I Am Deeply Worried About How Not Like The Dot Com Bubble This Is I spent hours and hours reading old articles through broken paywalls and archive.org links in the hopes I’d find some sort of positive spin - a way that the AI bubble wasn’t as bad, some sliver or nugget of joy, some shred of hope, and everything I’ve read has made me more and more worried. The real problem is that there are similarities, but only with the worst parts of both bubbles. We’ve got stupid amounts of money being sunk into stuff. We’ve got stupid companies that want to IPO. We’ve got hopeless startups juiced up by credulous venture capitalists and marketed by even-more credulous journalists. Except this time we have the worst margins this side of a vineyard planted in Las Vegas Nevada, and despicable boosters that will go to war with you to try and prove you wrong using ghost stories, fairy tales and pixie dust. I realize I’m being a little cavalier and colloquial about this, and that’s because I feel utterly emotionally drained by this - things are so much worse than I thought. I really felt like I’d dig into the past and find that there were direct, obvious similarities, and thus have some degree of hope that things wouldn’t be apocalyptic. Instead, I’m convinced that things will be much, much worse. The dot com bubble was relatively distributed, and created useful infrastructure. The ideas of some of the most prominent dot com startups were valid, but based on stupid hypergrowth business models that didn’t make sense and were only sustained through mass hysteria and ignorance. By comparison, AI startups are fundamentally illogical, selling unreliable software that’s best-known for its consistent mistakes and active harms backed by the corrosive and ever-worsening infrastructural costs. And they’re the customers of the largest company on the stock market, that can only keep its valuation, on which the markets depend, by selling more of an expensive-to-buy and more-expensive-to-ins…
The Logical Endpoint Of My Argument Depending on how right I am, I worry that the following will happen: NVIDIA will lose anywhere from 40% to 90% of its revenue, which will annihilate the value of the S&P 500. Microsoft, Google, Amazon and Meta will face massive, multi-billion dollar impairments within the next few years. Oracle will face potential bankruptcy or at least a severe, horrendous series of layoffs and restructuring efforts to try and right the ship after agreeing to $248 billion in lease obligations primarily to get the revenue from its $300 billion, 5-year-long deal with OpenAI, a company that is going to run out of money in the next year. Venture capital is going to take such a severe haircut from the AI bubble that it will effectively kill any chances of raising a round after Series B for many, many years. Those $178.5 billion in data center debt deals will be predominantly underwater, leading to massive losses for private equity and banks (leading to a chill in effectively all debt markets), and massive job losses across the many, many construction projects that have started as a result of the AI bubble. If OpenAI or Anthropic can manage to go public, every investor will lose out as they collapse under the weight of their bullshit assumptions. Every partner, every company relying on them, every infrastructure provider will be burned. I also believe that we, as a society, will face a violent paradigm shift as a result of the AI bubble bursting, because it revealed how many people do not understand stuff. The amount of bosses, influencers, movie stars, politicians and other individuals of note that have fallen behind generative AI and claimed again and again that it can do things that it can’t and perpetuated myths that will lead to massive societal harms both today and in the future have revealed themselves as fucking frauds. It’s been obvious since 2023 that generative AI flat out does not do what many people say it will and obvious since 2024 t…
And believe me, even if I’m half right, things will likely be so much worse than when the dot com bubble burst. I don’t see a scenario where anything survives the collapse of CoreWeave, let alone the collapse of OpenAI. I don’t see a scenario where any more than a few AI startups survive, and if that happens, there won’t be any customers for those GPUs - not that anywhere near enough existed to fill even a tiny percentile of the demand. On some level, I hope I’m wrong. I just don’t know how anymore.
Tomorrow: My 13,500 word historical and financial analysis on how the AI Bubble is magnitudes worse than the Dot Com Bubble, with a contagion that will spread throughout the global markets and our society.
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10.10.2023 08:50 — 👍 2 🔁 0 💬 0 📌 0
