A lot of people seem to take it as a given that the AI bubble will "pop", leading to a mass devaluation of AI companies from their current peaks.

What I'm confused about though is what makes current AI evaluations a bubble.

Bubbles usually exists when future speculation outpaces productivity: eventually some realization leads the market to no longer believe in that future speculation, causing devaluation which triggers a mass sell-off.

However, AI companies currently have very high revenues and are growing extremely fast. Their valuation is backed by actual commerce. I can't imagine that there is any room for a bubble, as it is very clear where the market is at, and why demand for AI is so high.

Now, certain specific companies I can imagine losing a lot of valuation, but only contingent on the fact that they serve a middle-man role in the market that improvements in the underlying AI models will solve, which would likely only mean more revenue for the frontier labs, and thus less reason for a bubble.

the bubble isnt in AI itself its in the thousands of startups that are just a wrapper around an API call. The moment OpenAI or Anthropic adds that feature natively they're dead

the companies with real moats (proprietary data, network effects, deep domain integration) will be fine. The ones charging $20/month for a nice UI on top of GPT wont survive the next price cut, but that's just my opinion.

running an ai product on top of anthropic's api. from this side: customer demand is real, recurring revenue is real. but margin lives or dies on whether anthropic keeps cutting token prices. real revenue, fragile pricing. that's the bubble shape most people miss.

Since it's not actual A.I., I'm reminded of nuclear fusion, which has long been only 25 years away. It's not an actual invention yet.

Yet, thanks to our times, at least one major company appears to be thought-bubbling. It appears to hope (if it's not just window-dressing) that fusion will suddenly appear in the next 2 years ... to avoid driving regional electric rates sky high.

I am operating as an advisor for Indian firms targeting the international market. What I’ve noticed is that many of the companies have moved away from Intercom, Zendesk, or other such tools and built in-house simpler versions.

The same thing applies to Chargbee, Chargify, and other such tools. These ready-made solutions have many features, and they are complex. Most companies only need a subset of those features but the ability to customise them. Making a general-purpose tool is very difficult.

The same thing I’ve noticed for Uptimerobot, PagerDuty, and others.

As a result, I suspect SaaS revenue will drop further and further.

Companies are questioning why we pay $x,xxx per month for a SaaS solution when we can roll it out for some token expense, highly customizable? And it's nothing new, Google has its software managing its internal stuff.

It's not about the companies having high revenue, but rather investors being really interested in AI because it's the new flashy object everyone must have nowadays. Yes, I think it will still be a thing a few years from now and later, even. But, at the moment, the AI trend is staying afloat due to how much people are investing on it. Except that companies are just losing ridiculous amounts of money due to compute costs. Which is why OpenAI had to close Sora AI and cancel their contract with Disney to allow Sora AI generated media in Disney+.

> Their valuation is backed by actual commerce.

Is it?

Revenues start looking lot less impressive if the margins are very low at same time... Software was special place where producing more units costed only tiny bit more. But AI seems to be something where producing more will well cost almost the same.

Because too many new companies are popping up with the business model of "We're going to use AI" and they don't actually have any explanation for how or why they're going to use AI.

This is just like the Dot Com Bubble, where a lot of companies popped up saying they were going to "use the internet" without actually having a plan.

I haven’t seen a single ai-based product that’s relevant and making money.

In all the companies i have worked for, ai hasn’t been a productivity multiplier

I’ve been thinking about this: Has current AI truly led to a significant improvement in productivity? For many jobs, AI seems to be getting more and more powerful, but has it fallen into the problem of a mismatch between show cases and real-world cases? If there is a bubble in AI, I think it will burst because, in the current environment of a sluggish global economy, people’s excessive expectations of AI have not been realized.

When the tide recedes, those who are running naked will understand. Just let the bullets fly for a while.

It is widely agreed users are not paying enough to cover the costs of inference. This is what "subscription" plans are. So, many users are losing the companies money.

This is not discussed publicly and is covered up for by raises, because there is growth and the hope that at some point the economics could work out. Which remains to be seen.

It's a variant on a Ponzi scheme. Investor hope is that at some point someone invents a way to stop losing money.

If at any point investors start to lose faith that this is going to be the case, the bubble pops.

It’s important to keep in mind that railroads, airplanes, and the internet also caused bubbles.

Just because of an invention is useful and world changing doesn’t mean it won’t cause a bubble.

1.) Exceptions from a society of people, half of which don’t know what a computer is,

2.) the speculative debt - Oracle is (was?) the most buried

what makes AI a bubble is the return over investment. By Scam Altman's spreadsheet, openai should be spending some $100B/year with computing from partners that are building the datacenters for that. They should also be buying 40% of all available RAM. Those things are not happening.