We remember the internet bubble. This mania looks and feels the same
crazystupidtech.com80 points by speckx 3 hours ago
80 points by speckx 3 hours ago
The internet was monumental and valuable, offering instant conveyance of media and data. AI is monumental, allowing instant access to near infinite data; but whether instant access is as valuable as instant conveyance yet alone five times the value, appears to be the question
Honestly anyone who thinks AI has intrinsic value to rival the GDP of nations is a bagholder in denial and I'll be happy to buy your puts.
Pets.com→Chewy
Webvan → Instacart, DoorDash, Amazon Fresh
Kozmo.com → Postmates, Uber Eats, Gopuff
Boo.com (fashion) → Farfetch, Net-a-Porter, ASOS
Broadcast.com → YouTube, Netflix, Twitch
The dot-com bubble didn’t prove the internet was a fad — it proved the internet was inevitable, but the valuations assumed adoption would happen in 2 years instead of 15–20. To me it feels like the AI inevitability will be much quicker.
On the RHS, post hype, the second movers could work on the boring, unsexy problems in those domains nobody wanted to solve. And solve them extremely well. Then build a moat around that.
> To me it feels like the AI inevitability will be much quicker.
AI is accelerating "let them eat cake" at rates never seen before in history, so I imagine the violence will follow soon after
To say whether it's a bubble, we need to know the value of the technology.
The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, is normal for any new technology.
If you add the value of the potential political power gained by controlling AI, then the value to the owners and investors is astronomical. Many of the investors have demonstrated a strong motivation to sacrifice money for political power, for example by supporting nationalism that undermines a global economy that they benefit enormously from. Somewhere, I read someone explaining their investment by saying 'it's the greatest transfer of power in (modern) history'. Also see: https://news.ycombinator.com/item?id=45983700
The implied promise was that these things were going to “revolutionize the workplace” i.e. massively automate middle class office jobs
A couple of years down the road, their useful applications still are summarizing text, transferring style to text, generating code under strict supervision, and generating images that need retouching.
That’s a lot to get out of a tool, but it’s dubious that investors were pouring trillions of dollars into these things thinking of automating away junior software engineers and low end design work.
Edit: I forgot their other niche, that of generating homework and school test answers
You forgot - cheating on job interviews, writing resumes to be repetitive, and adding an annoying flowery tone to non-native English speakers who think AI wrote something for them that isn't AI-obvious.
Many of those things were already at a “good enough” level since GPT-3.5.
There’s probably a good business usecase there for companies wanting to have smoother communication with offshore teams.
Could that be a game-changer? I wouldn’t discount it, but it does sound like something that has to operate at a very low margin and that doesn’t merit a lot more investment.
How many people graduate from a US software engineering degree each year? About 100k? If they (the 100k in the US) earn $100k each in the first year, before gaining the skills to earn more, that's $10 billion a year, every year. If you can capture that market for next 20 years, it's worth $200 billion.
Except… can you capture it? A junior dev is… not exactly someone you want connecting to your business-critical database without supervision, and a real human dev will get better with a predictable rate. Will LLMs get better? The makers are betting on that, but we'll only know after the model releases, and even then after we play with them for a bit to differentiate between the record performance on whichever benchmark and the actual work we want them to do.
Then there's the question of can you really keep an edge for 20 years with investments today: Sometime between 2030-2035, there's likely to be models matching 2025-SOTA performance that run on ${year}'s high-end smartphone.
(Well, unless we all die in WW3 because of Russia getting desperate from its failure to remove Ukraine's sovereignty, or because China has a hot war with Taiwan and/or the USA messing with global consumer electronics supplies, but I don't think those get priced into the market…).
> If you can capture that market for next 20 years, it's worth $200 billion.
that's like 5% of NVIDIA's current market cap. sounds like peanuts when you lay it out like that
Perhaps.
But that's just the USA's software developers in just their first year after graduating. Software devs are 1% of the US job market, the first year after graduation is (66-21=45 years, 1/45 ~= 2%) of a working life, the US is just 4% of the world's population/25% GDP.
For the 1% to matter, there have to be other jobs that LLMs can do as well as a fresh graduate. I don't know, are LLMs like someone the first year out of law school or medical school, or are those schools better than software? Certainly the home robotics' AI are nowhere near ready yet, no plumber, no driver (despite the news about new car AIs), would you trust an Optimus to cut your hair? etc.
For the 2% to matter, depends how seriously you take the projections of improvements. Myself, I do not. Looks like exponential improvements come at exponential costs, and you run out of money to spend for further improvements very quickly.
For the 4% to matter, depends on how fast other economies grow. 4% by population, about 25% by GDP. I believe China is still growing quite fast, likely to continue. Them getting +160% growth, and thus getting 2.6x times the money available to burn on AI tokens, over the next 20 years would be unsurprising.
All in all, I don't think the USA is competent enough at large-scale projects to handle the infrastructure that this kind of AI would need, so I think it's a bubble and will burst before 2030 because of that. China seems to be able to pull off this kind of infrastructure, so may pull ahead after the US does whatever it does.
> For the 1% to matter, there have to be other jobs that LLMs can do as well as a fresh graduate. I don't know, are LLMs like someone the first year out of law school or medical school, or are those schools better than software?
Before looking to medical and law schools, I might look to middle-manager school or salesperson school or bookkeeper school.
The hardware also wears out really fast. And every replacement is more expensive. How long can that party keep going when none of the companies make enough revenue to cover the expenses?
GPUs have massive applications such as Alphafold, CRISPR, Medical Imaging, Meteorology.
The massive planetary investment is not to make more AI chats that summarize text. That's just short sighted.
> Meteorology
It seems like that at first glance. But in reality, GPUs have had extremely slow adoption for real-world operational meteorology applications. Because of the fundamental design and architecture of most NWP systems, it was very difficult to leverage GPUs as compute accelerators; most efforts barely eked out any performance gains once you account for host/device memory transfers. It really wasn't until some groups started to design new weather modeling systems from the ground up that they could architect things in such a way that GPUs made a significant difference.
Obviously AI / ML weather modeling is a different story.
As someone working in a field that has used NLP for quite some time - yeah, I generally agree that those investments are worth their weight in gold... which is unfortunate because before ChatGPT came along they were viewed as niche unprofitable money-sinks. The astronomical investments we've seen lately have been in general models which can be leveraged to outperform some of our older models but had we wanted purely to improve those models there were much more efficient ways to do so.
Hopefully we can retain a lot of this value when the bubble bursts but I just haven't seen any really good success stories of converting these models into businesses. If you try and build as a middleman where you leverage a model to solve someone's problem they can always just go to the model runner and get the same results for cheaper - and the model runners seem (so far - this may change) to be unable to price model usage at a level that actually makes it sustainable.
Those older models running specialized tasks seem to be trucking along just fine for now - but I remain concerned that when the bubble bursts it's going to starve these necessary investments of capital.
> converting these models into businesses.
I think it's pretty clear to all the big operators that they will need to go whole hog into ads and take some of the Google/Meta pie. It's just a matter of time.
You're missing the point. Those kind of narrow AI applications are not the motivation for the trillions of dollars being poured into AI. Of course AI has a variety of applications many disciplines, as it has for decades. The motivation behind the massive investment in AI is as forgetfulness said, reap the benefits from "revolutionizing the workplace"
That’s copium, as the kids say nowadays. The massive planetary investment is a 100% for AI chats. All those other things are taking the crumbs where they can.
Big business and government aren't buying supercomputer clusters and licensing models to run chats.
Eh, those applications (incl. protein folding) existed for a decade-plus before LLMs came onto the scene, and there was absolutely nothing like the scale of capex that we're seeing right now. It's like literally 100-1000x larger than what GPU hosting providers were spending previously.
> thinking of automating away junior software engineers and low end design work.
And it's really still very arguable imo if it's even doing this
Like you said, it still needs strict supervision. In my opinion it is not a good use of your supervisory time to be babysitting an LLM versus mentoring actual juniors
> In my opinion it is not a good use of your supervisory time to be babysitting an LLM versus mentoring actual juniors
Right. Because at least juniors are supposed to learn and at some point become senior and stop needing this kind of supervision. Also, interacting with people can be more rewarding (or not, depending on the people)…
its helping people be more productive but its not helping firing people which was the wet dream
Ok, ignoring any AGI or massive advances, let's just say an LLM can help the average office worker be 15% more productive... what do you think the economic value of that is?
300 billion a year, with math that’s downright delusional.
So, back of the envelope math, the US GDP is 27.72T USD, 80% (22.18) corresponds to the tertiary sector.
Let’s say that this is a 15% increase over a 10 years period, because YoY a boom like the computer revolution itself looks like 2% increases a year.[1]. This amounts to about 1.5% increases each year.
Let’s just make the huge leap that you can just scale the productivity up of all this just by making typing out reports and emails a faster activity, and summarizing information for which you’re not facing liability if the bot gets it wrong.
Yes, including the nurses, cleaners, truckers, teamsters, all of it.
1.5% of it is a cool 330 billion.
How much of a cut of that productivity increase could AI companies take? 30%? That’s 100 billion in one year there.
So with pie-in-the-sky math, they could break even if their obligations throughout the decade don’t amount to 3 trillion (since those 1.5T in bonds issued this year mature in longer periods)
1. https://www.bls.gov/opub/mlr/2021/article/the-us-productivit...
The value of LLM is reliable high quality translation between all languages. The economic value of this is at least trillions of dollars per year. The cultural and humanitarian value is equally gigantic, even if it can't be measured in dollars and cents.
That is of immense social value - but manual translation services for commercial projects (like application localization) is already dirt cheap to do and automatic casual translation services for consumers would be incredibly difficult to monetize.
I think your perspective might be severely limited. There exists millions of businesses outside of big IT enterprises.
Not only that, but it’s devaluing the sacred cows of the very same companies that are investing heavily.
Search is dead or dying
Social media is dead or dying
Content creation is dead or dying
If they cant make AI work, then they are left with AI at a level that continues to devalue their core business.
They have no choice. They made a deal with the devil. And the devil means to collect.
This is why I think Apple is lucky their attempt failed so bad. They dodged a bullet. They have an opportunity to guide a lost tech industry through a post AI bubble world.
Alternate viewpoint - The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, might be a sign that the technology shouldn't be valued this highly at all
> The value of modern AI seems very high. That nobody knows how high, that they still haven't figured out applications, and that the technology and its tools are still far from refined, is normal for any new technology.
The same could be said for the internet. But, and I know this will be hard for younger readers to believe, I seem to recall the value proposition of the Internet being more immediately apparent at the time.
You can have brilliant technology and still go broke.
The internet was amazingly valuable, but many of the early companies failed. Investing in internet companies was hardly a sure bet.
There was a recent Bezos talk about the fact that (much like the dot-com) we've overspending on infrastructure that'll bubble and implode but then we'll have all this amazing infra for companies to build off of... but the process of that overspend and implosion is essentially a massive debt erasure - a lot of people are currently propping up this market with their capital and the companies they're propping up will collapse and those obligations liquidated - and that will result in massive society-wide pain. We may end up in a better place for the next generation because of this investment - but if you're a retail investor don't expect your 401k accounts to weather that burst gracefully... and, unlike the boomers, this will largely hit Millenials and Gen Z both of whom are currently under massive financial stress.
The value can be incredibly high... just like the value of the internet was incredibly high.. and it can still be a finanfial bubble. I feel like the people arguing against the bubble perspective are saying look the internet was actually valuable and so too will this.. and that's totally a valid perspective. The bubble is not about whether there's value but about whether or not the market will come down. All of the above can totally happen
Yep. It seems somewhat inevitable to have a readjustment at some point. Both Web 2.0 (online retail) and AI are (rightfully, I believe) creating a lot of buzz and stimulating a lot of investment. It's all very new and exciting and there is bound to be a lot of hit and miss activity. Once the dust settles, the misguided bets will become more obvious and there will be a culling, just as we had during the dot com bubble.
> The value of modern AI seems very hig
Very useful, clearly. But valuable? In aggregate it seems clear that it is. But where does that value acrue? It seems to me the value will be thinly spread while the costs are concentrated.
It does not seem possible that any conceivable business can pay for all the announced plans for developing data centres, nor energy available to power them.
If AI systems can be developed to be trust worthy enough to act on their own, none so far (?), then I can see where the value could acrue, but as things stand?
Absolutely nothing in your list prevents the AI from being a bubble. The Internet is an absolute marvel of engineering that completely changed the life of the majority of people in the world, and yet it crashed 25 years ago, and crashed hard. Both can be true at the same time.
> To say whether it's a bubble, we need to know the value of the technology.
Not really. I mean, not only. The value of the web is immense. And yet, the dot-com bubble was indeed a bubble. What matters is the value in the short term compared to the value of the companies in the current context. Even if AI is huge 20 years from now, it can still crash dramatically tomorrow.
Arguably, it's exactly this mindset creating the problem. It's not the value of the technology that matters. It's the value of the companies. If one company was the only one that had a particular valuable technology, then that would matter, but otherwise 90% of them likely end up worthless even if the sector itself doesn't.
How that washes out on net we'll have to see. I'm not gonna pretend I know more than anyone else. Just keep in mind that a major difference between now and 2000 is companies stay private a lot longer. An IPO forces you to open the books and sustain public scrutiny of the broad investor class. A still-private startup only needs to convince one funder of their value. That inevitably leads to higher variance and a greater risk of failure. That doesn't mean the whole sector is necessarily a bubble, but if it is, it can be sustained a lot longer without us knowing. A small number of people with $50 billion they need to park somewhere and no other obvious options can keep shitty ideas afloat in a way that wouldn't be possible if they had to be subjected to broader exposure. We like to believe people with $50 billion can't be wrong, but the wisdom of crowds always beats the wisdom of individual genius.
Heck, AI itself taught us that same lesson!
> And Coreweave, the former crypto miner turned data center service provider, unveiled in its IPO documents earlier this year that it has borrowed so much money that its debt payments represent 25 percent of its revenues.
Wow, what a sentence. It starts out bad and just gets worse.
I think I'm asking for the impossible here... But is anyone trying to hedge risk in their personal finances?
I'm not a real "investor" (index funds only) but I am feeling more willing to forgo gains to be more risk averse just based on my own neuroses.
Maybe I cash out and buy T-bills? Gold? Bullets? What's the non-crazy person equivalent?
Why is that an impossible question? I've moved from investing mostly in the SP500 (which is something like %25 big AI companies) to investing into other indices which are not so AI-heavy -- healthcare, infrastructure, etc. I've also put a lot into TSLS (inverse etf for tesla), because I think it is particularly overvalued. I still have a fairly high risk tolerance, but trying to reduce the amount that I'm tied to AI. I'm sure there are even better ways this could be done, but this is a fairly simple way to do roughly what I want.
It’s pretty unpopular, but a properly designed whole life insurance policy is a good stable, growing asset. You can borrow against it at reasonable rates, and it makes a good rainy day fund and risk buffer. You can generally annuitize them later if you wish, providing a stress reduction in retirement which is correlated with longer life, iirc, though that could simply be due to selection bias.
I have been 'raising cash' by selling stuff in my portfolio that seems high risk and is up. I've learned from the past that I end up feeling physically unwell when the portfolio sinks and stays low for a year, some days 1-5% which make me stop looking. Now I'm reducing my risk exposure - yes, that means not literally 'cash' but either a money market fund and a tax-free bond fund. For years I had a lot of gold miners and a gold mining index which only recently popped, I thought that was a 'hedge' but now I am convinced the only hedge is cash or if you know what you are doing, options. Everything is prone to pops and crashes, from big giant index funds, to gold, to bitcoin, to large caps, all the stuff people said was supposed to be a hedge.
For this round I've bought (well, bought and sold, and now waiting to buy via an order) puts on a semiconductor ETF. Since I own some of the stocks, if it goes sky high still I win, if it crashes I win, and if nothing happens I'll have to sell it 30 days before it expires to avoid the theta decay, which starts to really bite in that last month.
No one knows anything - which is the environment I'm learning to operate it.
A very conservative investor, say a boglehead or a 'value investor' would tell you to buy in an index fund and not look, unless you know for sure what you are doing and have done insane research on a company and it's priced low. They would say, buy VTI or VOO if you don't need the money within 5 years, and stop looking at it. Oh, and DCA into it versus all at once.
During covid you probably wanted a 70/30 split so you didn't get eaten by inflation, but I think 60/40 is probably a safer bet for the average person right now. I'd consider pulling back to 50/50 over the next 6 months to a year so you can loss harvest and skip the capital gains. I'd also consider moving money you don't expect to need anytime in the next decade into real estate.
I'm not really an investor btw, this is just my intuition. I'm curious what others here are doing.
Property. It is the one thing they cannot produce more of.
Real Estate is currently trading at the highest price to earnings ratios ever recorded.
Yeah, not sure how valuable lots of real estate is if there aren't any high-paying jobs nearby, in part due to AI.
And this isn't even about the total number of high-paying jobs. Even having too much income concentration (fewer, but higher paying jobs) will mean that there's less demand at the margin. To put it another way, if the job growth in say, silicon valley, starts to reverse because of AI, there will still be newcomers, but not enough to buy out the available housing at an ever increasing price.
If the price trend ever reverses and holds that way long enough to seem like a new normal, I suspect the price will suddenly correct downwards. Everyone holding on to real estate as an investment will have a great reason to sell once it becomes a depreciating asset. If it goes on long enough, people will be underwater on housing and start walking away.
The price trend is already somewhat flattened, which reduces FOMO. Why buy now when AI is uncertain and the price seems pretty flat?
If you look at most stock markets over a very long timeline, on average it goes up because the economy is growing. So a very broad portfolio of stocks or ETFs.
Gold is only for very rich people if you want to have something in the case the whole economy goes to the bin.
Bullets if you are paranoid.
I've always used value-tilted indexes, and am hoping that they will suffer less when the bubble pops. With that and a healthy dose of fixed income (which I chose years ago based on an assumption that the equity portion of the portfolio could drop 50% in a downturn at any time) I'm trying to stick to the plan and not try to time the market. Even though it very much feels like the bubble is near its peak (if not just past it!) I do still believe on some level that market timing is a fool's game, so I'm trying to stay convinced that the steps I've already taken are all one can rationally do.
What sort of fixed income that doesn't require much research? A broad bond fund?
What are the implications of bond prices in this dubious interest rate environment? It seems no one knows what the Fed should or wants to do, including the Fed. And if the economy is on shaky ground, won't that be bad for bonds if companies can default?
At least historically, the research I've seen is that one is better off keeping risk in the equity side of a portfolio, not trying to eek out gains on the fixed income side. So that would suggest sticking with intermediate duration, government bond (funds).
You're not expecting it to earn much, but it should hold its value over the long term. This will reduce the expected return of the portfolio, but the goal is to get volatility to a level you can stomach, allowing you to ride out fluctuations on the equity side. Because even though we can all look at the current situation and say the stock market appears overvalued, we can't know how much higher it will go, when we've hit the top, or once it starts declining, when we've hit the bottom. Even experts do no better than luck would dictate at that game.
I would stay away from US fixed income due to low spreads, higher than usual inflation and a devaluing currency in forex.
I'd say ex-US international value stocks, especially EU, are a better hedge.
Agreed on globally diversified value stocks/funds. Personally I still like to have a fixed income cushion as well, though there are certainly arguments both ways on that. (And on whether to globally diversify the bonds you do hold.)
This sort of reactionary post is a tiring as the motivating situation. Here's a big difference: aside from all the circular investments the companies at the root of AI have huge earnings and did so before the boom as well.It's convenient to say "Look at all these declines in the past month! The end is nigh!" - maybe expand your chart to 12 months or even 5 years. You can argue against Nvidia but if you do they've made you look foolish 3 pivots in a row. Are companies very expensive right now? Absolutely. Are there a lot of frothy valuations and looming failures? Probably - I think so. Is this just like the Internet bubble? Beyond the generic basics, no.
Most of them have big revenues; not earnings.
that's not true; check the (edit: historical) PE ratios for the big names referenced in this post.
Ah. Yep. They mention NVDA, MSFT, GOOG, etc. I was thinking of the startup world and OpenAI, Grok, etc. The giant cash machines of FAMOG will probably come out well positioned when the dust settles.
I know this is semantics pedantry, but there has never been an „Internet bubble“, only an „Internet-related stock market bubble“.
It’s not as if there were ten million people using and/or building on the Internet, and then this bubble popped and for some years there were only ten thousand people on the Internet.
And I think the same is true for „AI usage/adoption“.
Idk, we seem to be the at the cusp of autonomous driving. Transportation is like ~8% of world's GDP. Payroll is, what, 30% of that? It seems like we can already have the return on all AI investment by just conquering this one application.
Fundamentally they seem different. The web looked like it had the potential to make lots of money but no one knew exactly how.
AI literally does people's jobs for them. There's not much imagination required.
But currently, nobody's actually making money on AI.
It's also not doing peoples' jobs for them, for the most part. AI's supporters do very loudly proclaim this, though.
What would it take to make money? Double or triple the pricing. Most of these companies messed on pricing initially. ChatGPT Plus/ Claude Plus (or whatever it is called) are $20/month. These should be $80 to $100/month products. Probably even more, $200.
But then, how do you get the users and growth figures that justify the current boom in infrastructure build-up? A high equilibrium might be profitable to a few companies and useful to a few rich customers, but it’s far from justifying current valuations.
Which jobs is it doing, exactly?
From what I can tell at this point it's a solution looking for a problem. Incredibly impressive, not so useful
Customer service.
Only for the most basic of requests. I have interacted with a fair share of AI front loaded customer service chat portals and they are often misleading, sending outright incorrect info (telling us that the dev team would work on it even when they weren't going to) and I almost always just want to talk to an agent. Yes, it's a good first layer to prevent people who haven't even bothered to read any FAQ or informational pages, but it's not doing real customer service work.
I wonder if we need a new term rather than bubble for these types of short-term over-invested sectors.
The Tulip mania (if it existed) was a bubble. It popped, it's never coming back. BeanieBabies was a bubble for the same reason. NFT art remains to be seen, but I think it was likely a bubble.
The internet was over-invested and decreased significantly when looking on a timeline of 5-7 years.
But outside of that, if you were to take the valuation of internet companies, it is greater than during the period we call the bubble.
We'll see the same with AI. There will most likely be a drop in valuations when looking at a medium term timescale, but long-term, I expect AI companies will be worth far more than they are today.
When the markets drop on a monthly scale, but then rebound, we don't call that a bubble, so why do we call this sub-decade decline a bubble?
Do you think we should have another term for this?
Same with the housing bubble, yes, it popped and lots of people got hurt, but those who were able to hang-on, I think, ended up ok, and on a moderately decent timeline.
I am very grateful how the title of the actual article linked saved 40 minutes reading the whole thing.
One difference is most of the companies listed are old, long standing, well-performing businesses. Pets.com had potential, Apple, Amazon, and Google had large amounts of revenue even 3 years ago.
The bubble may deflate but every company mentioned will still be standing, whereas in 1999 many of them were basically Ponzi schemes relying on further investor dollars to subsidize losses. All this AI spending will hurt some investors if the bubble pops but just make for a few bad quarters for the big tech cos.
> One difference is most of the companies listed are old, long standing, well-performing businesses. Pets.com had potential, Apple, Amazon, and Google had large amounts of revenue even 3 years ago.
Plenty of old companies spiked in 2000. Companies like Microsoft, Intel, or Cisco. Shovel sellers with a history of decent profits. I mean, the NASDAQ crashed, an it is not all made of start ups. You sound in denial, but there are more similarities than you seem to realise.
Hmm. The comparison makes sense in some ways, but the thing is - as much as I dislike AI, I think AI will stay, whereas the internet bubble seemed to subside without that much left from it, more or less. While I hate most of AI, it does have some use cases - the current hype will eventually subside or collapse, but I think the core use cases will most likely remain.
"All but Alphabet have seen big share declines in the past month. Microsoft is down 12 percent, Amazon is down 14 percent, Meta is down 22 percent, Oracle is down 24 percent"
That fluctuates anyway and profits are made by some - nothing new here.
I think the world needs to detach from the stock markets though. That may not seem realistic right now, but if you look at the current US president and the ties to superrich, we really have a huge problem now. A few parasitize on the masses. That can not be sustained. It is not ethical.
"It will spark a generation of innovations that we can’t yet even imagine."
I am not so sure. So far I successfully avoided AI, including becoming dependent on AI - I am not. So that is good.
I can not really see what "innovation" would make me want to embrace AI. Perhaps I can be forced into it, but right now I am happy avoiding it.
"Because we humans are pretty good at predicting the impact of technology revolutions beyond seven to ten years."
No, we really are not.
"Not only does the AI bubble in 2025 feel like the internet bubble in 1999"
It is still not the same.
I feel the article is falling apart there. It tries too much to compare to the 1999, but it is not the same.
The fact that I'm getting rate-limited every day even though my company has enterprise-level subscriptions to gemini, chatgpt, etc. tells me this bubble is far from popping. I predict within a year 80%+ of devs will be using LLMs to write most of their code for them.
No, it doesn’t. Go and actually read the crazy story about startups like Global Crossing.
Crazy amount of funding, little to no revenue, no competitive moat, no demand.
Compare that to today, and you see only the crazy amount of funding part is the same.
How are the revenues these days? Let’s not count Nvidia since they’re the ones selling the shovels. How are the moats?
Revenues are up massively, across the board for the big companies but interestingly enough also for startups like ChatGPT, Loveable, Cursor etc. Which is again totally different than last time where mostly startups were driving the insane valuations.
For the shovels part: Actually Global Crossing tried to sell shovels. But failed since there was no demand and no moat. Now compare that to NVIDIA.
> Crazy amount of funding, little to no revenue, no competitive moat, no demand.
Doesn't this also describe Thinking Machines Lab?
From what I remember, in past bubbles that burst, everyone thought stocks will go up forever.
So, if people are wondering out loud (with widespread traction) if there's a bubble, there's probably not one. It may be self-fulfilling. The awareness of a potential bubble influences us to be more cautious.
No, there's never been a time where everyone was saying "stocks will go up forever" then. Even in the late 90's, as momentum was accumulating towards what would eventually burst as the dot-com bubble, a Very Central Figure in the whole thing was warning about "irrational exuberance" in the market but didn't have safe tools do anything about it.
For the last most explosive bubbles -- "dot-com" (~2000) and "housing" (~2008) -- you can go back and find all sorts of warnings and critiques and fretting and skepticism in newspapers, academic and industry journals, blogs, television, personal ephemera, etc. And not too far from almost all the examples you find, you'll also find somebody blowing off the skepticism.
The tricky part is that you can more or less find similar dialog in all those sources even when there didn't turn out to be a looming collapse. There's just always people worrying about collapse or hard correction when the markets are running hot and always people blowing them off, and sometimes worriers prove right. Eventually. And sometimes they don't, and the underlying economy either catches up with the market or government policy successfully props it up for long enough that some other concern dominates or some other industry can absorb the over-allocated investment.
Basically, it turns out your heuristic for spotting a bubble faces too much noise and isn't actually all that informative at all.
What’s really scary is the money that’s being invested vs the .COM bubble. In the end 90s 100 million was a huge investment. Now it seems every AI company immediately a billion dollar and more valuation. There was a time when this was called “unicorn”.
Ok, so if that prediction is true what actions did you take?
Identify the therefore part of the prediction and enumerate the three highest priority steps.
Have you determined that the stock market will crash and bought positions accordingly? Have you sold all your nvidia stock? What are the implications in the broader economy and what steps have you taken?
I've thought about and asked this question. One potential idea: AI was sold as the "death of SaaS" and hit their share prices accordingly. If you think this is not true (at least in the near to mid-term) you could buy stock at (what you perceive as) a discount. I might look at a company like Constellation (a big vertically integrated portfolio of mature, decent revenue-generating SaaS) as a proxy for a fund focused on this strategy.
This sort of approach is pretty aggressive and definitely contrarian to the general market, but some alternatives to mitigate the coming pain (if you believe it's near) would be shifting into a more liquid position to take advantage of tightening liquidity, i.e. big companies may see their shares tank but will likely still be able to service their debt. In the meantime you'll miss out on a market that still seems pretty strong.
I’ve got 15-20 years to retirement so I just watch the market but don’t do anything other than keep buying index funds and rebalancing periodically.
Do you have to? I'll be 45 in a few days, but even at that age, I'm still not expecting to need anything I have invested for at least 20 years, the ratio of the value of the broad overall market then to now is still likely to be a larger multiple than for any other asset class I can expose myself to. If there's really a bubble, maybe that won't be true in 5 years, but I've yet to see a downturn that didn't recover in 20. Even if your predictions are directionally correct eventually, if you're not clairvoyant, trying to time the market is still not a great idea.
I grew up in the 90's and remember being a computer nerd BEFORE the .com bubble, and starting my career precisely after it burst. Let me tell you one difference I personally am experiencing that differentiates the two. Note, this is a pro-'we're in a bubble' stance:
In the late 90's and early 2000's, businesses were SALIVATING to get online, individuals were finding new ways to benefit and profit from it, and massive investment was being made to facilitate what was inevitable: an interconnected network of everything. Do you remember faxing things ? Paper mail? People half in the know were pushing the Boomers and older Gen-X types to get on with it and modernize.
Now? Not only are people not CLAMORING for more AI, it's that The Powers that Be are forcing it down our throats. At work, we have mandatory AI training, we have people getting promoted for promoting extremely dubious AI solutions both internally and on our product. I log into ANY web site now, whether I'm shopping for a vacuum cleaner or logging into a vendor website, and I get AI shoved in my face, from from "assistant" I have to interact with before typing "agent" to new features I don't care about.
Is there some truth, some merit? Absolutely. But my red flag I'm trying to raise is this: never did it feel FORCED in the 90's, there was a salivation from individuals to get more online, and a reluctance from institutions like elementary and high schools to get with the program.
Now? Corporations large and small are shoving it down our throats. Why? Well, to justify the crazy spending.
I'm no prophet and the world (and economy) are fundamentally unpredictable. But I'll say this. I'm putting my money where my mouth is, and I've put in an order to buy a 5 digit dollar amount of puts on a big 'AI' type ETF, that'll expire in the Spring. It's already wobbling and if you can't beat them, profit off of them when they stumble.
There's absolutely something wrong in the current moment, even if AI is somehow the future. For one thing, the U.S. economy would probably be in a recession right now if it weren't for this insane AI spending. It's wobbled with the recent Nvidia earnings release, and I think it is going to dip (not crash, but start dipping) soon.
The author wrote:
"None of these companies has proven yet that AI is a good enough business to justify all this spending. But the first four are now each spending $70 billion to $100 billion a year to fund data centers and other capital intensive AI expenses. Oracle is spending roughly $20 billion a year. "
In my opinion it's a theoretical arms race 'just because my competitor might win', and not based on anything certain.
Work keeps forcing it on us. I’m hoping the bubble bursts just so I don’t have to hear about it at work anymore and can actually get some work done.
Maybe guard your investments, but the big question back then was "is the internet really that good, will it stick around" and the reality is it won argument hands down. The same thing will prove true about AI.
writing a “bubble” post is new monad tutorial - gotta write one to get some street cred
This post argues the burst is not only inevitable it's right around the corner - never mind their principal argument being "we're terrible at predicting technology revolutions in the near term".
This seems like a variation on the President's (and my CTO's) process of 1. go on record both supporting and denouncing all positions, but commit to none, 2. wait... 3. spin your previous wisdoms based on the actual outcome. A super-inconsistent & confusing track record is actually a major asset when executing this strategy!
There’s a bubble bubble and it will pop in 26.
This is another doomer article about AI. The author openly admits to using AI for the article and the irony isn't lost on me. How long will we be hearing about the AI bubble?
People continued to use the internet during and after the very real ".com" bubble burst.
LLMs can be useful tools in the right situations and the valuations for companies involved with them can be wildly and irrationally inflated at the same time.
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Yeah except I pay hard cash for multiple AI services and use them all day long.