this post was submitted on 14 Nov 2024
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I see lots of talk on Lemmy about the AI bubble bursting. That AGI isn’t going to happen in the near-term, maybe it won’t ever happen. And so the the AI bubble will burst; ala the dot-com bubble.

But what exactly will burst? OpenAI and Claude? Those are private companies so maybe they will downsize or merge, but that’s not a bubble? NVIDIA & Microsoft? I don’t really see those companies imploding. They have a pretty large and diversified customer base. Besides, Apple and AWS are already moving away from NVIDIA by making their own hardware. I genuinely don’t understand where the big implosion is. Can someone help me understand this?

ETA: Is there an example analogous to pets.com for this AI bubble?

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[–] [email protected] 10 points 1 week ago

Investors have invested lots of money into these companies. This means in some form or another these companies have agreed to pay back these investors in some way. You can answer this by quite literally thinking of money like a river, and the motion of that river is what gives energy to businesses so they can do their things.

In a normal not-bubble market, there is a flow of cash that goes from investors, into the company, and then back out to investors so they can do other things with it.

In a bubble market a lot of cash is flowing into the company, but little or no cash is flowing out back to investors. There are two possible things that happen here, either the cash eventually starts flowing again and we're all good back to normal after some stabilization period, or people stop pumping cash into the business and the dam breaks. All that money is lost, or all that potential business energy is lost, or some combination of the two no matter how you slice it it's wasted effort.

To keep with the water metaphor the AI market is like a hose that's wound up in a box we can't see into. We've pumped a ton of water into this hose and haven't seen anything come out the other end. There could be a leak somewhere, or maybe we don't have enough water to even get through the hose and people will want to use their water for other things instead. One thing we do know is that we've devoted so much water to this operation that if something does go wrong it has to go wrong spectacularly.