencode to copilot. Productivity is up (roughly) 100-300% in terms of story points and 75-200% in lines of code. And defect rate is down [0], more bugs are caught in review before QA or prod. Our teams are just starting to figure out our new workflows too, for design -> spec -> code -> review, it'll only get better as we refine the process.
It's looking like software industries will reap massive benefits, while most others which have some error tolerance will only see modest gains. It's unclear how it will impact high accuracy fields like legal (it might even be net negative).
Also which is it - a useless technology that has to be force-fed because it sucks, or a economy-shaking game changer that will put folks out of jobs en masse? Those seem like a contradiction.
0 - i think process here is extremely important. I think it would be very easy to create an unmaintainable slopocaplypse. We have an informal platform team of about three (including myself) that have been affectionately and informally dubbed the Tech Priests of Mechanicus Adeptus (warhammer reference) that ensure the prompts/skills and associated tooling are optimal, that code standards are enforced, and that solutions are converging at the system-wide level.