Im not convinced by the claims of infrastructure only being expensive to build initially. Hardware doesn't last forever especially in a data center, maintenance isn't free, electricity is not going to get significantly cheaper. If models get more efficient we won't need super expensive and expansive hardware build outs, if models keep getting more powerful and needy and are hardware limited, each new hardware generation will stomp over all this expensive and soon to be old hardware in electrical efficiency requiring another massive round of funding that players already holding debt will struggle to afford.

If new hardware comes online that doesn't allow you to payback your billions in hardware, what then? The level of rigor in the article is low.

If we steel-they the point in the essay, it still doesn't matter because a bubble is setup in the economics of the system, not whether the underlying tech works and/or is profitable. It can both work, be profitable, but have been overcapitalized before the knock on effects are in-place in the rest of the economy. This is a crazy analogy, but what if 1700s earth figured out, theoretically how to build a fusion reactor that could supply all the energy needs of the whole planet. But it cost in their equivalent dollars, 1 quadrillion dollars? You can't even integrate under their money curve to scrape together that many dollars. The only economy you can make about that is in the research side to push the cost down. Then when its dialed in, you can launch that rocket AND the rest of the system has had time at many different levels to integrate AI at various levels. OpenAI dry barebacked its way into the economy and literally screwed everything up. If they really were an altruistic AI safety lab, they should have kept working on ChatGPT, but demoed it to the world including government, so we could as a planet decide where we are taking this.

It is a huge bubble, AI is over capitalized, we have no idea what the knock on effects are and really the only benefit right now is in programming, which is huge and civilization changing. But it also has massive downsides in that it has given the most powerful even longer levers to move the earth.

I just don't think the author really has any clue.

they seem to think that debt markets are infinite. "There's Still Plenty Of Capital To Raise"

> The ones that have issued public debt, like Alphabet and Meta, have excellent bond ratings. If they need more capital, they won't struggle to find people to give them a loan.

Yes, and that bond rating is based on the idea that they really don't have that much debt, and have a net profit of something like 30%. If they hoover up a load of debt, the rating will plunge.

> I don't think the rhetoric about the AI bubble is really about finances

Its exactly about finances. The market participants that are not bollocks deep in fake Private Equity valuations are worried about circular debt obligations that are off books. The SEC has been rather lenient about reporting of non-traditional obligations (hence why spaceX was allow to do what ever the fuck it did)

For example anthropic has about 450 billion in non-cancellable obligations. the S-1 puts it at 895 billion. all of that is someone's debt.

If openAI are doing the same thing, thats pretty close to 1.6trillion in debt, both for the same customers, at the time when customers are going "hmm this isn't giving us what we hoped for the price"

> electricity is not going to get significantly cheaper

The DC push may be the thing that finally gets renewables over the finish line in the US. For example, TX is around 35% renewables right now. If that continues to rise, we may see power fall in price. It’s all about incentives.

So much this.

The current-gen hardware is expected to have only 2-3 years of useful life. New tech, and especially new architecture is going to make inference much faster and more efficient in the near future, and the big vendors are going to be more limited by datacenter floor space and power/cooling, so that the hardware will be replaced very quickly by better models.

It hardly seems to be a one time expense. GPUs and networking equipment may have a useful lifespan of only about five years before needing replacement, and it could be expensive to do so.