I'm not convinced the AI bubble exists

“Its a bubble”

“Its a bubble”

“Its a bubble”

“Its a bubble”

“Maybe its not a bubble”

*bubble pops*

every time.

> There's a weird contradiction you see from AI skeptics where they're afraid of how AI will change the world, but also seem convinced that AI will only ever produce slop that nobody would ever pay money for.

One thing to keep in mind when you're "debating" things online is you're actually debating with a tag team of people, with a whole spectrum of views. And at any point people with stronger arguments (starting from different precepts) will reply while people with weaker arguments will fall silent.

That's why "the average hacker news poster" is simultaneously rich and poor, powerful and powerless.

Deluded

title is an attempt to switch from wild singularity tone, hype, to a mature reasonable tone, hype.

> More than anything, I think the supposed AI bubble has become such a large talking point because it represents the hope that things can go back to how they used to be. People are afraid of what's going to happen with AI, and rightfully so.

> So, people wishcast. They tell themselves that this is all a giant bubble, and one day soon, everything will crash down and immediately go back to how it used to be.

+1 to this. I think this is why Ed Zitron gets so many readers - people want someone to tell them things will go back to “normal” someday.

I think a data center bubble exists and may have just been forcibly popped. But that's never really been an AI bubble. It's a real estate bubble wearing a shirt that says AI.

Meta’s margins are apparently getting crushed as a result of AI investments.

The lack of a clearly profitable operating model and huge (trillions) in commitments for buildout is what concerns people.

I am not convinced by this person who is not convinced there is a bubble. The bubble, by the way, specifically refers to the valuations. Is Anthropic worth 1.2 trillion when it’s not clear they will have positive cash flow in the foreseeable future?

I stopped reading after the 10th sentence or so demonstrating AI-pilled psychosis and hand-waving. That it is obviously this or obviously that and obviously some other thing.

I look forward to these types of posts fading in frequency much more so than AI use itself.

A fair critique. Even I, someone who started as a (righteous) angry doomer over it, have come around for the most part.

My viewpoint also shifted around the shape of the bubble. The technology isn't going away, obviously, but the valuations of these companies like OpenAI and Anthropic feels divorced from reality. Inference continues to go down, most folks don't need frontier models for common tasks (including coding), and local models provide a competitive edge in several domains the frontier labs cannot (namely value and privacy). Combined with demand still largely subsidized and the companies being deeply unprofitable, and I just don't see the investments in Anthropic or OpenAI or the sort actually paying off. That is the bubble I'm concerned about, not the tech itself.

...now when the debts get written off and all this compute is just sitting around idle, available for bottom-dollar prices to try and eke out any sort of ROI for whichever creditor(s) inherit the assets? That's going to be pretty cool times.

>In other words, once you ignore the cost of building infrastructure, AI is very profitable.

Its not clear that the infrastructure will ever be paid back. Its also not clear that once models are trained and distilled that the infrastructure will be useful. Ignoring 1.9 trillion dollars of debt is probably not the greatest financial analysis.

>However, there's no reason for why this level of spending has to be maintained in the first place.

Exactly. So Anthropic and OpenAI might be holding the bags for latecomers who distill their models and get ahead. Sort of the Commodore64 and Atari of the AI space.

>Once all the data centres are built, AI spending is going to plummet.

Well data centers need maintenance, and GPUs and similar do have a very short lifespan. But even if spending plummets repayments on existing debt needs to be accounted for.

>In a pinch, AI companies can also cut costs by no longer allowing people to use their products for free and temporarily suspending expensive AI research.

Research keeps them in the headlines, see above about the latecomers.

>For context, Alphabet (parent company of Google and Youtube) reported earning almost 162 billion dollars of revenue just in 2019. Adjusted for inflation, that's an even more impressive 213 billion dollars.

Yep, so all Open AI or Anthropic need to do is get acquired by a much more profitable business to pay back their debt.

>at some point, the rate of increase has to level off, but that doesn't have to happen anytime soon.

The rate of increase of revenue in the AI sector also doesnt need to be apportioned to OpenAI or Anthropic. If it wasnt for their generous loss leading subscriptions or their rnd, theres not much there to hold on to people.

>it's hard for me to see AI consumption not being 10x what it is now.

Right AI consumption will increase very likely. But will it increase at the cost of an already subsidised subscription, or increase the use of cheap Deepseek 4.1 tokens.

>For starters, the average person isn't going to use a locally hosted model, ever.

Isnt this expressly where Apple Intelligence is heading? Building small low cost models that run on Apple hardware? If I was nVidia I would have both plans being run down at the same time, looking towards selling GPUs to hyperscalers on one side, and working with OEMs to deploy AI coprocessors in laptops on the other side.

>For example, I pretty much only use ChatGPT, not because I have any really reason to, but because it was the first LLM that I ever used.

N = 1. OpenAI is already what halfway to their trust thermocline anyway?

>A potential way for a bubble to pop is for the companies involved to run out of capital to spend while they grow, causing them to fail.

Isnt Anthropic already down to BB+?

> NVIDIA are all AI companies that have seen their market capitalization explode over the past few years

NVIDIA is a hardware company that can has so much demand on their products they will likely survive 3 AI market collapses.

>Alphabet, Meta, and NVIDIA

Alphabet, Meta and NVidia all have other sources of revenue. They are companies building AI, not AI companies.

>When the dot-com bubble happened, it was largely driven by companies that couldn't turn a profit or had P/E ratios in the hundreds.

Anthropic and OpenAI dont have "E" (as in earnings)

Anthropics Debt to Equity is 363%.

>A potential way that this could be a bubble is if AI proves to be a fad.

A potential way this could be a bubble is if the makers of consumer devices point customers at cheaper or local models as part of their onboarding experience. OpenAI and Anthropic get thoroughly zuckerberged by the people holding the primary relationship with the customer base.

Or perhaps, the funding to the top 1% of token purchasers also turns out to be loans, and that dries up too.

https://www.pymnts.com/news/artificial-intelligence/2026/ope...

>As one final note, I don't think the rhetoric about the AI bubble is really about finances.

The people bringing it up every 10 seconds are doing it to spread FUD about AI. That doesnt really change the financial picture.

A bubble can't pop as long as most people, or at least most dollars, still think it's a bubble. Bubble pops can only take the market by surprise.

> The AI bubble is a speculative concept that the AI industry is extremely over-valued. If true, the value of most companies involved in AI (several of whom are worth well over a trillion dollars) will collapse, devastating the entire economy. If you check any online discussion about the financial situation of the AI industry, it's essentially taken for granted that the bubble exists and is going to pop any day now. I don't think that this is a reasonable assumption, though.

Matteo's analysis is very flawed though. For instance, he projects that the outcome is "devastating the entire economy". Why would that have to be the case though?

The AI bubble can collapse partially. There are tons of examples of how this has happened in the past. Not everything is dot-com 2.0. What we see right now is a "consolidation" bordering on partial collapse of some of the companies' projected revenues. It makes sense to assume that there is not a complete collapse, and some companies will end up dominating more than others.

> If you check any online discussion about the financial situation of the AI industry, it's essentially taken for granted that the bubble exists and is going to pop any day now. I don't think that this is a reasonable assumption, though.

To say that it is (essentially) taken for granted isn’t a great start to a rebuke. You have to engage with the arguments that they have, and they have presented arguments. Just see born-again clanker Dan Luu respond to Zitron’s claims.[1]

I don’t see any engagement with skeptic’s arguments in this piece.

[1] https://danluu.com/zitron/

> In other words, there's massive unmet demand for AI companies to profit from.

Of course. There are hundreds of millions of white collar workers that are jealuously hoarding their unrightful wages.

> There's a weird contradiction you see from AI skeptics where they're afraid of how AI will change the world, but also seem convinced that AI will only ever produce slop that nobody would ever pay money for. You can't really have it both ways here.

But you can. A bubble of this magnitude will negatively impact the world, not just AI investor cretins. You can take the extreme position that AI is useless and still be worried about the fallout.

> It's completely valid to be afraid of AI taking your job, but money is going to change hands when that happens.

The conjunction here implies a contrast which I fail to see.

> As one final note, I don't think the rhetoric about the AI bubble is really about finances. Conversation about the AI bubble is too widespread for it to be a contrarian position, and too gleeful to be driven by investors' fear. More than anything, I think the supposed AI bubble has become such a large talking point because it represents the hope that things can go back to how they used to be. People are afraid of what's going to happen with AI, [...]

The always-amazing observation that your intellectual opponents have motivated reasoning. Likewise, most AI positives have motivated reasoning, like that they can enrich themselves or that they are getting so much code out of their current subscription prices.

When I write about AI it’s clear when I argue against AI itself and when I am whining about my boo-boo thoughts about losing all of my economic prospects.

> I’ve applied to seek the Liberal Party of Canada nomination

That tracks.

I think the last paragraph puts it pretty well

>>> As one final note, I don't think the rhetoric about the AI bubble is really about finances. Conversation about the AI bubble is too widespread for it to be a contrarian position, and too gleeful to be driven by investors' fear. More than anything, I think the supposed AI bubble has become such a large talking point because it represents the hope that things can go back to how they used to be. People are afraid of what's going to happen with AI, and rightfully so. Beyond fear for the future, AI in the present has become uncomfortably common, with AI slop everywhere online and increasingly even IRL. This has all happened so fast, it's easy to forget that ChatGPT came out a little less than 4 years ago. Our world has changed in such a scary and odd way, and while I have a pretty optimistic view of AI overall, I get why people would want it all to go away. So, people wishcast. They tell themselves that this is all a giant bubble, and one day soon, everything will crash down and immediately go back to how it used to be.

And on a personal note, this probably goes against all economic theory, but I think the larger the scale gets of money, the less "real" it becomes. The US national debt is $40.5 trillion. I personally don't think a fraction of that will ever really be paid. There are rich and poor, but once you become rich, that added richness is essentially useless, and the debt we see is a mixture of money missing from the poor person's wallet, or the money missing from a billionaire's portfolio. One of these is more sensually palpable than the other.

If your product is good enough, shows potential, and has meaning, it will get funding. I have never done a startup or gotten venture capital so it's pretentious for me to say, but I think the money just comes, through effort (and I think 100's of pitches for the new startup), and we can't always know from where. It's just there. My brain is too small to consider where that money comes from. We're not valuing money at a certain point, but just sheer utility, and so investors will be there to back you up. In decades-long terms, sometimes centuries-long.

The debt will keep building up, but so will be our infrastructural changes. Early adoptees will get rich to degrees, and investors who held a conservative view on major progress like AI (will still be rich but) will be slightly less rich. Maybe there will be unpaid debt, like the 500 billion incurring a $400 billion loss during the dot-com crash. But the technology will continue growing.

After all, money doesn't mean anything anyway (in the theoretical sense). It buys us soup, clothes, and a place to pay rent to, but it is just an agreement. And with the changes in the world economy that some of us are expecting to see after the AI revolution grows even more, I really don't know what the meaning of money will become.

Large data centers never made sense. If an additional pc with a graphics card was put into every home, we wouldn't need power grid upgrades. Our power grid is designed around human distribution i.e. homes. Large data centers cherry pick where it may be possible to quickly connect power connections up. Data centers need to secure their power connections before the utility rate hikes on everyone else generate public opposition.

If large data centers cannot secure free power connections paid for by everyone else, they cannot make any of this profitable. The whole thing was a scam from the start. This is why cloud AI companies bought up so much pc and server hardware. Artificial scarcity was the only way to slow down local llm adoption and sell the false narrative that cloud AI has value.

Plucking a graphics card out of every home and centralizing the cards to a handful of large data centers that require a trillion dollars in power grid upgrades is an idea so dumb, we should all be laughing at it. They even have to use active cooling or evaporate drinking water instead of free air cooling. The consumer doesn't benefit in any way from this. Consumers would essentially be paying more just to be datamined.

LLMs are not a bubble, large data centers are a bubble. Look at how large data centers are now the first target in any war. A graphics card in every home, doesn't give someone a concentrated target. National security makes large data centers extremely bad.

[dead]

There's also the fact that the US and China are in an AI arms race. So there's an inherent existential benefit to being ahead in AI regardless of where the financial feasibility/profitability discussion lands.

And at least currently, keeping up in that arms race means a maximal push on growth at the expense of profitability. Realistically, this will go until we hit some bottleneck.

> There's a weird contradiction you see from AI skeptics where they're afraid of how AI will change the world, but also seem convinced that AI will only ever produce slop that nobody would ever pay money for.

Fair enough. But the real problem, it seems, is that people love slop.

My family is trying to sell a house in the South of France; the real estate people are sending us 500-words emails every so often, that are so obviously AI it hurts. Well written, and content free. Nobody cares. I'm the only one having issues with it.

At work, a new team let Claude do all their work and write all their status reports. Everybody seems to love it. It's so fast! And mostly correct! And so fast to correct when it's wrong! And here too, I'm the only one having issues with it.

A Canadian author wrote a book in French that turned out to be 100% AI ("C'était ça ou mourir"). Before that was revealed, every critic loved it, in Canada, in France and everywhere else (25 translations were started). The public loved it too: it's one of the top best sellers, and success continued even after the "scandal".

We are drowning in slop and nobody cares.

most of the infrastructure will be garbage in 4 years. As before, it will become a monopoly of 1-2 big players and everyone else's datacenters will become ... crypto miners or something.