Specially when those companies are valued in TRILLIONS. Nothing is worth trillions, somehow these surreal numbers have been accepted as hard fact.

The most optimistic take I've seen: AI is a drain on the entire economy that sucks up all investment and this is why the rest of the economy is basically in a recession. Once the bubble pops, investors will flood back into the real economy and correct the problem.

I'm not optimistic.

Hahaha this is fine, I am fine with this, what could possibly go wrong

Basically Dutch Disease.

Yep it's such a fragile situation

Yes! The problem is that we won't accept the full correction that is actually required. We print money, we buy securities, we find ways to prop to reduce the pain but we end up shifting the weakness to other areas of the economy.

Is it just me, or are the bubbles coming closer together these days?

Yes and no.

Yes in the sense that we have a lot more "fad" economies. There is something new so that needs to be EVERYTHING and the market course corrects, often at the cost of hardship for many.

But "no" in the sense of what "bubbles" tend to refer to. Things like the Japanese Bubble Economy where it causes (I forget if it is officially one but) recessions and even depressions.

The AI Bubble is not going to do that (on its own...). Yeah, a LOT of companies are going to be left holding the bag when they realize LLMs can't solve all problems for them AND manifest a Cyber Stana Katic to give them a blowie while it does that. But what will they be left with?

1. A LOT of "prompt engineers": This is bad because that is going to be a LOT of people who, increasingly, went to school to get a degree in something with very little utility. That said... Art History majors have been showing us how to do that for decades and at least they did something they loved on their way to service industry jobs.
2. For the companies that gutted their workforce over the past few years: A need to rapidly hire talented workers who don't require ChatGPT to do their job: This is REALLY good for the people who have been hurting and should actually lead to a lot of job mobility... for the old hats who predated this fad
3. For the companies that purchased hardware: A lot of edge computing devices are going to be of questionable value. But for the folk who "just" bought a shit ton of GPUs from Daddy Jensen? They have a shit ton of GPUs they can either sell for cheap (not horrible) or repurpose (good)

Don't get me wrong. There is going to be upheaval and it is going to be bad. But it is also important to remember that drawings like the above are actively misleading and bordering on manipulative. Because basically all the biggies, except OpenAI, have non-AI uses. Oracle ballooned massively because of the OpenAI injection but... they are still god damned Oracle. Same with nVidia who, when they aren't powering every LLM on the planet, are also one of the companies that makes all the cards that power stuff like computer vision and the like in cars and what not.

Because... remember the dot com bubble? Remember how basically the entire world still runs on The Internet? It was just a case of rebalancing and pivoting for the most part.

All that said... the US is in a really bad way because the fascists have been increasingly gutting the economy and stopping basically any industry that involves manufacturing or communicating with external countries. We are gonna have a massive stock market crash when OpenAI et al pops...

Global economy has inflation since what, middle of the last century? Since slavery and colonies stopped being a thing?

I think it's hard to definitely call something a bubble until it pops.

The definition of a bubble goes something along the lines of market prices exceeding the intrinsic value of the investment they represent, which may be true here?

If you want to read more about this the rough name for these companies was "the magnificent seven" a year or so ago when I last looked at this. A quick Google suggests represent about a third of the SNP 500's value now and have a cape ratio (cyclicly adjusted price to earnings) of ~37 compared to 15-20 being normal.

Edit: the above baseline is incorrect; see sugar_in_tea's comment for a more accurate baseline and some interesting counterpoints

I can't find a good numerical source for the correlated risk within this group, and I suspect analyzing it is very difficult. Given they all used to be a lot more diversified in the past but now a large % of their valuation is predicated on AI historical correlation analysis probably fails. But the diagram linked here suggests it's probably bad to put all your money in these companies. (Or even a 3rd if you are in an s&p 500 index tracker 😶)

Like, none of this definitively says this is a bubble, since if it were possible to divine that the bubble would immediately pop, but it does suggest there is a strong likelihood we are seeing a bubble.

All the economy is a big circle if you draw the circle big enough.

Actually scratch that. There is an economy that is not just one big circle jerk, such as the development of new technologies or the terraforming of deserts into fertile land; as neither of these things ends the way it started; it brought lasting change, and that is true progress.

Actually did you see my presentation that i made about this recently?

The point is to convince the americans to invest in new technologies.

To all those who say that human spaceflight is impossible:

Great point.

I know right? It’s not a bubble if there are transactions between the different companies in an industry. Nothing here shows that these investments are self-supporting circular, nor that all of this is propping up the economy.

Circle != bubble

Eh. Lemmy has a lot of ignorance surrounding technology and science compared to other sites. Hacker News is what you're looking for if you want somewhere that is full of the most tech savvy people on the Internet, and most of them are extremely pro AI (with some weird AI cultishness alongside). Myself I think AI is a bubble but there is a lot of promise in the underlying technology once you take away the hype, just like the .com bubble at the turn of the century.

Investments and income have been divorced from reality for a while now, bud.

I thought it was the place for people who didn't want their shitposting interrupted by random child porn. Am...am I in the wrong place???

If Lemmy is supposed to be the place where the most tech savvy people in the interest congregate

Says who? Mostly feels more like sales than R&D here. Which kinda fits with these pitches.

Lemmy is not the most tech savvy people on the internet nor the customer base for AI. Where did you get either of those ideas?

Nvidia are very smart in that regard, ethics aside. Very early on they decided that selling cards to gamers will not give them the infinite growth everyone so desperately desire, so they started looking for what does, and they were consistent at it ever since. Every tech bubble of the recent history is powered by Nvidia cards. How much they contributed to the hype (and damage) is not entirely clear, but that's not zero for sure

They made gpus long before the gold rush and will not stop after. The usefulness of tensor cores will not dwindle with any market correction. Even before ai boom they were valued astronomically out of reality. Not a single stock is tied to actual selling or owning of anything anymore

Ai will be the best tool to keep the masses stupid since television.

The GDP issue is not because of the AI bubble, it's because of tariffs and the complete destruction of US soft power abroad

Please let this happen.

God damn it, if the US collapses who will supply weapons to all its peaceful democratic allies in the world? I'm super fucking pissed off about this.

The entire US economy has been running off of an asset megabubble that demands global dollar recycling via Wall St. and property for decades now. This is much worse than 2008 as there is no cushioning. We will see what 20+ of doubling down looks like in the end.

Houses have value: you can live in them. Yet there was a housing bubble.

Was?

but the circles

I suppose similar in the sense that the housing bubble involved a bunch of rich idiots speculating on bad debt that had been vaguely washed to make it look good and now we have a bunch of rich idiots speculating on AI based on vague promises that it'll be good.

More like the .com bubble but much worse.

Yes, you absolutely will be effected.

In a general way, the plebs always do the heavy lifting - a universal truth since the dawn of time.

More specifically, your pension / 401k will lose a heap of money.

As the economy contracts there will be lay offs.

That means loan defaults, et cetera.

I don't know the answer, but during 2008 onwards (seems like the economy didn't fully recover until the end of Obama's presidency), every industry slowed down. Was hard for me to get a fast food job or consistent minimum wage assembly line work through temp agencies. Things can go into vicious positive feedback loops during downturns (investors afraid to invest due to bad economic outlook -> factories and such don't get built or expanded -> unemployment rises -> people spend less -> companies start laying off -> economic outlook worsens -> investors selling and moving to "safer' assets -> ...). The entire banking system pretty much imploded during 2008; I don't know how much exposure banks have to AI (commercial real estate is another thing to worry about though). With any luck the AI crash would be more like the dot-com crash, which mostly just hurt one industry (but I remember my father talking about factory layoffs during that too).

One thing people didn't mention is that I'm pretty sure the top 10% of Americans by income make up 50% of consumption because of the heavily K shaped revovery that has happened. These Americans have a large percentage of their wealth in stocks, and if the stock market crashes, they will feel less wealthy and less willing to spend, decreasing their spending, tanking the US economy.

Your pension is tied to these companies stocks. I can pretty much guarantee that "your" pension fund owns quite a few of these stocks.

But, and this is the important part, that isn't your pension. It is the pension for those that are retired right now. There is no saved stack of money that you earned during your life thats waiting for you. Unless there is an equal amount of tax paying workers by the time you retire, you wont be getting that pension.

Pension funds are to a large extent exposed to the stock indices. Since these companies grow and grow in valuation, a larger portion of pension funds are exposed to these companies. The so-called "magnificent seven" make up about 35% of the US stock market now. A lot of people will see a large portion of their pension savings affected by this. If you are not a US citizen, you sre still likely exposed to these companies.

One reason it’s dangerous is that the rest of the economy sucks, so AI is masking bigger problems which will become evident and tumble out of control when the money has nowhere left to go.

Were you affected by the dotcom bubble?

Maybe the remaining tech companies, such as Microsoft and Nvidia, might raise prices of their products to cover the losses.

Goldman Sachs also though NINA mortgages were a good idea, and they also thought it was a good idea to bundle bad mortgages in with good mortgages, and find a rater to mark them AAA investments.

And then we saw how that worked out.

I mean, what's he gonna say?

I wonder what the people over at Bear Stearns think oh wait they gone.

They will just cut power to people's houses. What are the Americans gonna do? Rise up and rebel? lol

The s&p 500 tanks a ton and banks call on loans from these AI hyped companies using the price of the stocks as collateral (previously expected to rise). Credit crunch and now companies tighten the belts even further so higher unemployment again. Federal funds rate gets slashed and those that can manage steady good work during the recovery years will be fine. Everyone else will be struggle busing as usual

Used GPUs

yes, We can't prevent the bubble burst. We can hope it happens sooner rather than later but the bubble is baked in. So what companies and individuals can to is basically buy up their detritus at bargain prices. And then use them to make better, more solid companies that do not require $3T investment while showing no fucking profit.

A bunch of brain dead junior Devs who cannot think for themselves

But what will be left after it bursts?

Affordable GPUs? Less pushy AI commercials?

The wealthy will just move on to the next thing to inflate. Capitalists don't work. They don't care about anything other than ROI.

The gpus will still be used for AI, just not as profitable

What was left after the cryptocurrency crash? A whole lot of GPUs that got repurposed for AI. They'll just get repurposed for whatever extremely computationally intensive thing some computer engineer comes up with. Until that bubble bursts, rinse and repeat. What's happening is project managers are selling the next big thing to make a lot of capital really quickly to a board of directors.

There are many fine uses for tensor cores, we will not stop processing data.

And no one with any influence will learn from it. Then it happens all over again

Will it have Margot Robbie in a bathtub?

bad on you for letting them use your money

Oh, but you can bet your bottom dollar there are still something like 20:1 ratio of dark-market bets synthetic collateral against these shares further underpinning valuations.

Legitimately fear that this will make the ‘08 meltdown look quaint in comparison, as the fiscal stress will not be limited to shares but impact loads of financial instruments (home and car loans, retirement accounts etc.).

And that is why Yamaha makes everything from musical instruments to motorcycles

Many of the economic advisors accompanying the SCAP administration had experience with the New Deal and were highly suspicious of monopolies and restrictive business practices

Your country was very different then.

Why should it pop sooner? US money can’t go anywhere else with the same profit margins. It‘ll run out if something more profitable comes around. Maybe a war or so.

Can you explain how we're beyond bubbles like I'm 5? Is it that there are gentler market corrections now?

I've been saying the same thing.

The 2008 housing bubble was predicated on cheap lending. It was all debt. It was massive amounts of toxic debt sold around Wall Street, like using Trump Coin or counterfeit cash used to buy a house.

The vast majority of what's happening here is not debt. Sure, some, but very little. Even the OpenAI AMD stock swap thing is swapping a gamble on stocks worth real money, not debt.

IMO the first sub-bubble to pop will be all the time and effort wasted on "Startups" that are nothing more than a couple people acting as a wrapper for an AI agent. That's not really going to impact the economy too much on its face, but suddenly a lot of people are going to go from being "entrepreneurs" to being truly unemployed.

Edit: Also, just saw this gem, and THIS is how you get a supercharged 2008 repeat, bank deregulation and $2.6 trillion in lending. Which is exactly how we got to 2008's subprime lending.

Idk if ghost city thing was a bubble tho.

China used planned infrastructure and bunch of confused journalists in US were like "what kind of government plans for housing of their citizens"

And the main AI companies have actual products that make money for them rolled out already. So it is not like the dot com bubble

Citation needed.

I don’t think the AI bubble will burst is because it is driven by companies that actually make money.

Last I looked, the big AI companies are all hemorrhaging money.

I think the biggest difference between this bubble and the ones that pop are whether the valuations were built by debt. In this case - no. So when their products turn out to be less useful than they claim, it will devaluate. But the debt issued to build the bubble wont go through a sudden correction that is amplified and causes an even bigger collapse like in 2008 or the dotcom bubble.

In bicycle repair terms it is called a slow leak.

Well argued. Also, even if it is a bubble, it's arguable that most technology innovations are preceded by necessary bubbles which are important for directing investment into emerging technologies. The railroad mania in the 19th century or the fibre optic rollout in the late 1990s, during the dot com boom, benefited humanity long after the froth and excitement subsidied.

Its not a bubble but most people here dont think for themselves. They dont even seem to understand the connection between what news is put out, which analysts they choose to give attention, and for what purpose.

Imagine living your life and just believing whatever someone says in the news just because he has the title of analyst. And never thinking about who profits from that specific guy being on the news at that specific time. Who picked that guy to say what he does and why? Its not random.

Being able to influence the market is key to making a lot of money. How do people think they influence the market? This is how they do it. How else?

Sometimes they probably lose money too, specially when orange man opens his mouth and says something very stupid, like last Friday. But then they position themselves for the coming uptrend and make their money back, maybe even more then they had before, since they have giant pockets.

Well, they now control all the money, so they can decide all the value.

What

you say that like skynet is a bad thing?

True, but consider that a huge amount of retail investors' portfolios are tied to the S&P 500/NASDAQ. Think retirement savings, IRAs, 401(k)s, pensions, etc. Then consider that the entire market is effectively propped up by AI right now (see: The entire stock market is being carried by these four AI stocks). If the market gets a 60% correction, it's going to be the middle class losing their shirts all over again.

License plate readers? Facial recognition? Speech recognition?

Timing is a fools game for sure. Bubble could pop next month, next year, or even later.

If you're old, make sure you have a good percent in bonds. If you're young, make sure you have 6-12 months saved in case of layoffs and keep saving - market will look completely different in 20-30 years anyways so it's not worth worrying about.

Zoom out past a week? 5-10% swings are not uncommon.

Crypto had it's black monday.

The fall may have been accelerated by portfolio insurance hedging (using computer-based models to buy or sell index futures in various stock market conditions) or a self-reinforcing contagion of fear

Algorithms and feedback loops gummed up all the crypto exchanges and liquidity disappeared.

The crypto tide went out and we all saw who wasn't wearing any shorts.

Isn't crypto being massaged by trump atm, so erratic is kinda the new normal? (And, not erratic from trumps view)

Wasn't that just a temporary drop so that some whales could get richer on shorts?

They're all paying each other. That's literally the point this image is trying to express.

What's especially insane is that the companies that are actually providing the service to end users, i.e. Coreweave et al, are not the ones seeing massively inflated prices, contrary to your point about the monthly fees justifying the higher evaluation.

1. it's not AI, regardless of how many idiots repeat that bullshit. It is machine learning with glorified pattern recognition.

2. Why would anyone want to enter the market? It has no practical use that justifies the energy consumption. Because it is not targeted, for every individual application, there are much more efficient ways to accomolish the same/better results for much less energy.

Literally the entire point of searching something is to open up the links and find out more about what it's saying.... Do you need your AI to come up with the search queries too???

I think you are overestimating the amount people will pay for convenience or cling to their old ways.

Did e-readers kill the bookstore? Some people will always prefer to cook out of a book or dive into docs to write code.

Or look at the modern streaming landscape. In the beginning there was basically Netflix and everyone was fine paying that monthly fee for the convenience of streaming basically everything. Now we have 20+ vendors all charging for some subset of content. And we have seen a corresponding loss in subscribers as people hit the limit of what they are willing to pay for convenience.

they're giving out ai memberships and trials constantly to try to get ppl used to it paying for it, hasnt worked, ngl I generate images ocsssionaly I like seeing random mashups sometimes, but id never pay for it if its free and fast why not, I was never gonna pay anyone to do it and im not selling anything, dont get why ppl get all pissy when ai is used for self entertainment