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This is the core of my belief that data center construction is a huge bubble.

AI is not a bubble, IMO, though we may see a retrench and some companies with sky-high valuations will crash to more reasonable ones. But data center demand is probably a bubble, and the main driver will be reduction in the actual amount of power and data center space required to serve escalating demand.

I think hardware and model improvements will pace or maybe outrun demand and then when demand starts to saturate will keep going and leave a lot of orphaned data centers.

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> AI is not a bubble

When people say "AI is a bubble", they mean economically as a whole, which includes data centers.

Perhaps we need better terminology for "product useful; numbers nonsensical"

Bull case - spend to date is about $1tn or 0.8% of global GDP. If AI becomes comparable with people for doing jobs it makes sense to put a few percent of GDP into it.

I disagree. I own over 1TB of vram at home. I can tell you that it's not a bubble. From my builds, I would rather have cloud, cloud is easier. From running small models like Qwen3.8-27B to large models like Qwen3.8-2.4T. I can tell you that small models will never be enough or match up. Everyone will want the smartest model, not just a good enough model.

> Everyone will want the smartest model, not just a good enough model.

Not so sure about this. There’s always a potential threshold. After all, we don’t all use the most powerful computers, the latest phones, the highest resolution cameras, the fastest or best cars.

I am already not interested in cloud LLMs and I don’t even use the best (on paper) model that I can run locally. I prefer a model that people insisted (here) was “dead on arrival” but appears to work better for me.

I think the difference is that AI as an edge. That edge will turn into more money, better quality of life, etc. Of course, with serious skills, you might be able to use use a not so smart model to keep up with folks with smart models. People are lazy tho, and will prefer for AI to do all the work if it means they do none.

Can't be an edge if everyone has access to it.

The edge is somewhere else.

... and everyone won't have access to it, look at Fable. How many people in the world can afford Fable or are using it?

What is "somewhere else" for you? (Besides distribution and money)

I don’t know. But if you assume that the AI companies have an enterprise subscription product available to any given market sector then given their desperate need for money they will sell it to anyone and everyone. So it becomes a widely used standard feature. Having access to it doesn’t give you an edge; it puts you on the same surface as everyone else.

It’s like being an algorithmic betting exchange gambler; being the first with access to some new stream of information may give you a very temporary advantage but once everyone has access to it, the market prices it in.

If you want an advantage you have to seek it out elsewhere.

It might be in the harness or tooling, but if your cloud LLM can write it quickly for you, it’s the same for your competitors; their cloud LLM can write it for them.

The idea that using a cloud LLM is an edge — an advantage — doesn’t stand up well to scrutiny.

The only edges left will be human.

Jevon's paradox says that if data centers can serve a lot more tokens per dollar or watt there will be increased demand for data centers.

Jevon's paradox isn't a physical law, it doesn't magically apply to everything. Millions more copies of Atari's ET game didn't cause everyone to pickup a cheap copy, and cause extra demand for a garbage video game. Some times (actually, usually, I'd argue) things are made that will sell for less than the cost of construction because of irrationality, and they don't induce extra demand and they don't change the negative profit margins.

You can't simply wave Jevon's paradox at things. Thousands of miles of canals were dug in the UK that couldn't be sustained and were abandoned. Thousands of miles of railways were laid that could be sustained and were abandoned. And those are potentially durable investments, unlike cheap walls, pillars and roofs laid over a levelled concrete slab full of fast depreciating IT equipment.

It's true that Jevon's paradox doesn't always apply, although this does seem like a classic case.

But yes, if sold for a negative margin Jevon eventually stops because the decreasing supply will drive up prices.

> things are made that will sell for less than the cost of construction

Price is set at the marginal cost. Capital costs aren't in marginal costs.

You'll need a better counter-example than UK railways which suffered from Parliament price-fixing.

I agree, but I would say what the parent is saying is more akin to Say's law: https://en.wikipedia.org/wiki/Supply_creates_its_own_demand

> You can't simply wave Jevon's paradox at things

I'm so glad the tide here is turning on this talking point, brought on by exactly the same people beating us over the head with it for months while no progress is made towards it materializing.

Many, many people who post here are capable neither of real analysis nor distinguishing real analysis from memes. They aren't hackers, they are adherents of a cult that happens to focus on the same subject matter as hackers.

Jevon's Paradox, RSI, revealed preference

Jev, ASI, RLHF, Jev, Jev, water usage

Jevon's paradox only applies to products with near infinite demand. Energy being the most famous example. I dont think its difficult to argue that compute/intelligence is also a base input into the economy and theres almost no limit to the amount of intelligence the world will want.

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