AI Bubble Teetering on the Brink as OpenAI Admits to Massive Financial Failure: A $20 billion setback.

The funniest part is that the dot com crash didn’t kill the internet. It killed a lot of terrible business plans. AI may follow the same script: useful tools survive, investors discover that a chatbot isn’t worth infinite money, and taxpayers get stuck with the data center power bill. The technology can be real while the valuation is pure casino. - PS: You didn’t mention the smartphone. And that’s exactly what people mainly use these days.

Tech Bros have been trying to repeat the Net Boom almost immediately after that bubble burst - I think it didn’t take more than a couple of years after that Crash for the “Web 2.0” to start being paraded around like some kind of new gold rush that everybody should jump into and, as clearly visible in the list of hype techs you wrote, they just kept doubling down on the hype and the fraud ever since.

I actually was in Tech in the 90s and during the Crash, and then came back to that industry and into startups almost 2 decades later, and my feeling is that the point when the entire sector turned into nothing more than a giant grift was either a bit after the crash or, at best, just when the boom before it was peaking - I remember very clearly that in the 90s startups mostly started with somebody having a cool idea for tech, whilst in the 00s and onwards they mostly started with somebody having a business idea which was generally about setting oneself up as an intermediary in a kind of business transaction already done for decades, using the Internet and/or Smartphones to come up with a new twist for it and some way of becoming an aggregator/middle-man between both sides of the transaction.

Yeah, just like, after the Segway bubble burst, we’re all riding them now.

AI IS a useful tool for some things, just not everything. So it ain’t going away. Just as the “cloud” is still with us. Or email. Anyone remember when every ISP had their own email?

Every new idea goes through the process of catching on, stupid rapid growth, and then the weeding out of 90+ % of them, and finally the stabilizing the market for those that actually need and use it. Whether is cars, TVs, Cell phones, or AI, every hot new idea goes through this process.

I wonder if AI will leave much progress behind when it implodes.

I think it will, it’s the one bit of AI optimism I actually have. I have a theory the big AI firms love for example Yudkowsky’s doomsday cult so much because it’s easier for them to imagine the end of humanity than it is to imagine them not getting an extractive oligopoly over an emerging technology.

The tech itself is actually decent as tech, it’s not what the boosters claim it is but even if development stopped advancing today there’s loads of niches it’d be changing for a long time; computer vision in medical settings for example. Useful things like TTS will be much better going forward than they ever were, and for better and worse things like computer vision in general (ie in public) will never be the same. LLMs are basically magic NLP boxes too, they’re useful for classification as much as generating slop.

The tablet one eventually came true. Desktops and laptops aren’t anywhere near as popular for personal use by non-technical people.

remember pets.com

I think pets.com is probably the best analogy to what will happen with this first round of AI companies. In hindsight pets.com’s business model was fine and modern companies like chewy are doing the same thing successfully.

The problem was timing, internet adoption was low and most people didn’t understand how to use the Internet or trust it. Combine that with a flood of speculative dollars that mostly gets funneled into marketing with no adoption to justify it and the business falls apart.

I think we’ll see the same thing happen with some of these AI applications, the use case may be valid, but people, and the devs, won’t know how to use AI and the people won’t trust it so adoption will be low even with high marketing and the company will go bust. Then 10 years from now we’ll make fun of that AI party planning app that went under while we all plan our parties through some new AI app.

Netbooks and thin computing too.

Nope, all hype and fizzle.

Turns out people want to own their personal hardware/software tools and data, without some perverts reading and observing their family interactions.

Yes this time it will be different, please purchase ETFs with names like “AI, Metaverse and Blockchain” (they actually exist)

/s

Technology investment bubbles have existed since at least the industrial revolution kicked off. Tons of airlines went bankrupt in the early days of air travel, for example. I don’t know anything about it but I assume the same thing happened with trains and a gazillion other technologies that actually are pretty cool.

Marx pointed out that capitalism needs periodic cycles of capital destruction, and here we are…

I hope you are right .

But i just read and article suggesting that new university students "cant imagine " writing a 5 page paper without AI chatbots…

I just want some RAM, man. :(

And I wanna build a gaming PC!

slow down, there’s going to be enough for everyone once the AI hype dies and they’re scaling back (probably)

As a person with assets, I will gladly watch them burn together with AI. Can we be done with this tomfoolery already please.

I am with you the whole way, friend. I love seeing the stock market crash. Brings them all down closer to our daily level.

So you selfishly want others to fail and yourself to thrive. That’s an honest position, but perhaps not very ethical. Incidentally almost exactly the same position the billionaires take.

It’s not even that good at coding. It has to be heavily curated and focused to output somewhat “correct” code, it is full of gaps that lead to lots of bugs and missed scopes that a human would bring up if they wrote it themselves, and the output is incredibly verbose and inefficient (and harder for engineers to read).

It’s subpar at everything, there are no areas it shines.

Quite a lot of that ARR is based on Ouroboros-like investment loops.

50B is annualized revenue, accrued revenue will be almost certainly be quite a bit lower this year.

Tech companies love reporting ARR because it is always bigger than GAAP revenue (if the business is growing at all).

“revenue” that’s propped up by the government and ignores other factors, such as overall expenses, competing open source models, and non-realized assets.

The difference between Microsoft and OpenAI or Anthropic is that Microsoft has a profit model.

There’s absolutely no way that the big LLM companies can make enough profit to overcome their expenses in the next decade even, especially since the technology on the open front only continues to improve. That’s why the LLM bros keep hyping it up via fear mongering and criminal activities like hacking - to keep selling the illusion that it’s AI.

yeah $20 imaginary dollerydoos were shaved off the $70 anticipated imaginary dollerydoos, it’s all so idiotic

The bubble part is the extremely high losses, even before hiding training expenses as assets that become worthless the next month after a new version release. Also monumental promises that they will require massive new fundraising for, that fewer people understand remain possibly sustainable.

Idk if this is a sign of a bubble collapsing just because it’s record setting growth and revenue aren’t as crazy as they initially said.

That’s because you’re thinking about the situation rationally, which isn’t something the market is known for.

Good point. It is important to keep things in perspective.

its basically elizabeth holmes, but with AI, and with the same freaky facial expression.

I favor incarceration with no bail.

Are you suggesting that The End is not, in fact, Near? And OpenAI is not about to collapse into bankruptcy, ending the entire AI ecosystem?

Or, after a nasty hangover, it’ll free up capital and people that can be put to more socially productive uses.

Yes. When the bubble finally pops it means AI is here to stay and the remaining companies will probably climb 100x over the next two decades, but all the people currently invested will lose almost everything. The people not invested will still feel the effect as the layoffs and bankruptcies start rolling out, and anyone pension or retirement that is tied to bubble will lose a lot of value.

This will come right as the bond market is reaching the point of no return, and the US won’t be able to pay back the debt. A lot of people are going to lose everything, including their retirements during the debt liquidation that is coming.

Pop pop pop!

I’ll be fine, my mortgage is fixed for 4 more years before any damage it causes to the economy can seriously effect me. That is a problem for me in 4 years time, not me today.

Kimi sucks, run GLM or Deepseek if you manage to get that setup. Both of those have done more for me than Kimi with its expensive subscription plan

It hasn’t been people hoping. There are quite a few analysis papers out there doing the math of the impossibility of achieving profitability of the current US model. Chinese models offering equivalent performance for 10x lower cost, and near frontier level open weight models to run in house for the cost of the hardware, and this hardware being way more modest, makes the bubble pop a certainty. As with data loss, the question is when, not if.

massive drop in revenue expectations

This is still future predictions.

The pop happens when the bonds cannot be repaid.

On September 21st OpenAIs sponsor, BB+ issuer Softbank, placed an $11 billion single bond sale to fund an AI infrastructure bet, and it was oversubscribed.

The bubble is still inflating.

What are you talking about? The 20 billion difference is based on a “leaked internal memo” that suggested annual revenue of 70 billion. And a memo to investors in September that they expect a 50 billion revenue. In short. It’s based on a leaked previous estimation compared to a more recent one.

The number they used for annualized revenue for these rapidly growing companies is taking the most recent month’s revenue and multiplying it by 12. It’s not a guarantee about the future, but it is misleading.

The extreme version is taking a good week’s revenue and multiplying it by 52, or even worse, multiplying a day by 365. Those are outright dishonest. But not accounting fraud, because it’s not accounting at all.