Where’s the evidence, this writing strikes as purely belief based? For all the overhypers of AI, you also get extreme skeptics like this, and neither side has good evidence. It’s speculation. If he truly knew the future he’d short all the companies right before collapse.
Oracle's share price recently went up 40% on an earnings miss, because apart from the earnings miss they declared $455b in "Remaining Performance Obligations" (which is such an unusual term it caused a spike in Google Trends as people try to work out what it means).
Of the $455b of work they expect to do and get paid for, $300b comes from OpenAI. OpenAI has about $10b in annual revenue, and makes a loss on it.
So OpenAI aren't going to be able to pay their obligations to Oracle unless something extraordinary happens with Project Stargate. Meanwhile Oracle are already raising money to fund their obligations to build the things that they hope OpenAI are going to pay them for.
These companies are pouring hundreds of billions of dollars into building AI infrastructure without any good idea of how they're going to recover the cost.
I'm slightly confused about how solid the expected revenue has to be to be counted as RPO. Does this mean OpenAI actually signed a contract binding them to spend those 300 billions with Oracle?
The second interesting part is also the part you're assuming in your argument. Does the fact that OpenAI doesn't have 300 billions now and neither has the revenue/profit to generate that much matter? Unless there are deals in the background that already secured funding, this seems very shady accounting.
If I earnt £10k a year from my job, and I was spending more than £10k a year getting myself deeper in debt every year, I wouldn't go out and sign up for £300k of goods and services. But maybe that's just me.
> These companies are pouring hundreds of billions of dollars into building AI infrastructure without any good idea of how they're going to recover the cost.
Well... to be fair it's only really Anthropic (and the also-ran set like xAI) that runs the risk of being over-leveraged. OpenAI is backstopped by Microsoft at the macro level. They might try to screw over Oracle, but they could pay the bill. So that's not going to move the market beyond those two stocks. And the other big players is obviously Google which has similarly deep pockets.
I don't doubt that there's an AI bubble. But it won't pop like that, given the size of the players. Leverage cycles are very hard to see in foresight; in 2008 no one saw the insanity in the derivatives market until Lehman blew up.
There are various links in the article that have more information. Clicking these references will give the evidence for bad unit economics claims and whatnot.
As for predicting the moment, the author has made a prediction and wants it to be wrong. They expect the system will continue to grow larger for some time before collapse. They would prefer that this timeline be abbreviated to reduce the negative economic impacts. He is advising others on how to take economic advantage of his prediction and is likely shorting the market in his own way. It may not be options trading, but making plans for the bust is functionally similar.
The papers he linked all fail to support his claim. The first paper he linked simply counts the mentions of the term “deep learning” in papers. The 2nd surveyed people who lived in… Denmark and tried to extrapolate that to everyone globally
The 2nd link seems reasonable to me? Why does a study about 25k workers in Denmark (11 occupations, 7k workplaces) not count as evidence? If there was a strong effect to be found globally, it seems likely to be found in Denmark too.
Also, what about the other links? The discussions about the strange accounting and lack of profitability seem like evidence as well.
If anything, this article struck me as well-evidenced.
Side note: If you're going to short an AI company (or really, buy put options, so you don't have unlimited downside exposure), I would suggest shorting NVIDIA. My reasoning is that if we actually get a fully automated software engineer, NVIDIA stock is liable to lose a bunch of value anyways -- if I understand correctly, their moat is mostly in software.
Wile E Coyote sprints as fast as possible, realizes he zoomed off a cliff, looks down in horror, then takes a huge fall.
Specifically I envision a scenario like: Google applies the research they've been doing on autoformalization and RL-with-verifiable-rewards to create a provably correct, superfast TPU. Initially it's used for a Google-internal AI stack. Gradually they start selling it to other major AI players, taking the 80/20 approach of dominating the most common AI workflows. They might make a deliberate effort to massively undercut NVIDIA just to grab market share. Once Google proves that this approach is possible, it will increasingly become accessible to smaller players, until eventually GPU design and development is totally commoditized. You'll be able to buy cheaper non-NVIDIA chips which implement an identical API, and NVIDIA will lose most of its value.
Will this actually happen? Hard to say, but it certainly seems more feasible than superintelligence, don't you think?
NVIDIA is like the only company making money on the AI bubble, they're not the one I would choose to short.
Tesla is currently trading at 260x earnings, so to actually meet that valuation they need to increase earnings by a factor of 10 pretty sharpish.
They're literally not going to do that by selling cars, even if you include Robotaxis, so really it is a bet on the Optimus robots going as well as they possibly can.
If they make $25k profit per Optimus robot (optimistic) then I think they need to sell about a million per year to make enough money to justify their valuation. Of a product that is not even ready to sell, let alone finding out how much demand their truly is, ramping up production, etc.
For comparison the entire industrial robot market is currently about 500k units per year.
I think the market is pricing in absurdly optimistic performance for Tesla, which they're not going to be able to meet.
If today you told me all this about Enron or FTX while they are still an industry darling, I for one wouldn't want to bet against them. For every FTX where cooked books leads to epic failure, there is a Tether where cooked books lead to accidentally unwrapping an unlimited money tap through all sorts of dubious means.
