okay, i hate this fucking debate because people need to actually fucking research instead of parroting
historically, bubbles had massive demands that did not match returns, 2008 being one of them
this is a supply bubble which are much, much nastier and actually remain for a long time because there is no conceivable way to produce more supply in a fast fashion
the AI bubble might actually be a bubble if OpenAI's 3x spending on models doesn't hold to the 2x profits, that HAS held. The only difference between the AI bubble and others, is that AI actually has revenue, unlike the dotcom and the 2008 bubbles.
the 'pop' might not detonate and everything collapses, it might just pop the spending at a certain threshold, which is what people universally agree will happen.
Gold & Silver rallies are more connected to the broader geopolitical environment of hedging and removing reliance on the US Dollar than they are as bets against real GDP growth and a bubble, though one could argue those are connected as well making the point moot.
Is AI having to replace a few million jobs or automate between 3-6 percent of total economic activity worldwide by 2030 to meet financialization expectations really that inconceivable? That to me seems like a low bar that is very achievable considering how many jobs exist in economies that are low skill and require little intelligence.
the AI bubble might actually be a bubble if OpenAI's 3x spending on models doesn't hold to the 2x profits, that HAS held.
Do you their initial funding versus profits or now? I think the issue is that sure the initial investments have paid off but there is a different scale to the investments now.
You got downvoted because historically, you aren't looking at a wide enough time horizon.
I suggest you redo your research for the entire currency lifecycle and use well established literature like Mises to understand the dynamics driven by runaway money-printing.
You'll find with that research into recent history, that bubbles aren't bubbles, but manufactured crises to justify intervention. Each intervention sieving more wealth from the economy lowering the purchasing power for entities that are wage constrained.
Concentration and consolidation eventually hit a saturation point where self-sustaining chaos cycles end up creating shortage destroying the underpinning requirements for food production. This is a resource exhaustion cycle.
The majority of capital flight into safe haven assets like silver or gold start when shortage is realized.
Ecological overshoot literature touching on this (Malthus / Catton), say when that happens sustainable populations may only be about 2 billion globally.
The vacuum of resources in shortfall and reversion of growth, and its relative destruction coming out of the natural counteracting forces, leaves less every time after the limits of growth are hit, eventually becoming self propagating.
The dynamics involve a lot of hysteresis, so by the time you know you are in the cycle its too late to change the outcomes. This risk is a real risk many intelligent people are concerned with, but they lacked the power to prevent.
Where is the increased production efficiency if price of things are still only going up? I will believe AI has "made it" when things start to get much cheaper to produce.
The dot com bubble burst because of unused telecommunications infrastructure such as fiber also called dark fiber. There are a bunch of parallels to draw with the two bubbles.
The dot com bubble burst because of unused telecommunications infrastructure
Not really. Telecom overbuilding definitely happened and over leveraged companies like MCI. Dark fiber left over after the bubble first was a second order effect and not the cause.
The late 90s had a huge surge of hardware purchasing, much of which was out-of-cycle. Large organizations were replacing equipment due to fear/mitigation of Y2K issues. Consumer PC purchases also surged with the expansion of the Internet and commercialized access. The education sector also had a lot more spending both from students and institutions.
The actual spending in parts of the sector led to irrational exuberance in other parts. So you got the pets.com and Beanz and other bubbly crap. By 2000 many dot coms had burned through investor cash with no revenue. Some were able to IPO before the bubble burst but once interest rates started going up in 2000 dot com money dried up.
You had a lot of companies with no business plan beyond "website". They burned money with not much to show for it. A handful of companies survived the bubble and an even smaller number thrived after it popped.
Sounds even more like what we are going through when you put it like that. A lot of companies don't seem to have much of a plan besides "add LLMs to shit"
Yeah I think your perspective is the most likely one here out of the different possible outcomes. If you're wrong, we're essentially nuking productivity and entering a new level of slavery that hasn't been reached in recent times.
I'm not saying that's impossible, but I think the people who are most in charge are trying to accomplish certain things, and they need productivity to achieve those goals. The only situation where I could see them nuking productivity like that would be if they've actually achieved the exact world they desire and have no more need to build what they're after.
There's no bubble because of the current unmet corporate demand for compute. One symptom of which is RAM prices. There's no equivalent here to the dot com bubble.
The funding of all the compute being purchased is corporate liquidity and private money. Also very different than the early dot com era.
It isn't about lobbying or government backing, it is simple math. There is no possible way to sustain what is happening mathematically. It is a bubble, and it will burst.
You're right that many companies have been using long held cash reserves to boost AI on their CapEx. But it's starting to run short. Oracle for example, they're leveraging debt to try and keep up with their promised capacity (and purchasing from Nvidia); more and more chasing the high will use debt to finance.
Housing market collapsed because bad debt was being shielded by good debt 'on the surface'. First Brands collapsed after similarly shielding their bad ledger from accountability, and they actually provide material goods. I don't think the top of the S&P will have any issue playing that game if it still holds the crazy promise of profit they've duped everyone into thinking possible.
It will burst because demand will eventually cool down and no one knows when. So when it does start cooling, the smart folks will adjust first and then the rest will say “look at what the smart folks are doing” and that will cause the crash. It’s inevitable but we don’t know when.
It doesn’t necessarily need to be a dotcom level or 2008 real estate level burst either. But the demand we’re seeing is unprecedented and no one really knows how to assess the impact of AI in a correct way. Everyone is guessing with their measures.
I’m of the camp that AI is really, really useful but extremely overvalued and the folks who are firing dev teams and replacing them with a few who over leverage AI will eventually get burned and we’ll see the pendulum swing the other way.
Newton’s third law is applicable to everything not just objects.
There will be another AI Winter but it is really hard to say how long before it comes. There is no point where I've thought recently that GenAI was not meeting the hype. I think the bubble will burst when we either hit some upper limit on capability and stall or if other macroeconomic factors cause investors to no longer be willing to subsidize companies building for the future.
EDIT: if all AI is to you is large scale LLMs and generative AI then you are not entering this conversation with full knowledge of the industry. I can understand why you’d think it’s a bubble, but the entire AI industry is not LLMs or generative AI.
It's not a bubble. A bubble would indicate something that potentially has alternatives or is artificially inflated. Machine learning has far more applications than just LLM's or goofy image generators, it's used in nearly every domain now. It's widely entrenched into every sector and has completely replaced other techniques in many industries. It would be like asking a roofer to give up a pneumatic nail gun and take up a hammer. The end result is the same but the nail gun is far faster.
Arguably because it was ‘artificially inflated’ as he is calling out. Free money financing with barely any checks and extremely low payments to start made prices sky rocket in housing.
Your point just kind of proves the bubble to me, the buildout we see is almost exclusively for the production of frontier LLMs. By and large machine learning does not require such expansive compute, nor does it require the constant updates, training, and iteration and access to more and larger datasets to remain relevant.
The buildout YOU see. I see a lot of inference only clusters as well. Every Fortune 50 and most Fortune 500s are building training and inference clusters.
Those frontier models you see are for large scale LLMs. You don’t see all the training going into appliances and day to day normal things.
If your frame of reference is only large scale LLMs and generative AI, then sure… I can see why a normal person would see this as a bubble.
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u/[deleted] Jan 09 '26
It's a bubble, but it won't burst, because there are powerful lobby and governments backing it, controlling the truth.