Sam Altman seems to be making OpenAI way more non-profit than before:
Even as the AI bubble becomes a mainstream talking point on Wall Street, tech companies continue to peddle the fantasy that AI is poised to become an almost magical money-maker. Case in point, OpenAI wants you to believe that by 2030, it’ll be raking in $100 billion a year just from ads alone — even though it’s currently struggling to reach just $1 billion.
↫ Joe Wilkins at Futurism
The US tech giants fueling this “AI” bubble are trying to hide the true extent of their debt:
Hidden debt at U.S. tech giants swelled eightfold in four years to an estimated $1.65 trillion as artificial intelligence investments ballooned, a Nikkei study shows, exceeding actual debt and making it tougher for investors to assess risk.
[…]
The five companies’ hidden debt, which does not appear on balance sheets, totaled $1.65 trillion in the most recent quarter, exceeding the roughly $1.35 trillion in debt reflected on their balance sheets. The data includes some estimates.
↫ Kohei Yamada at Nikkei Asia
The bubble is expanding to comical proportions:
The American stock market is booming, thanks to artificial intelligence. Tech giants are borrowing billions to acquire AI talent, purchase chips and hardware, and construct data centers. And market watchers are starting to get worried. They see financiers bulldozing giant piles of money to private AI start-ups with no realistic path to profitability, tech companies reliant on other tech companies for revenue growth, and non-tech businesses without a lot to show for their AI investments. The value of AI-linked firms has climbed $27 trillion in the past three years—an astonishing amount, equivalent to 36 percent of the value of the entire U.S. stock market today. Although future earnings could justify those valuations, as Dominic Wilson and Vickie Chang of Goldman Sachs argued in a note to clients, the profit expectations require Panglossian optimism.
No less an authority than Sam Altman is arguing that we are in an AI bubble. The International Monetary Fund is citing it as a significant risk to financial stability and warning about what might happen when it bursts: diminished investment, tighter credit, reduced consumption, disrupted trade flows.
↫ Annie Lowrey at The Atlantic
I’m not worried, though.
I have it on good authority that “AI” increases productivity by 10x, so surely, none of the above is a problem. Any day now, we will be inundated with waves of brand new, high-quality, valuable software. Any day now, existing software will increase in quality by 10x, leading to a huge surge in software sales. Any day now, productivity in factories will increase rapidly thanks to “AI” freeing up workers’ time, driving prices down 10x, leaving consumers with 10x more money to spend. Any day now, everyone will be able to produce the next Citizen Kane or write the next Anna Karenina, causing an explosion in magnificent, timeless art that will have historians of the future marvel at our civilisation’s ingenuity and artistry.
In the meantime, these companies can just ask their “AI” how to become profitable. Should be table-stakes for a 10x force multiplier.
I’m not worried.
Thom’s irony aside, I’m VERY worried.
When the subprime crisis caused the economy to collapse in 2008, I paid the price. Just like every other citizen, since the governments wrote off the debts. Yet I have never owned a single share or stake in any company. But the financial crisis had a knock-on effect on the real economy.
When the AI bubble bursts, why would it be any different?
SergeJ,
if you asked me last year, I would say: it would be different and more like “dot-com” burst where good companies Amazon survived, and bad ones like Flooz.com failed.
However today things are different. Some of the big ones, especially those who have participated in the latest shenanigans (like stock pumping by circular billing) will be backstopped.
But unlike 2007, the economy is not supported by mortgages, (Freddy Mac/Fannie Mae) which turned out to be empty papers.
Yet, this time it is supported by student loan payments (Sally Mae), which are of course much more reliable as all students are paying on time! (do we have a [s] tag?)
Both are multi-trillion dollar government sponsored funds that generate constant income.
(This has replaced the function of the central bank, which is not even in the same league anymore, but will ultimately have to do “quantitive easing” or whatnot to fix the new mess)
Yes, it is kind of an Open Secret that there is a lot of debt under the carpet.
BTW Thom, yesterday I had to think of you when I discovered the new label of “Certified organic software” at got-openbsd: chirpysoft.be
“organic software”
I like that. I suppose voluntary open-source software is “free range” rather than the factory farmed software produced by paid commercial devs.