I don’t feel like this article addresses the question of whether we’re seeing an AI bubble or not at all.
To me this is very simple: certain companies have invested billions upon billions in AI data centres that need to see a very high return on investment in the years ahead to avoid a “pop”. I think nvidia is also being valued is if it’s a certainty that we will continue to build many such data centres every year for the foreseeable future.
These expectations are now being faced with the reality that AI isn’t making us that much more productive, and the improvements in LLMs are slowing down, so it’s not clear there will be a continued will to pay expensive subscription for these AIs, and certainly not clear that companies are willing to accept higher prices that may be need to get ROI.
There’s another way this could go down: I have a sneaking suspicion that we can get 90% of the productivity benefits of LLMs with models that can run locally. A combination of an algorithm breakthrough, better tuned models, better software tooling around them, and better hardware in the hands of end users, may get us to that 90%. That could end up making a lot of AI companies redundant.
meshugaas · 1h ago
> If they're talking about the 2023-2024 "chatbots = rich", that's a bad argument because hardly anyone believes that anymore
Oh yes, this must be why chatbot companies announced $25 billion of new funding last week.
harryf · 55m ago
Better to talk about the Gartner Hype cycle and it's stages compare it to technologies that clearly followed that cycle such as;
- Virtual Reality: big hype in the early 90s (arcades, movies like Lawnmower Man) through to use cases today like surgical training, aviation training
- Mobile video calls: hyped in early 2000's with 3G and pre-iPhone devices. Actually took off with 4G and 5G plus iOS and Android phones
- 3D printing: back in 2013 we were expecting "a 3D printer in every home" ... today valuable in industrial prototyping
Looking back at 2025 we'll be saying "Remember when they said everyone would lose their jobs to AI..."
Atlas667 · 9m ago
> Looking back at 2025 we'll be saying "Remember when they said everyone would lose their jobs to AI..."
Even if... one would think that a capitalist economy would do great with more and capable workers. One would think that more stuff would get done. Right?
I think there is a good chance that it will, in fact, shift millions towards unemployment. I am pro technology, yet technology in the hands of profit seekers will only be used to seek profits.
It happened during the agricultural revolution and during the industrial revolution. Millions of people were made unemployed by more efficient technology. Millions had to flee the country sides to then be thrown out of factories a few decades later, leading to slums and mass poverty. So many that the government had to enact more and more welfare programs like public schools, and food programs.
Capitalism is the only economic system that cannot handle more workers. For-profit production is not compatible with mass employment.
Almost like capitalism shoots itself in the foot and then forgets about it.
catigula · 53m ago
That's a nice story but without any advancements proper leverage of currently existing AI models can indeed remove many, many jobs from the labor pool, probably double digit percentage-wise.
The idea that these tools won't at all improve from where they are now isn't a widely held position.
UncleOxidant · 41m ago
Pareto principal. We've seen the 80% but that last 20% is going to be really tough (and expensive). GPT5 illustrates this - it wasn't really better than GPT4o and in some ways worse.
qgin · 5m ago
AI doesn't have to replace human jobs as they exist today 1:1.
In many situations, the work is not indivisible. If AI can handle 80% of the work, then a company can let AI handle that 80%, fire 80% of their people, and consolidate the remaining 20% still-human-work with whoever is left.
catigula · 38m ago
Regardless you have no way of knowing where you are on the curve at any given point.
That all being said I strongly disagree that GPT-5 isn't categorically better, I just think it's less obvious because we're starting to hit human cognitive ability to even assess that limits.
mergy · 1h ago
I appreciate the author trying to address this. The only issue is the author didn't define what 'pops' in the bubble.
The 'what' that pops, probably, IMHO, is the investment and resources ecosystem dumped, poured, thrown, redirected, etc. to AI.
Just like the .com boom, the costs and money thrown at AI are outsized and will 'pop" as it matures. A 'pop" and leveling down to something perhaps not so outrageous is coming.
As the author states, .com popped but left the Internet still around and expanding. AI is exactly that kind of bubble.
danielrm26 · 46m ago
Hi, I tried to address that in the video version.
I think what pops is the false belief.
.com -> going online will save you
AI -> adding a chatbot will save you
To me, those are what qualify as bubbles. And the other stuff is just overheating, disruption, and other effects.
ghc · 24m ago
> I think what pops is the false belief.
Then you're inventing your own term. Bubble is shorthand for the Economics term "speculative bubble" or "economic bubble" and has described the behavior of many markets over the centuries. What collapses is asset prices, not ideas. It's definitional...just ask your friendly neighborhood economist.
Edit: Here, I went and found the origin for you (via wikipedia). The South Seas bubble spawned the term:
"The metaphor indicated that the prices of the stock were inflated and fragile – expanded based on nothing but air, and vulnerable to a sudden burst, as in fact occurred."
meshugaas · 32m ago
A financial bubble has a clear definition. You're just changing the meaning to be a different strawman so you can refute that. Are there lots of companies that are overvalued because of their AI offerings, and will those companies fail when they don't provide acceptable returns? If yes, bubble.
CagedCoder · 9m ago
Why should I trust someone that's making money from AI to tell me that AI isn't a bubble?
Especially when the entire argument seems to hinge on the author's dislike for the word Bubble. The bubble that pops isn't the actual thing, it's the money that was propping the thing up...
velieroglu · 11m ago
Oh really, just look into internet and recent investments and valuations then we will talk about later, cluely is enough to prove ai bubble
grzracz · 51m ago
I really dislike the title and the article. You are basically stating that AI is not a bubble, but everything around AI is a bubble, which people obviously mean when they say AI is a bubble. Same was the case with dot com crash, where people didn't LITERALLY mean .com domains would crash, but everything around the domains (& Internet) would crash.
Does not help that the author is overinvested into the AI space.
bgwalter · 47m ago
So we are in the "it will be useful later" phase. Here is a little stock chart from the dotcom bubble until today:
>Do people actually believe that if you just "add AI" to what they have, they'll instantly become millionaires?
Looking at recent YC batches, YC seems to believe so.
He says bubbles are false beliefs about reality that everybody figures out is false. The claim that "[AI] will displace tens or hundreds of millions of knowledge workers in the next 3-10 years" is that false belief inflating the bubble. Big tech and investors are dumping money into AI thinking at least a sizeable portion of the white collar workforce is going to be replaced with $2000-$4000/month subscriptions to AI agents (I am so sick of the term "agent") acting almost autonomously. We're hitting the wall with what's feasible with LLM scaling laws even if you're dumping countries GDP worth of money into making bigger and better models. Is spending $500 billion to $1 trillion dollars to get something that performs marginally better than the best LLM today worth it?
danbruc · 56m ago
But if they think the bubble is the idea that "Modern AI will significantly transform business and the global economy, and that it'll lead to massive unemployment for knowledge workers", then—in my opinion—they're just wrong.
AI will one day transform the world but I do not believe modern AI will make that happen, that will have to wait for futuristic AI. I guess that makes AI not a bubble but I can still label modern, i.e. current, AI a bubble, right?
diamond559 · 57m ago
Says a man personally invested on this bubble inflating more, are we really just going to take these people at their words still? After seeing GPT 5?
Part of why AI is concerning is that literally nobody can actually predict what the outcome of these models is going to be even a couple of years out, the decision tree just instantly blows out and becomes impossible to track.
Anybody telling you otherwise is lying to you.
rvz · 1h ago
It certainly is a bubble.
EDIT: The fact that I'm downvoted for saying that tells you that not only we're in a massive bubble, but the author knows that he's personally invested in the bubble getting bigger.
So of course he'll say "it isn't a bubble".
api · 1h ago
It can be very useful and powerful and also be a bubble. See: dot-com bubble. It reminds me a lot of that.
TaupeRanger · 1h ago
Please read the article before commenting - your comment is literally what the article is addressing.
UncleOxidant · 25m ago
I read the article and it certainly doesn't address this well.
> The .com bubble was the belief that if you took your mid-ass business to the internet, you would instantly become rich. That is what popped.
And currently there's a belief in the market that if you just add AI to it it's going to the moon. I don't see how there's a difference here.
To me this is very simple: certain companies have invested billions upon billions in AI data centres that need to see a very high return on investment in the years ahead to avoid a “pop”. I think nvidia is also being valued is if it’s a certainty that we will continue to build many such data centres every year for the foreseeable future.
These expectations are now being faced with the reality that AI isn’t making us that much more productive, and the improvements in LLMs are slowing down, so it’s not clear there will be a continued will to pay expensive subscription for these AIs, and certainly not clear that companies are willing to accept higher prices that may be need to get ROI.
There’s another way this could go down: I have a sneaking suspicion that we can get 90% of the productivity benefits of LLMs with models that can run locally. A combination of an algorithm breakthrough, better tuned models, better software tooling around them, and better hardware in the hands of end users, may get us to that 90%. That could end up making a lot of AI companies redundant.
Oh yes, this must be why chatbot companies announced $25 billion of new funding last week.
- Virtual Reality: big hype in the early 90s (arcades, movies like Lawnmower Man) through to use cases today like surgical training, aviation training
- Mobile video calls: hyped in early 2000's with 3G and pre-iPhone devices. Actually took off with 4G and 5G plus iOS and Android phones
- 3D printing: back in 2013 we were expecting "a 3D printer in every home" ... today valuable in industrial prototyping
Looking back at 2025 we'll be saying "Remember when they said everyone would lose their jobs to AI..."
Even if... one would think that a capitalist economy would do great with more and capable workers. One would think that more stuff would get done. Right?
I think there is a good chance that it will, in fact, shift millions towards unemployment. I am pro technology, yet technology in the hands of profit seekers will only be used to seek profits.
It happened during the agricultural revolution and during the industrial revolution. Millions of people were made unemployed by more efficient technology. Millions had to flee the country sides to then be thrown out of factories a few decades later, leading to slums and mass poverty. So many that the government had to enact more and more welfare programs like public schools, and food programs.
Capitalism is the only economic system that cannot handle more workers. For-profit production is not compatible with mass employment.
Almost like capitalism shoots itself in the foot and then forgets about it.
The idea that these tools won't at all improve from where they are now isn't a widely held position.
In many situations, the work is not indivisible. If AI can handle 80% of the work, then a company can let AI handle that 80%, fire 80% of their people, and consolidate the remaining 20% still-human-work with whoever is left.
That all being said I strongly disagree that GPT-5 isn't categorically better, I just think it's less obvious because we're starting to hit human cognitive ability to even assess that limits.
The 'what' that pops, probably, IMHO, is the investment and resources ecosystem dumped, poured, thrown, redirected, etc. to AI.
Just like the .com boom, the costs and money thrown at AI are outsized and will 'pop" as it matures. A 'pop" and leveling down to something perhaps not so outrageous is coming.
As the author states, .com popped but left the Internet still around and expanding. AI is exactly that kind of bubble.
I think what pops is the false belief.
.com -> going online will save you AI -> adding a chatbot will save you
To me, those are what qualify as bubbles. And the other stuff is just overheating, disruption, and other effects.
Then you're inventing your own term. Bubble is shorthand for the Economics term "speculative bubble" or "economic bubble" and has described the behavior of many markets over the centuries. What collapses is asset prices, not ideas. It's definitional...just ask your friendly neighborhood economist.
Edit: Here, I went and found the origin for you (via wikipedia). The South Seas bubble spawned the term:
"The metaphor indicated that the prices of the stock were inflated and fragile – expanded based on nothing but air, and vulnerable to a sudden burst, as in fact occurred."
Especially when the entire argument seems to hinge on the author's dislike for the word Bubble. The bubble that pops isn't the actual thing, it's the money that was propping the thing up...
https://companiesmarketcap.com/juniper-networks/stock-price-...
Looking at recent YC batches, YC seems to believe so.
He says bubbles are false beliefs about reality that everybody figures out is false. The claim that "[AI] will displace tens or hundreds of millions of knowledge workers in the next 3-10 years" is that false belief inflating the bubble. Big tech and investors are dumping money into AI thinking at least a sizeable portion of the white collar workforce is going to be replaced with $2000-$4000/month subscriptions to AI agents (I am so sick of the term "agent") acting almost autonomously. We're hitting the wall with what's feasible with LLM scaling laws even if you're dumping countries GDP worth of money into making bigger and better models. Is spending $500 billion to $1 trillion dollars to get something that performs marginally better than the best LLM today worth it?
AI will one day transform the world but I do not believe modern AI will make that happen, that will have to wait for futuristic AI. I guess that makes AI not a bubble but I can still label modern, i.e. current, AI a bubble, right?
Anybody telling you otherwise is lying to you.
EDIT: The fact that I'm downvoted for saying that tells you that not only we're in a massive bubble, but the author knows that he's personally invested in the bubble getting bigger.
So of course he'll say "it isn't a bubble".
> The .com bubble was the belief that if you took your mid-ass business to the internet, you would instantly become rich. That is what popped.
And currently there's a belief in the market that if you just add AI to it it's going to the moon. I don't see how there's a difference here.