The market can remain irrational longer than you can remain solvent.

The better strategy, IMO, is to keep your money safe and wait for the bubble to burst, then pile in for the recovery. Where to keep money safe is a good question, though. Just holding cash might be risky if inflation comes back, and the current administration seems anxious to pump up inflation.

There's a pair of seriously bad assumptions underlying your analysis:

(1) What AI does right now is all it's going to do. Given the way capabilites have grown recently, this is a ludicrous assumption. Keep in mind that ChatGPT was launched November 30, 2022... it's less than three years old! And the reasoning models are barely a year old. There is no reason whatsoever to assume that this technology has peaked.

(2) We already know how to take full advantage of AI. Every time a new technology comes along it takes decades for us to fully understand how to effectively use it, and to deploy it everywhere it is useful. I'd say we still haven't fully incorporated the Internet into our society, and we've been working on that for over 30 years now. We're barely beginning to understand how to use what AI we've already got, and it'll take years, if not decades, for the full economic benefits to be achieved -- and in the meantime AI is probably going to continue improving.

The AI thing absolutely is a bubble, but it's not "sand-castle based or vapor based". It's very real. The problem is that the massive wave of investment is going to have to start generating returns within the next 3-4 years or else the financial deals that underpin it all will collapse. That doesn't mean the technology will disappear, it just means that the current investors will lose their shirts, other people will scoop up their assets at firesale prices, and those people will figure out how to deploy it effectively, and create trillions in economic value.

Well, assuming AI doesn't just kill us all.

Is utility in your eyes alone, or the eyes of all beholders?

I think he measn utility in the sense of economics, as in value for the companies. So not in the eyes of all beholders, but in the eyes of the shareholders. The major current problem for AI implementations is that while there are cases where it is useful (sometimes even highly so), it's not profitable because the cost to develop, train and run the models vastly exceeds the amount of money the providers are getting from it. Image/video generation is a good example of this, but the same applies to all current AI-implementations, including code. Ed Zitron has recently written about this breaking down some of the num,bers when it comes to costs and burn rates for the companies for example here:

As I've written again and again, the costs of running generative AI do not make sense. Every single company offering any kind of generative AI service — outside of those offering training data and services like Turing and Surge — is, from every report I can find, losing money, and doing so in a way that heavily suggests that there's no way to improve their margins.

In fact, let me explain an example of how ridiculous everything has got, using points I'll be repeating behind the premium break.

Anysphere is a company that sells a subscription to their AI coding app Cursor, and said app predominantly uses compute from Anthropic via their models Claude Sonnet 4.1 and Opus 4.1. Per Tom Dotan at Newcomer, Cursor sends 100% of their revenue to Anthropic, who then takes that money and puts it into building out Claude Code, a competitor to Cursor. Cursor is Anthropic's largest customer. Cursor is deeply unprofitable, and was that way even before Anthropic chose to add "Service Tiers," jacking up the prices for enterprise apps like Cursor.

My gut instinct is that this is an industry-wide problem. Perplexity spent 164% of its revenue in 2024 between AWS, Anthropic and OpenAI. And one abstraction higher (as I'll get into), OpenAI spent 50% of its revenue on inference compute costs alone, and 75% of its revenue on training compute too (and ended up spending $9 billion to lose $5 billion). Yes, those numbers add up to more than 100%, that's my god damn point.

Large Language Models are too expensive, to the point that anybody funding an "AI startup" is effectively sending that money to Anthropic or OpenAI, who then immediately send that money to Amazon, Google or Microsoft, who are yet to show that they make any profit on selling it. - -

As discussed previously, OpenAI lost $5 billion and Anthropic $5.3 billion in 2024, with OpenAI expecting to lose upwards of $8 billion and Anthropic — somehow — only losing $3 billion in 2025. I have severe doubts that these numbers are realistic, with OpenAI burning at least $3 billion in cash on salaries this year alone, and Anthropic somehow burning two billion dollars less on revenue that has, if you believe its leaks, increased 500% since the beginning of the year. Though I can't say for sure, I expect OpenAI to burn at least $15 billion in compute costs this year alone, and wouldn't be surprised if its burn was $20 billion or more.

At this point, it's becoming obvious that it is not profitable to provide model inference, despite Sam Altman recently saying that OpenAI was. He no doubt is trying to play silly buggers with the concept of gross profit margins — suggesting that inference is "profitable" as long as you don't include training, staff, R&D, sales and marketing, and any other indirect costs.

I will also add that OpenAI pays a discounted rate on its compute.

In any case, we don't even have one — literally one — profitable model developer, one company that was providing these services that wasn't posting a multi-million or billion-dollar loss.

(sources for the numbers and stats can be found hyperlinked in the post itself)

That's the core problem with the current trend. Not that AI can't be useful, but that the current business models the major players are using are fundamentally broken and no-one seems to have realistic path to profitability when factoring in how fast their costs are growing. OpenAI has currently has around 1,4 trillion (not a typo, trillions, not billions) of datacenter commitments set up for the upcoming next 8 years, and their yearly revenue is less than 2 % of that yearly (~20 billion), if we believe Altman's own figures which are probably overly optimistic, and they're nowhere close to getting enough external funding to cover those commitments.

Sure, but nothing tangible would be lost - just some notional "Market Cap" reduction which is only really meaningful to Wall Street types, although that would also impact people's pension's etc.

Where nVidia would be exposed would be is companies have bought significant quantities of their chips, but go bust when the bubble pops without settling their invoices from nVidia first. Best case that ties up nVidia's cash while the bankruptcy process happens and they get a significant slice of the outstanding financial pie. Worst case the companies in question all implode with significant debts to multiple parties, their assets (mostly nVidia's chips) get sold off to pay off those debts, but nVidia still gets next to nothing once the assets are divied up. Combined with a heavily reduced market cap, that leaves nVidia with a significant reduction in cash-in-hand and a lack of value with which to help secure loans and investment, which in any case would need to come from a financial market reeling from a multi-trillion dollar bubble pop. The reality is more likely to be somewhere in the middle, but nVidia isn't going to sail through this completely unscathed either.

It's not a product in the traditional sense. It's a tool that the upper elite are hoping to use to replace you so that they are no longer dependent on your labor or your consumer dollars.

It always strikes me odd that people ask the question if there are no consumers who will buy their products?

You think somebody with a billion dollars hasn't asked that question?

What if they come up with a different answer than the old one we're told Henry Ford did. (Fun fact Ford paid better not because he wanted consumers but because the work was extremely tough and he had a hard time getting employees)

What if the solution they come up with is to automate everything and anything so that they can limit their dependency to a handful of engineers and a handful of bugs that keep those engineers in line?

What if there's no place for you in tomorrow?

I don't think most people can face that kind of existential dread. It borders on cosmic horror

Well I can't argue with that. I was there too and saw a good deal of it.

I was looking at this at a macro level. At that level I think the net number of people will be around the same but you are right we will rotate out competent people who understand this stuff for a smaller handful of expert fixers, and ultimately a number if incompetents who will inherit systems they don't understand and can't maintain, and more inflexible policy band-aides.

This radio ad from GTA 5 sums it up perfectly:

The future is now!
The future is in the cloud!
Cloud computing!

GIRL: what's cloud computing?

Imagine a computer you share with everyone
imagine your private data spread around the world
being shared equally with everyone
it's the cloud

GIRL: I'm in the cloud!

It's utopia
nothing can possibly go wrong
imagine instead of your own computer
it's a giant one we all share together
your data is safe
it's in the cloud!

GIRL: Everyone is in the cloud!

Live life lsurrounded by the mists of time
with Cumulonimbus Computing!
The cloud is hard to describe
you can't see when you're in it
and when you get close, it disappears!

GIRL: Where did the cloud go?

Now when your data is damaged
you don't need to fire the IT department
you can fire the Internet!

GIRL: you're fired Internet!

We've taken the metaphor to extremes
because when you're in the cloud
the lightning won't strike
it's Cumulonimbus Computing!

GIRL: I'm really in the cloud!

You're in the clouds now!

It's like the railroads. Enormous fortunes were made and then lost as the railroad boom played out and then the bubble burst. When people were driving hard to push rails across the continental US, the business case for doing so wasn't there. Yes, linking the east and west coasts had some value, but not much, since there really wasn't that much on the west coast. And there was a whole lot of nothing in between. But it was obvious to everyone that when the railroads connected the coasts and opened access to the interior, there would be enormous value. What exactly, no one knew, in the sense that no one knew where all of the railroad-enabled interior cities would be constructed or what kinds of things they would do. But it was clear that there was value in access to all of that land and that someone would do something with it.

On the other hand, realizing that value didn't happen right away. It took decades for all of the land granted to the railroads to become really valuable, because it wasn't valuable until people came and built farms, dug mines, established ranches and generally built lives and industry. The return on that massive investment was there... but it came far too late for most of the people that invested it. Lots of bankruptcies resulted, and others swooped in and snapped up the resources for bargain-basement prices, and they're the ones who became incredibly wealthy (well, they and the ones who supplied the steel, e.g. Carnegie).

It's been the same with pretty much every technology-driven bubble. Remember telecom/dot-com bubble in the 90s, with all of the "dark fiber" that was laid everywhere? Bankruptcies and consolidations resulted, and all of that fiber got lit up and used. That bubble built the Internet, and huge fortunes were made as a result -- the top half-dozen most valuable companies on the planet are all a direct result.

OpenAI and Anthropic are betting that this time will be different, that the payoff will come fast enough to pay back the investment. Google is betting this somewhat, too, but Google has scale, diversity and resources to weather the bust -- and might be well-positioned to snap up the depreciated investments made by others. If history is any guide, OpenAI and Anthropic are wrong. But, then again, AI is fundamentally different from every other technology we've created.

Like most racists, your critical thinking skills (assuming you have them) are shoved aside by overwhelming confirmation bias. Otherwise, you'd have noticed that the US was also a lot whiter before the Pendleton Act, and that the post-Pendleton boom continued and even accelerated after the Civil Rights acts and a large influx of non-white immigrants. We became the world's sole superpower and continued increasing our economic, political and cultural dominance as a diverse, melting-pot society. The rise of China as an economic power (oh, wait... how is that, they're not white, how can they possibly do well?) has flummoxed us somewhat, but even with Trump beginning to throw away the apolitical civil service, our international partnerships and, well, the rule of law as a whole, we're still on top. But the decline is beginning, and it's not the brown-skinned immigrants who are taking us down, it's the white nationalist administration.

If you could discard your biases and examine the situation objectively and critically, you would notice that the timeline you're referring to completely and utterly refutes the conclusion that you're trying to draw.

Sounds like just about every '80s action TV series. Get captured, guards leave, lock the door, turn around and have Murdock bite through the ropes until B.A. Baracus can just break free. Then free the other hostages, use tools and scrap materials that the kidnappers conveniently left behind, build some kind of armored vehicle with flame throwers, propane tanks for rockets, and use that to defeat the bad guys. Maybe if you get kidnapped for your crypto, if your hot 20-something daughter can find them, maybe you could hire the A-Team...

There is a way to play that too. Government; especially one as divided as our current one; can't do anything fast.

There will almost certainly be in the event a major market crash the idea ballots floated.

Someone like Massie or Rand Paul will threaten to be votes to derail it.

- Sell this news (in this case exercise those PUTs) because we all know after Washington does its things for a couple weeks (maybe longer) something will get done.

There is a pretty simple script here. People say you can't time the market, that is true. However if you get the initial hypothesis right (there is going to be an AI driven crash in this case) you absolutely can time it; if you are not trying to call the absolute tops and bottoms. If you buy those puts now.. sure maybe we go up until q4 earnings start get turned in, so what you shave a couple percent. Maybe on the other end the bailouts take a little longer to get done and its four weeks not two like the current shutdown. Again you'll still do just fine.

The only things you have to be right about is proposition #0 - there is a major crash coming in the somewhat immediate future.

- For the record again, I say "Aint happening"
I think we are going to see a 'correction' we go down 10% or or less from recent highs and trade sideways for a while. Maybe that correction happens now maybe in a couple months and I am not investing in tech right now, because that will be epicenter of said correction.

It shouldnâ(TM)t really be surprising that the compulsive liar was lying.

Here is the thing, you are posting on Slashdot. Don't tell me you are not sharp enough to find a broker, and buy some long dated at the money PUTS either on the AI and AI adjacent firms or just the market over all with funds like SPY / QQQ.

You If you really had conviction about truly big enough crash for Main Street to feel it to commit 18 or 20K; you'd make enough to keep the mortgage current and food on the table for a year right there after there return of the principle.

The thing is you don't really believe in such a crash. The bigger part of you thinks this will all just blow over in couple quarters, you might not get a great Christmas bonus either for 2025 or 2026 but mostly you don't think your financial life will be all that greatly impacted. I think that bigger part of you is right. OpenAI's investors are going to lose a lot of money, probably Anthropic and anyone else not actually in the business of making the compute hardware, or using the compute hardware to make physical things like drugs, better plastic, etc. I don't think there is going to be any 2008 like crisis..

 

People building actual stuff will do just fine.

NVIDIA and anyone building the rest of the compute support chips to run the ML accelerators.

There is huge money to be made ultimately, once drug companies, like GSK, BASF, Dupont, 3M, etc use it to advance chemistry and materials.

OpenAI and its peers on the other hand is likely to crash to earth in a flaming wreck and many of the hyper-scalers that have over invested will probably have to suffer some big write downs on data centers once people realize the LLMs are not going to replace actual thinking persons, anywhere where the outcomes matter. Ditto for reading X-rays and such, it might aide actual techniations and doctors but it won't replace them. Even the self driving cars, it might move your cabby to some desk some place rather than in the car with you, it might even let him monitor 4 or 5 fares at a time; but it wont cut the numbers or the expense by 5x - you'll still have to have people to do the other things he did like clean the interior etc. All in all it might represent a 2x savings, in the end.

Long story short trouble there is a profitable business in the like OpenAI as well but nothing like the current valuations reflect.

and safe deposit boxes are not all that strong, the vault is open all day, and if someone walks into the bank waving a gun around the the staff will step aside and let them take whatever they want.

The real security of the bank is - the cops will show up in 5 to 10min and insurance will cover whatever cash disappears. That last part importantly not so for the contents of your box if that does get cleared out. Nominally bank robbers don't go for the boxes because prying them open would use to much of that 5-10 they have, to get out of there..

Ultimately its a lot of security; but I am not sure I'd want my bulk of my net worth relying on it. The FDIC/SPIC seems like a little more secure bet there.

The other thing you have to ask is does it really protect your person. If the guy with the wrench is any less than entirely convinced that you don't have a copy anywhere else, or know the information - they are still likely to beat you to death trying to get. Look at it from their prespective "I swear the only copy of that wallet information is locked up third-federal, I can't tell you anything" - "Sure buddy, let's just see if your story changes any after I take this hammer to your left hand then.."