The Subprime AI Crisis
We recorded 35 claims from this post. 35 can’t be checked. 15 more are held. Read the post at its source.
Claims from this post (35)
In the order they appear in the post. Each quotation is the speaker’s words in this post. A label such as “Supported” or “Can’t be checked” is the claim’s current assessment; its page has the evidence and the reasons.
Assessment: Can’t be checkedSaid
Conditional forecast
“I also fear that said collapse could be ruinous to big tech, deeply damaging to the startup ecosystem, and will further sour public support for the tech industry.”
Our reading: He fears that the collapse of the generative AI boom could be ruinous to big tech and deeply damaging to the startup ecosystem, and will further sour public support for the tech industry.
No horizon
Only if: if the generative AI boom collapses
Assessment: Can’t be checkedSaid
Forecast
“I’m going to paint you a bleak picture — not just for the big AI players, but for tech more widely, and for the people who work at tech companies — and tell you why I think the conclusion to this sordid saga, as brutal and damaging as it will be, is coming sooner than you think.”
Our reading: The end of the generative AI boom will be brutal and damaging and is coming sooner than people think.
No horizon
Assessment: Can’t be checkedSaid
Forecast
“As I discussed at the end of July, OpenAI needs to raise at least $3 billion — but more like $10 billion to survive, as it is on course to lose $5 billion in 2024, a number that's likely to increase as more complex models demand more compute and more training data, with Anthropic CEO Dario Amodei predicting that future models may cost as much as $100 billion to train.”
Our reading: OpenAI's annual losses are likely to increase beyond $5 billion as more complex models demand more compute and training data.
No horizon
Qualifier: as more complex models demand more compute and training data
Assessment: Can’t be checkedSaid
Conditional forecast
“In effect, investors aren't getting a piece of OpenAI, or any kind of control over OpenAI, but rather shares in the future profits of a company that loses over five billion dollars a year, and will likely lose more in 2025, if it makes it that far.”
Our reading: OpenAI, which loses over $5 billion a year, will likely lose more in 2025, if it makes it that far.
No horizon
Only if: if it makes it that far
Assessment: Can’t be checkedSaid
Forecast
“While The Information reported that OpenAI's revenue is $3.5 to $4.5 billion a year in July, The New York Times reported last week that OpenAI's annual revenues have "now topped $2 billion," which would mean that the end-of-year numbers will likely trend toward the lower end of the estimate.”
Our reading: OpenAI's 2024 end-of-year revenue will likely trend toward the lower end of the $3.5–4.5 billion estimate.
No horizon
Assessment: Can’t be checkedSaid
Causal claim
“It has massive, intractable problems as a result of these models being probabilistic, meaning that they don't know anything, they're just generating an answer (or an image, or a translation, or a summary) based on training data, something that model developers are running out of at an incredible pace.”
Our reading: Generative AI has intractable problems because its models are probabilistic and don't know anything, and developers are rapidly running out of training data.
No horizon
Assessment: Can’t be checkedSaid
Observation
“And even if they did, it isn't clear whether generative AI actually provides much business value at all.”
Our reading: It is not clear that generative AI provides much business value at all.
No horizon
Assessment: Can’t be checkedSaid
Recommendation or value judgment
“Last week, we got our first real, definitive glimpse of what’s around that corner that future. And boy, was it underwhelming.”
Our reading: OpenAI's o1 launch last week, the first real, definitive glimpse of the next generation of models, was underwhelming.
No horizon
Assessment: Can’t be checkedSaid
Observation
“While this sounds like a seismic breakthrough, or even another step towards the highly-feted artificial general intelligence (AGI) — it isn’t — and you can tell by the fact that OpenAI opted to release o1 as its own standalone product, rather than a number update to GPT.”
Our reading: o1's chain-of-thought approach is not a seismic breakthrough or a step toward AGI.
No horizon
Assessment: Can’t be checkedSaid
Observation
“It has described the reinforcement training process as “thinking” and “reasoning,” when, in fact, it’s making guesses, and then guessing on the correctness of those guesses at each step, where the end destination is often something that can be known in advance.”
Our reading: o1 does not think or reason; it makes guesses and then guesses about the correctness of those guesses.
No horizon
Assessment: Can’t be checkedSaid
Causal claim
“All of the things it generates to “consider” an answer (to be clear, this model is not “thinking”) are also charged for, making complex answers for things like coding likely incredibly expensive.”
Our reading: Because hidden reasoning tokens are charged, complex o1 answers such as coding are likely very expensive.
No horizon
Qualifier: hidden reasoning tokens are charged
Assessment: Can’t be checkedSaid
Observation
“OpenAI is shoving Strawberry out the door as a means of proving to investors (and the greater public) that the AI revolution is still here, and what they have is a clunky, unexciting and expensive model.”
Our reading: OpenAI is pushing out o1 (Strawberry) to prove to investors and the wider public that the AI revolution is still here, but what it has is a clunky, unexciting and expensive model.
No horizon
Assessment: Can’t be checkedSaid
Observation
“In fact, I'd argue that o1 shows that OpenAI is both desperate and out of ideas.”
Our reading: o1 shows that OpenAI is desperate and out of ideas.
No horizon
Assessment: Can’t be checkedSaid
Observation
“We’re not “in the early days.””
Our reading: Generative AI is not in its early days, given over $150 billion spent since November 2022.
No horizon
Assessment: Can’t be checkedSaid
Observation
“That it's artificial intelligence.”
Our reading: It is a lie that generative AI is artificial intelligence.
No horizon
Assessment: Can’t be checkedSaid
Forecast
“That it will become artificial intelligence.”
Our reading: It is a lie that generative AI will become artificial intelligence.
No horizon
Assessment: Can’t be checkedSaid
Observation
“That it is inevitable.”
Our reading: It is a lie that generative AI is inevitable.
No horizon
Assessment: Can’t be checkedSaid
Conditional forecast
“Based on how unprofitable they are, I hypothesize that if OpenAI or Anthropic charged prices closer to their actual costs, there would be a ten-to-a-hundred-times increase in the price of API calls, though it's impossible to say how much without the actual numbers.”
Our reading: He hypothesizes that if OpenAI or Anthropic charged prices closer to their actual costs, API prices would rise ten to a hundred times, though he says the amount is impossible to know without the actual numbers.
No horizon
Only if: if they charged prices closer to actual costs
Assessment: Can’t be checkedSaid
Observation
“OpenAI is more than likely charging only a small percentage of what it likely costs to run its models, and can only continue to do so if it is able to continually raise more venture funding than has ever been raised and continue to receive preferential pricing from Microsoft, a company that recently mentioned that it considers OpenAI a competitor.”
Our reading: OpenAI likely charges only a small fraction of its running costs and can only continue if it keeps raising record venture funding and receiving Microsoft's preferential pricing.
No horizon
Qualifier: can continue only with record fundraising and Microsoft preferential pricing
Assessment: Can’t be checkedSaid
Observation
“While we can’t know for sure, I imagine if this stuff was in any way profitable, they’d be talking about the revenue they were receiving from it.”
Our reading: While admitting he can't know for sure, he imagines that if generative AI were in any way profitable for the hyperscalers, they would be talking about the revenue from it, and they are not.
No horizon
Qualifier: while we can't know for sure, I imagine
Assessment: Can’t be checkedSaid
Observation
“What's important to remember here is that other than AI, big tech is out of ideas.”
Our reading: Other than AI, big tech has no new growth ideas.
No horizon
Assessment: Can’t be checkedSaid
Forecast
“This is the most likely path for Amazon and Google, who, while desperate to make Wall Street happy, still have their own profitable monopolies to point to — for now, at least.”
Our reading: The most likely path for Amazon and Google is a Meta-style 'year of efficiency': reducing capital expenditures, laying people off, and promising to slow investment somewhat, since they still have profitable monopolies to point to, for now.
No horizon
Qualifier: for now, at least
Assessment: Can’t be checkedSaid
Forecast
“I deeply worry about the prospect of mass layoffs being used to fund the movement, and nothing about the last few years makes me think they’ll do the right thing and walk away from AI.”
Our reading: He deeply worries that mass layoffs may be used to fund big tech's AI push, and nothing about recent years makes him think they will do the right thing and walk away from AI.
No horizon
Qualifier: I deeply worry
Assessment: Can’t be checkedSaid
Forecast
“I worry, somewhat, that option 2 is far more possible: that these companies are deeply committed to the idea that "AI is the future," and their cultures are so thoroughly disconnected from the creation of software that solves the problems that real people face that they'll burn the entire company to the ground.”
Our reading: Big tech may well choose to cut costs and lay off workers to sustain generative AI spending, burning their companies to the ground.
No horizon
Assessment: Can’t be checkedSaid
Causal claim
“All this could’ve been stopped earlier if the media had actually held them accountable.”
Our reading: The generative AI hype could have been stopped earlier if the media had held tech companies accountable.
No horizon
Qualifier: if media had held companies accountable
Assessment: Can’t be checkedSaid
Observation
“Based on The Information's estimates, Microsoft has somewhere between 400,000 and 4 million users for its Office Copilot features, meaning that there's a decent chance that Microsoft has built out capacity that isn't getting used.”
Our reading: There is a decent chance Microsoft has built data center capacity for Copilot that is not being used.
No horizon
Assessment: Can’t be checkedSaid
Observation
“I realize I sound a little crazy suggesting this, but back in March I made the point that I could find no companies that had integrated generative AI in a way that has truly benefited their bottom line, and just under six months later, I'm still looking.”
Our reading: He has found no company whose generative AI integration has truly benefited its bottom line.
No horizon
Assessment: Can’t be checkedSaid
Causal claim
“While there may be companies "integrating AI" that are driving some degree of spend on Microsoft Azure, Amazon Web Services and Google Cloud, I hypothesize a lot of this demand is driven by investor sentiment, with companies “investing in AI” to keep the markets happy rather than any cost/benefit analysis or actual utility.”
Our reading: He hypothesizes that a lot of cloud demand from companies integrating AI is driven by investor sentiment, with companies investing in AI to keep markets happy rather than for cost/benefit or actual utility.
No horizon
Qualifier: I hypothesize
Assessment: Can’t be checkedSaid
Conditional forecast
“After developing and launching these features, they find customers don't want to pay for them, as Microsoft has found with its 365 Copilot, and if they can't find a way to make them pay for it now, during the AI boom, they're going to be hard pressed to once people's bosses stop asking them to "get in on AI."”
Our reading: In one of several hypothesized scenarios, companies that can't get customers to pay for AI features now, during the boom, will be hard pressed to once bosses stop pushing people to get in on AI.
No horizon
Only if: if they can't get customers to pay during the AI boom
Assessment: Can’t be checkedSaid
Observation
“This point also illustrates one of the biggest problems with generative AI — that, while "powerful" in some vague way, said power mostly boils down to "generates stuff based on other stuff" rather than any "intelligence."”
Our reading: Generative AI's power mostly amounts to generating stuff based on other stuff, not intelligence.
No horizon
Assessment: Can’t be checkedSaid
Conditional forecast
“I believe that a lot of businesses are "trying" AI at the moment, and once those trials end (Gartner predicts that 30% of generative AI projects will be abandoned after their proof of concepts by end of 2025), they'll likely stop paying for the extra features, or stop integrating generative AI into their companies' products.”
Our reading: Once their AI trials end, many businesses will likely stop paying for AI features or stop integrating generative AI into products.
No horizon
Only if: once AI trials end
Assessment: Can’t be checkedSaid
Recommendation or value judgment
“In any case, it's time to accept that the money isn't there.”
Our reading: People should accept that the money in generative AI isn't there.
No horizon
Assessment: Can’t be checkedSaid
Rhetoric
“Yet, unlike cryptocurrency and the metaverse, everybody has joined the party and decided to burn money pursuing an unsustainable, unreliable, unprofitable, and environmentally-destructive boondoggle sold to customers and businesses as "artificial intelligence" that will "automate everything" without it ever having a path to do so.”
Our reading: Unlike with crypto and the metaverse, everybody has joined in burning money on generative AI, an unsustainable, unreliable, unprofitable, environmentally destructive boondoggle sold as AI that will automate everything without any path to doing so.
No horizon
Assessment: Can’t be checkedSaid
Observation
“I hypothesize a kind of subprime AI crisis is brewing, where almost the entire tech industry has bought in on a technology sold at a vastly-discounted rate, heavily-centralized and subsidized by big tech.”
Our reading: He hypothesizes that a kind of subprime AI crisis is brewing, with almost the entire tech industry bought in on a technology sold at vastly discounted rates, heavily centralized and subsidized by big tech.
No horizon
Qualifier: I hypothesize
Assessment: Can’t be checkedSaid
Rhetoric
“But the tech industry is building toward a grotesque reckoning with a lack of creativity enabled by an economy that rewards growth over innovation, monopolization over loyalty, and management over those who actually build things.”
Our reading: The tech industry is building toward a grotesque reckoning with a lack of creativity, enabled by an economy that rewards growth over innovation, monopolization over loyalty, and management over builders.
No horizon
Held from this post (15)
These records did not pass every check, so nothing about them is published. Held is not a finding.
- The criteria are ambiguous. Our reading, not assessed: By the end of the first quarter of 2025 at the latest, investors will begin punishing big tech companies for their AI spending, and the punishment will hit them far harder than NVIDIA.
- The two reviews read the claim differently
- The two reviews read the claim differently
- The two reviews reached different assessments. Our reading, not assessed: If business AI spending falls after trials end, OpenAI and Anthropic will almost certainly have to raise prices, if they haven't already.
- The two reviews read the claim differently
- The two reviews read the claim differently
- The two reviews reached different assessments. Our reading, not assessed: Whether in Q3 or Q4 2024 or even Q1 2025, Wall Street will begin punishing big tech for its AI lust, and the punishment will savage these companies far more harshly than NVIDIA.
- The two reviews read the claim differently
- The two reviews reached different assessments. Our reading, not assessed: Big companies' best effort, stapling AI onto existing products, doesn't appear to be working for anybody, and AI upgrades like Microsoft's don't seem to provide any real business value.
- The two reviews reached different assessments. Our reading, not assessed: Judging from his and others' tests, it seems o1 does not perform like a PhD student in geography, basic elementary-level English tests, math, or programming.
- The two reviews read the claim differently
- The two reviews reached different assessments. Our reading, not assessed: He is deeply concerned the industry is built on sand: LLMs at the scale of ChatGPT, Claude, Gemini and Llama are unsustainable and do not appear to have a path to profitability because of the compute-intensive nature of generative AI.
- The two reviews read the claim differently
- The two reviews read the claim differently
- The two reviews read the claim differently