This guy has zero zip nada null AI background. He is a videogame reviewer and PR guy. He is a pure influencer feeding on the AI backlash he helped to create.<p>He has been predicting a crash for how many years now? And while I can totally see Anthropic and OpenAI going through some things on the way to post-IPO FMV, those things do not include AI going away. It truly doesn't matter whether closed source Frontier lab models are spewing tokens or large foreign open weight models are doing it, the token factories will be just fine, and that's really all I care about.<p>The question to me is why the media favors influencers like this over practitioners.<p>And it's not like there aren't more balanced takes out there, here's just one...<p><a href="https://overweightskepticism.substack.com/p/ais-cash-cushion-runs-out-around" rel="nofollow">https://overweightskepticism.substack.com/p/ais-cash-cushion...</a>
Yeah, it's not like there are AI-focused hedge funds crashing and burning right now.
If your comment is referring to situational awareness, its due to 4x leverage. leverage is always risky. AI/semis are still doing extremely well (over last 2 years) despite the recent dip
One, very over-leveraged and risk-thirsty speculative vehicle crashed and burned during its first market cycle of bullishness the first time there was a reasonable pullback. Hedge funds in general got a boost from this implosion.
Its up 80% on the year. How do your investments compare?
Yes - correct. I have been saying this since this guy gained eminence.
1) Doesn’t make him wrong, and his thesis is looking more and more correct every day<p>2) The bullish AI side is full of grifters and folks that were block-chain and NFT “experts” before they became AI “experts.” 99% of the folks in AI know almost nothing about AI apart from thinking it’s cool and having played around with it a bit.<p>The folks that correctly call BS on a thing tend to not be deep in the thing. Thats how they see things that are completely obvious to anyone but those so deep in they can’t see what’s right in front of them. That’s playing out big time right now with AI.<p>The only folks that don’t see a massive AI bubble ready to burst right now are those that have drunk so much Kool-Aide that they long since stopped having any clarity in judgment.<p>The implosion of “situational awareness” last week due to a complete lack of situational awareness that most Wall St pros called total amateur hour is a textbook case of this unfolding.
Ed Zitron is enjoyably mouthy and rude about AI and AI people, but it’s a bit of a stretch to suggest that someone most people have never heard of helped create the AI backlash. He is just putting it into words.<p>You know what created the AI backlash as well as anyone, and it is: AI and AI people.<p>If e/acc voices were not so abrasively, obtrusively YOLO about their technology, if their entire take on what they earn millions to do was not so easily reduced to “yeah it sucks that your job will go away, learn AI I guess LOLz” then there would be far less to have a backlash against. Being lectured about the future by people who do not have a fucking business plan for how they will repay a trillion dollars and who might actually crash the economy does tend to grate on the nerves of the reality-based.<p>Being told again and again that we will be ruled over by two firms that ultimately amount to the corporate equivalent of trust fund kids, that is annoying.<p>If you want to convince people otherwise, find an analyst who is not churning out AI slop.<p>As to the “predicting it for years” thing, the first correct-with-specifics predictions of the subprime crisis were published in 2004, by a pretty fringe outlet (karmabanque) and its author, Max Keiser. I remember not being shocked at all when it finally happened, or being shocked at LIBOR rigging. Because Max
Keiser presented his reasoning on his crazy radio show, and told his listeners what signs to look out for.<p>If someone is right for the right, well-informed reasons and presents that reasoning, it doesn’t always matter all that much if their background is unconventional. They tend to be dismissed, and they were back then. “People will always need houses” is what we were told, as if that was enough to ward off massive structural problems.
Your example article of a “more balanced take” actually supports what Zitron is saying.<p>>They are two-party round-trips: a hyperscaler invests in an AI lab that is also its cloud customer, so the investment comes back as cloud revenue.<p>They may not label as circular financing but this is still the exact same thing he’s bringing awareness to in his article.
Too bad that take is AI slop.
There is a lot of demand for AI denial, but nearly everybody who is capable of writing even semi-coherently on the topic recognizes AI denial in general as cope, and has too much moral dignity to propogate their coping denial for personal gain.<p>So the ~one guy who doesn't gets around.
Is your ad hominem attack any better?
This is a bit of a doomer article, but quite honestly, 200 billion dollars a year on a 30 billion dollar a year business that is growing does not really sound as bad as the author makes it out to be, especially when that business consists of growth startups that are currently primarily concerned with completely automating your current revenue stream.<p>The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x and reducing inference cost by half (highly achievable with improved silicon and technology), then simply fire a large percentage of software engineers. From that perspective the current behavior is a bit wicked but downright logical.<p>And having two whale customers is not really out of the ordinary for any software company... it's just the scale that is staggering.<p>The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor. If you don't have a monopoly, you cannot rugpull and 6x the costs on the consumer.<p>Ironically, the actual thing that will likely kill OpenAI is ACTUAL OPEN AI.
<i>> that is growing</i><p>It seems like user numbers are stagnating, and the ad play isn't working out so far. Where is the revenue growth coming from? I don't think API can be the answer, because API has absolutely no switching costs.<p><i>> The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x</i><p>Presumably, that was the plan, but I don't see how that can possibly work with how quickly the Chinese models caught up.
> The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor.<p>Not in this specific article but Ed Zitron has been talking about open models quite a lot
> The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor.<p>So much this. I've never touched the Chinese models (no particular reason) but it is having an impact as the frontier companies are pushing the price down as a defensive measure. Is this pulling forward what would have happened eventually? No idea.<p>It is unclear how effective anyone beyond China and Mistral have been at developing cheaper, capable models. It is an expensive business. I'd be curious if anyone had any thoughts on that
> The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models.<p>The monopoly will likely then shift from the model to the compute, i.e. who has the GPUs to serve inference at scale from the open weight models. The cloud compute giants have basically bought everything that Nvidia, Broadcom etc. have to offer.
Currently, the inference margins are shared between the cloud giants and OpenAI/Anthropic. But if training great models becomes easier for some reason, the cloud giants benefit. Then they'll have used the OpenAI/Anthropic revenue and spending commitments to grow their cloud business, and then can serve other models and make even more money.<p>Given that OpenAI and Anthropic are private, I don't think there is any risk to retail investors in this scenario.
AI not turning out to be so useful, and OpenAI/Anthropic not being able to pay their bills is the correct failure scenario i think, as identified by the author.
> The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor.<p>OpenAI and Anthropic investors yes, however open weight models are good for cloud providers. They can turn the two large customers into direct ai services that can be spread across many customers and reduce the cloud providers overhead on ai services.
unironically sama is probably one of the most honest players here after all, he is burning money and if/when they have achieved AGI they will ask it in how to make money. its a different investor incentive story than trying to monetize into profitability right now that is indeed doomed to fail against china. Having no idea but a vision achieved is rrquired to be met to have those returns is actually the honest part here.
If Altman seriously believes his role is to create AGI then ask how to make the company profitable, he should get removed from his position of leadership asap. That’s crazy territory.<p>It’s a grift, “AGI will save us” is the same as Musk’s “Mars colony”, it’s not supposed to ever happen, it’s supposed to be a goal post they ever move further
> The question I want to ask anyone reading this who might have invested in or in some way backed the hyperscalers and the greater AI industry:<p>> What is it you think you’ve gotten yourself into? Because I think you’re being sold a lie.<p>Hundreds of thousands of dollars of realized gains.<p>And the question I want to ask to anyone paying $70/year for Ed's newsletter: what has throwing the AI baby out with the bathwater gotten you?
[off topic] I'm a writer too and I know people have to make their money but<p>- Huge subscribe CTA at top<p>- In-text subscribe CTA<p>- scroll through that get pop up in your face full page subscribe CTA<p>- close that and continue scrolling to yet another subscribe CTA<p>was enough to make me close the page and ask my agent for a summary rather.
I'm seeing this guy everywhere. He was on Bloomberg a day ago and then on another channel and now here. I'm curious why there are not more people like him voicing their concerns. Makes you wonder if he is completely wrong.
His history of predictions about LLMs is not great and he generally seems ideologically committed to pretending they're almost useless and teetering on the edge of collapse.<p>For example, this article claims:
"Every single story you’ve read about the “incredible growth” of these cloud platforms is an embarrassing misread of three companies that are misleading investors that will more than likely be forced in the next year or two to have to restate revenues, cut remaining performance obligations, and admit that they’ve drastically overbuilt capacity. "<p>In july 2024, Zitron wrote at length about how the economics of OpenAI were likely to collapse in the next 1 to 2 years [1].<p>It seems like the nearly inevitable collapse of generative AI is always 1 to 2 years away, but it's just the details of the intricate financial argument that change.<p>[1]: <a href="https://www.wheresyoured.at/to-serve-altman/" rel="nofollow">https://www.wheresyoured.at/to-serve-altman/</a>
He said:<p>> I am hypothesizing that for OpenAI to survive for longer than two years, it will have to (in no particular order):<p>And listed various things like a technological breakthrough or more fundraising. I would bet he’s right that they’ll fundraise by the end of the year if they can’t IPO and pass the bag to retail investors.<p>What the AI bulls don’t seem to understand is that AI could be a great technological achievement AND an impending economic collapse because the valuations of these companies are absurd, basically requiring them to fulfill 10% of the country’s GDP within the next couple years. The achievements are impressive but vastly outpaced by the mania.
For the record, I agree that the generative AI industry might collapse. But I think Ed Zitron is ideologically committed to this belief in a way that is not a reflection of the evidence, and doesn't seem to update this belief based on new evidence.<p>>What the AI bulls don’t seem to understand is that AI could be a great technological achievement AND an impending economic collapse<p>This doesn't seem to be Ed Zitron's position, though. He is always minimizing the use cases of AI, and seems to think virtually all of the demand is due to the technology industry manufacturing consent.
This is his position, he doesn't have time to say it on corporate media that give him 5 minutes but he starts basically every podcast with (paraphrasing) "LLMs are rightfully a boring several-hundred-million-dollar business that will be important in some industries like coding but the vast majority of the population won't care about".
The fact there are use cases or not for AI is pretty much irrelevant to his overall points. You can disagree on that specific thing but the thesis regarding what is fueling the bubble is pretty well documented by now
>In july 2024, Zitron wrote at length about how the economics of OpenAI were likely to collapse in the next 1 to 2 years [1].<p>One of my clearest memories of the first tech bubble was of a number of people who accurately identified that it WAS a bubble and then predicted it would go pop 12-18 months before it did.<p>They attracted plenty of scorn and derision for being 80% right from people who were 100% wrong.<p>Some also lost a bunch of money - short selling <i>really</i> explodes in your face if you time it badly. It's not enough to know that it is a bubble, you have to be able to know when market sentiment will finally turn which is a gigantic gamble.
Is that the prediction they're claiming is "wrong"? The year's nowhere near out yet.
"I can calculate the motions of the heavenly bodies, but not the madness of men"<p>-- Isaac Newton
He has been on the topic since a while, and has been recently picking up steam as the discourse on AI sustainability is shifting. But he’s not alone at all, quite a lot of economists have been discussing the exact same points he makes. He’s mostly gathering information and publishing
He's the Gary Marcus for this stage of the popularized denial.
I think it's mostly that he's a vocal critic of AI/big tech at a time when much of the public is anti-AI and anti-big-tech, so his message is resonating with people and he's popular.
In order to be invited on TV you must be entertaining first. You don't have to be correct in order to appear more times.<p>Personally I'm of the mindset that the current AI prices are too rich and that AI is very useful. Much like high speed internet in 2000. The prices were too high but the services themselves are great.
There’s also Michael Burry and Gary Marcus, and you can sort of infer Warren Buffett believes the market is frothy
> 'm curious why there are not more people like him voicing their concerns.<p>I have seen such people - notably Jim Chanos.<p>But, Zitron was vocal at the time where fawning over AI companies was basically mandatory everywhere else. He was the one bringing in numbers and, well, passion rather then fear when arguing that point.<p>On security, Brucr Schneier was also calling AI threat claims overblown repeatedly.
Ironically, AI has been great for Ed Zitron.
Has ed zitron ever accounted for the fact that his predictions literally never come true? In most jobs such a poor track record would be disqualifying.
> In most jobs such a poor track record would be disqualifying.<p><i>Economists have entered the chat.</i>
I don’t know. LLMs are plenty often wrong, and some people seem to love them.
His predictions don’t matter… what matters is the thesis and what it is based upon. Literally nobody can predict to the month or even year when a bubble will pop. But you can identify and document that a bubble exists, and what the actors are doing.<p>When reading an article you’re supposed to analyze the actual thesis, not just evaluate if the person is an oracle or not
I’ll give him 18 months before his polemics are written with the assistance of AI and he’s holding NVDA and MU.
<a href="https://x.com/edzitron/status/1817955630784917548" rel="nofollow">https://x.com/edzitron/status/1817955630784917548</a>
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Ed Zitron is like the living human embodiment of the Gell-Mann Amnesia effect, except he only talks about the one topic.
> I’d also argue that the vast majority of their capex exists to support these two load-bearing failsons.<p>Gotcha.