There Isn't an AI Bubble - There Are Three
- Reference: 0179406818
- News link: https://slashdot.org/story/25/09/20/1847246/there-isnt-an-ai-bubble---there-are-three
- Source link:
The first is a classic speculative bubble, with asset prices soaring above their fundamental values (like the 17th century's Dutch "tulip mania"). "The chances of this not being a bubble are between slim and none..."
> Second, AI is also arguably in what we might call an infrastructure bubble , with huge amounts being invested in infrastructure without any certainty that it will be used at full capacity in the future. This happened multiple times in the later 1800s, as railroad investors built thousands of miles of unneeded track to serve future demand that never materialized. More recently, [2]it happened in the late '90s with the rollout of huge amount of fiber optic cable in anticipation of internet traffic demand that didn't turn up until decades later. [3]Companies are pouring billions into GPUs, power systems, and cooling infrastructure, betting that demand will eventually justify the capacity. McKinsey analysts talk of [4]a $7 trillion "race to scale data centers " for AI, and just eight projects in 2025 already represent [5]commitments of over $1 trillion in AI infrastructure investment. Will this be like the railroad booms and busts of the late 1800s? It is impossible to say with any kind of certainty, but it is not unreasonable to think so.
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> Third, AI is certainly in a hype bubble , which is where the promise claimed for a new technology exceeds reality, and the discussion around that technology becomes increasingly detached from likely future outcomes. Remember the hype around NFTs? That was a classic hype bubble. And AI has been in a similar moment for a while. All kinds of media — social, print, and web — are filled with AI-related content, while AI boosterism has been the mood music of the corporate world for the last few years. Meanwhile, a recent [6]MIT study reported that 95% of AI pilot projects fail to generate any returns at all.
But the article ultimately argues there's lessons in the 1990s dotcom boom: that "a thing can be hyped beyond its actual capabilities while still being important... When valuations correct — and they will — the same pattern will emerge: companies that focus on solving real problems with available technology will extract value before, during, and after the crash." The winners will be companies with systematic approaches to extracting value — adopting mixed portfolios with different time horizons and risk levels, while recognizing organizational friction points for a purposeful (and holistic) integration.
"The louder the bubble talk, the more space opens for those willing to take a methodical approach to building value."
Thanks to Slashdot reader [7]Tony Isaac for sharing the article.
[1] https://www.fastcompany.com/91400857/there-isnt-an-ai-bubble-there-are-three-ai-bu
[2] https://www.forbes.com/sites/danrunkevicius/2025/03/24/is-the-ai-boom-headed-for-its-dark-fiber-moment/
[3] https://www.cantorassetmanagement.com/2025/05/29/cantor-perspectives-ais-infrastructure-revolution-a-new-golden-age-of-investment/
[4] https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-cost-of-compute-a-7-trillion-dollar-race-to-scale-data-centers
[5] https://empirixpartners.com/the-trillion-dollar-horizon/
[6] https://www.artificialintelligence-news.com/wp-content/uploads/2025/08/ai_report_2025.pdf
[7] https://www.slashdot.org/~Tony+Isaac
Mostly agreed, but (Score:2)
Genuine, important progress is being made
In a situation where billions are at stake, it's easy to see why hypemongers and pundits spread their nonsense
In a perfect world, real progress would be reported accurately with no predictions about the future
Unfortunately, the world is far from perfect
Expect the hype to get more three-dick-ulous
Re: Mostly agreed, but (Score:2)
Given his other examples were mostly containing real stuff, you seem to totally agree.
The railroads continue to be key to this day, even if they overreacted in the day.
The Internet infrastructure absolutely is critical now, despite the somewhat false start.
speaking of railroads (Score:3)
[1]https://www.scry.llc/2025/09/1... [scry.llc]
"Technology revolutions create "virtuous cycles" where growth in a primary industry drives growth in other industries. During the Steel revolution, the falling cost of steel led to more railroads, which led to cheaper commodities like wheat and coal. Cheaper coal made even cheaper steel for steel-framed buildings, which spawned elevators, penthouse apartments and fire escapes"
[1] https://www.scry.llc/2025/09/16/cost-of-information/
Re: (Score:2)
To use a tech metaphor, think of how many viable phone brands were in a phone store in 2005, and how much brand diversity you see now. Same goes for PC/laptop brands, even tablets. Money moves to find early leaders and funds them, until it's no longer profitable. Then there's a consolidation period, and monopolization of supply chains.
Although there's specific hardware underneath, AI is an app. What are the lifecycle of apps? Take a look at early office app consolidation. Anyone remember dBase? When Oracle'
Re: (Score:2)
> Genuine, important progress is being made
Nope. But they are making a determined effort to manipulate people into thinking that.
Three AI bubbles (Score:2)
> There Isn't an AI Bubble - There Are Three
They're labeled, "Good," "Fast," and "Cheap" and whichever one you (re)pick is the ironic one.
The infrstructure will get reused when it pops (Score:3)
I am skeptical we won't find a use for datacenters. The cooling, electricity, and servers can be reused for more mundane tasks. Sure, nVidia AI chips are wasted money if you can't find a use for them, but every other facet of infrastructure can be reused for any general-purpose computing. I would wager that even the GPUs can be repurposed to be powerful business servers if someone wrote some drivers to move more Java/JavaScript/Python routine processing to GPUs...it obviously won't be as efficient as a conventional CPU, but I am sure it can offset the price of buying new chips.
Just like we got a lot of cheap office furniture on eBay when the dot com bubble popped, I am sure there are going to be some firesales on cloud computing hardware or services when this horrid AI bubble finally pops.
Re: The infrstructure will get reused when it pops (Score:2)
You nija'd me. But I will add that nVIDIA and AMD AI GPUs can be used for HPC. Nuclear weapons modeling, climate models, seismic exploration, aerodynamics (CFD), finite model analysis. The posibilities for reuse are endless
Re: (Score:2)
Good luck with that. DCs of this type are far too specialized for that to happen.
Kind of funny (Score:3)
Kind off funny that the economy in general isnt booming with the existence of this bubble as in past instances where we had major tech bubbles.
Re: (Score:2)
That one is not a surprise: The efficiency gains claimed are entirely fictional. What LLM-type AI is doing is to destroy value. And hence no boom.
Aspects (Score:2)
Having lived through the Dot-Bomb it's basically the same.
You're not going to get a valuation bubble without a hype bubble. And nobody is buying companies for that much who have zero infrastructure. And the stock price is what they use to buy the infrastructure.
These are inextricably linked, not separate phenomena.
This is what Austrian Economists call the 'malinvestment' part of the business cycle. It's caused by artificially cheap money (not set by a market) and will unavoidably be cleared.
Our Orwell is
Re: (Score:1)
> Because an open market in lending rates is de facto prohibited.
I got 0.99% on my car loan. Maybe you are not looking hard enough.
Bubble #4 (Score:3)
Bubble #4 is that already algorithmic improvements are reducing the number of GPUs needed for the same result. I've called the attention mechanism the E=mc^2 moment that ushered in LLMs. What if, instead of the aforementioned ongoing incremental improvements, there is another sharp discontinuity beyond attention -- such as LeCun's JEPA, or embodiment championed these days by Musk -- that also happens to obsolete the GPU?
It is said the human brain is 1 exaflop. Today, that requires 20 MW, but the human brain requires only 20 W. We may wake up one day with a bunch of nuclear reactors we don't need.
The 4th Bubble is labor (Score:3)
The absurd amounts that these companies are paying to poach talent is over inflating the value of people that, based on the few that I've met, would be subpar employees literally anywhere else. Some of them think they $h!t gold; the few I've talked to in this space are so insufferable to even be in the same room. If this bubble bursts, quite a few people are in for a rude awakening about their worth as people.
Trough of Disillusionment (Score:3)
AI is probably in the "trough of disillusionment" phase, which is why there's so many negative articles now.
A few months ago I had ChatGPT run a semantic analysis which produced this graph -
[1]https://www.scry.llc/2025/07/0... [scry.llc]
[1] https://www.scry.llc/2025/07/09/ai-hype-cycle/
Oi (Score:3)
"adopting mixed portfolios with different time horizons and risk levels, while recognizing organizational friction points for a purposeful (and holistic) integration."
Several CEOs around the world just jizzed in their pants without knowing why.
Whoever wrote that sentence needs to be castrated.
i think (Score:1)
The bubble in stories about the AI bubble bursting soon is going to burst soon.
We'll just have to return to stories about who isn't going to manufacture Apple's car.
Re: (Score:2)
> The bubble in stories about the AI bubble bursting soon is going to burst soon. We'll just have to return to stories about who isn't going to manufacture Apple's car.
Adults?
Does it matter (Score:1)
... as long as the technology is good enough to replace relevant portions of the labour force with automated systems however limited they may be.
That's where the "Return" of ROI will come from and we will feel the pinch soon enough, I am afraid.
Can we be clearer about what we mean by AI? (Score:2)
The real problem with AI, and the AI discussion is how muddy it is. Are we talking about llm's diffusion models, or classification systems? Do we mean to say that we're talking about transformers or the underlying architecture? Are we discussing huge data centers or device based AI? Nascent, active, or dormant compute? And the same is true for the ethics, legal, and data governance conversation.
Every single one of these things is a different discussion.
AI is not a monolith.
Re: (Score:2)
When you read "AI" on Slashdot, or in a business article, it's almost certainly a language model made by one of a handful of companies.
If it's about Nvidia it might have something to do with robots.
1st + 3rd are bubbles -- not 2nd (infrustructure) (Score:2)
1st Bubble -- Yes, there is a lot of money invested into so many companies rapidly building AI products and, mostly, retrofitting old things. Obviously, they cannot all be winners.
2nd Non-Bubble -- In spite of a lot of failed projects, there will be more project and there is already too little infrustructure for the demand. For example, Microsoft 365 Copilot is clearly a weak GPT model but vastly under powered (easy to notice if you use it). The first wave of AI companies will have some winners and a lot
Indeed (Score:2)
The analyses of the whole mess and why it is a mess are getting better. Hopefully the inevitable collapse and return to sanity (with a few major players rightfully dead and soon to be forgotten) is not too far ahead.
Dude discovers railway mania (Score:1)
and writes a thesis based on it. The question will be really - when does the Beeching Cut come?
It was always going to be a bubble (Score:2, Insightful)
Because eventually the free training data available online is going to dry up and when that happens anyone who hasn't fully established themselves or who doesn't own one of the big platforms, specifically Google Microsoft and apple, just goes away.
But the potential payoff is replacing trillions of dollars of employees and salaries so it's chump change to the billionaires.
Remember we have a ruling class so past a certain level we have a group of people who can spend unlimited money without consequenc
Re: (Score:2)
What is wrong with you?
Re: (Score:2)
It is even worse: The training data they got in their massive criminal piracy campaign _ages_ and becomes less and less valuable. Nobody is coming out of this as a winner, except for some of the scammers pushing the hype.