r/investing
What are your thoughts on AI bubble, is it real or not?
Discussion on the validity of the AI bubble, questioning sustained heavy investment despite known industry limitations and hardware obsolescence risks.
- Heavy capital expenditure may not be justified if profitability does not materialize before hardware becomes obsolete.
- Persistent industry challenges and limitations suggest the current valuation might be disconnected from fundamental realities.
\- What is your opinion on the AI bubble?
\- If AI is really a bubble, why hasn't it burst already, especially after many of the industry's challenges and limitations became widely known?
\- Why does the market continue to invest so heavily in it?
\-:Do you think these massive investments will ultimately be justified?
\- For example, data centers may remain useful for many years, but what about the hardware and equipment inside them?
\- Will they generate enough profit before they need to be replaced with newer and more powerful technology?
I use AI almost every day, so I'm definitely not in the "it's all hype" camp.
But as an investor, I've learned that a great story and a great investment aren't always the same thing.
The question isn't whether AI is useful.
The question is whether the future benefits are already priced in.
In bubble times, the utility of the underlying product is so far away from what the stock is doing. Even in normal times, a great product doesn't mean the company is managing itself well.
This is the smart money - and just to build on it a little, I use AI every day and I'm astonished at how good it is. I genuinely believe some of the next industrial revolution possibilities.
But - investing now is assuming not only that the future benefits aren't priced in.... It's assuming that they aren't priced in for these companies and their strategy. Right now AI and data centers are RAM and GPUs built and optimized for deterministic computing models. what happens when language processing units Go mainstream? What does your data center upgrade path look like? What happens when the models trained for LPUs can run efficiently local? So many questions, even investing in an "AI index" of current players looks like such a big ?
- It’s a bubble
- Because FOMO, and investors will manipulate the market for as long as is necessary to get their money out before the shoe drops, which is why everyone is now in a mad dash to IPO for liquidity
- AI will be useful but never as good or useful as what has been messaged and the physical infrastructure will be dramatically scaled back which is already starting to happen
- The underlying compute hardware in datacenters will likely need to be updated every 2-3 years which is entirely unsustainable
- Probably not unless dramatic scaleback occurs
Not only ipos either. Even established players are raising capital now.
That is simply not true.
I think you can be right about the technology but wrong about the timing.
In the 90s, many of us knew the internet would change the world. But the dot-com crash happened because early internet companies had awful business models and didn't understand how to leverage the new technology. It wasn't until a decade later you got your modern Metas and Amazons.
I think AI will be very important in the future - but that doesn't mean the companies you see today and they way it's being used are.
They're literally burning through billions because of the insane power requirements. I just don't think the business model of today will ever be profitable.
AI is transformative, but whether the trillions of dollars will have a positive ROI is still to be determined. If the actual real income can rise quickly enough to justify the expenditures the bubble doesn't have to deflate entirely. However if, like the internet, AI is tranformative but not terribly profitable for the next 10 years than the bubble will crash.
totally, I remember when literally every media outlet and celebrity were talking day and night about NFTs.
hey whatever happened to those anyway
The bubble is real. The question is how hard does it deflate.
Hyperscaler spending (and thus buildout revenue) cannot increase at this rate indefinitely without revenue increasing even faster indefinitely and the pricing reflects a decade of revenue increasing at current rates. Companies are taking out debt and diluting ownership to raise money to compete on buildout capabilities. The foundational models themselves aren’t profitable at current prices and enterprise accounts are already balking at the cost.
My thesis is that the AI market goes the way enterprise accounts go. If they limit spending because they can’t find a way to leverage AI to increase their margins then we’re looking at trillions in currently priced revenue that never materializes.
A new piece of technology can be a very real and revolutionary game changer and a bubble at the same time. The two are not mutually exclusive.
What strikes me is that the technology is still very much in its infancy and has not yet been monetized to the point of being financially self-sustaining. Most of the current value comes from speculated future returns, not current profits. That says "bubble" to me.
Now, I expect that, when the bubble pops, we won't see the whole market come crashing down. Rather, it will be like the Dotcom bubble where some stocks came crashing down but others emerged as clear winners.
As far as why that hasn't happened yet, who knows. I suspect it's because no one has figured out a model for stable profits yet, so everyone is still flailing around and hoping they're the ones who crack the code. When that happens, there'll be a rush to fill the available niches and whoever's late will crash.
Effectively, it's a massive game of musical chairs, but the music is still playing, so even if someone trips or a chair gets removed, everyone is still circling and waiting. When the music stops, someones taking home a prize while everyone else is lying on the floor.
i definitely see your point but there's a huge terrifying factor being the major companies investing in the AI market are also the major players in world running technologies. Nvidia, Samsung, AMD, and many others are majority leaders of chip processing and memory manufacturing that is required from everything as big as data centers and as little as a control system on a vending machine. IF, and dear god let it stay an if, the AI market crashes and the companies get hit hard enough, there would be a requirement for a bail out probably bigger than the 2008 crash. the proprietary technologies they hold that are required to even make the chipsets mean that they CANNOT be allowed to crash unless a suitable replacement is already available which is not currently the case. reality is, it would crash the world economy without them. but that being said the cost of the bailout will still massively stunt the economy before it stabilizes, and the cost would come at the expense of the regular people and other companies. to me it just makes it scary to invest in anything else but safe commodities like gold until they find a profit strategy that works to offset the costs and bring in real profits and not speculated profits
Just because you use it and find value in it doesn't mean the Cap Ex is justified. It's about ROI and it isn't there yet and the credit lines are running out.
People were hyped for the original iPhone here in America, the problem was the high price and the fact it was exclusive to AT&T, one of 4 main cellular networks so effectively less than 25% of the population was able to get one unless they switched carriers.
Yes. Humans can have original thoughts and ideas that stem from existing information.
Interesting that you deflected the question and didn't answer it at all.
LLMs are just regurgitating information from the web. They don't have new ideas of conclusions and are even providing wrong answers based on Internet popularity. The facade of the interface is confusing you and many like you into thinking LLMs are something other than what they are.
I didn't deflect, you just didn't read thoughtfully, and don't know how LLMs work. LLMs generate based on guessing the next word, based on their training data. That isn't regurgitation, that's generation - they can generate things they've never seen before. Generating something new, then checking it against a non-generated input, is a path to intelligence.
You stop being competitive when new hardware comes out that is more powerful and efficient. 2-3 years is when you see a meaningful jump in performance for gpus for example.