If the AI bubble like the Internet, in what year are we now?

[bargainman]

On 2/28/2024 at 3:11 AM, mattee2264 said:

Something I have seen doing the rounds on Fin Twit is the idea that the release of Chat GPT is equivalent to the launch of the first web browser in the early 90s which means that we are only just getting started. 

 

 Its day one,  and the investment and innovation going into this is astounding...  As Is the pace

[tnp20]

It is so early in this game ...this is a 30+ year revolution unfolding ....innovation happening so rapidly that I can not keep up on a daily basis - I am signed up for like 20 AI newsletters....

 

Today - microsoft came out with a 1 bit model (normal is 16 or 32 bit)....lower the level of quantization , faster and more efficient it is with what was thought to be loss in accuracy but thats not the case 

 

YOu guys have seen Openai's SORA mode

 

www.openai.com/sora

 

now you can take a picture and turn it into a talking picture.

 

 

The media industry is going to be revolutionized ....

 

 

[bargainman]

10 hours ago, tnp20 said:

It is so early in this game ...this is a 30+ year revolution unfolding ....innovation happening so rapidly that I can not keep up on a daily basis - I am signed up for like 20 AI newsletters....

 

Today - microsoft came out with a 1 bit model (normal is 16 or 32 bit)....lower the level of quantization , faster and more efficient it is with what was thought to be loss in accuracy but thats not the case 

 

YOu guys have seen Openai's SORA mode

 

www.openai.com/sora

 

now you can take a picture and turn it into a talking picture.

 

 

The media industry is going to be revolutionized ....

 

 

I assume you have watched the talks by Ray Kurzweil and Tony Seba?

[Libs]

A negative take on the subject. What do our resident experts think of this?

 

https://garymarcus.substack.com/p/the-great-ai-retrenchment-has-begun

[mattee2264]

So far it is a virtuous cycle. Big Tech pump up NVIDIA stock price. NVIDIA going vertical boosts confidence in AI and supports the narrative that Ai will change the world. 

Big Tech's huge investments in AI make investors believe that incredible growth and profits lie ahead even though these companies already have multi-trillion market caps.

 

And AI is the easiest thing in the world to market. Corporates are rubbing their hands with glee imagining the potential to lay off half their workers. 

Consumers have been enchanted by Chat GPT already and can't wait to try the latest iterations. 

 

But there is a lot of extrapolation going on. Existing use cases are cheating on college papers, drafting emails, taking meeting notes and providing a somewhat superior upgrade to chat bots and personal assistants (Alexa etc). Useful maybe. But is it really going to move the needle and justify continued spending of tens of billions a year?

 

Also a lot of the spending is defensive. In the same way that Big Tech maintained their dominance by acquiring every potential competitor they are stockpiling chips and investing in AI start-ups. They'd rather lose money investing in something that ultimately turns out to have low returns than risk missing out on the next big thing and getting disrupted.

 

But as people said early days. People will have a bit of patience because the technology is new and there is still the belief that if enough computational power is thrown at AI it will bear fruit and mature into AGI. But eventually AI will have to deliver in a meaningful way to the ultimate users. 

 

[UK]

So after missing NVDA or TSM recently I was curious about and reading a lot of stuff like this:

 

https://www.economist.com/by-invitation/2024/06/17/ray-kurzweil-on-how-ai-will-transform-the-physical-world

 

https://www.ft.com/content/03895dc4-a3b7-481e-95cc-336a524f2ac2

 

But the funniest thing is, that even if I knew that such or similar predictions / fears are true (call me a skeptic, but no idea), I still would not have any firm view how one supposed to benefit from all this or at least not to be killed by this God-like AI, as investor:). Maybe just to be silly and own SNP500, which will include most possible winners and losers, as more extreme scenarious just would not matter anyway:)?

 

Edited June 20 by UK

[mattee2264]

I don't think anyone can really claim that AI is within their circle of competence.  But at the same time no-one wants to miss out. 

 

Most people just buy NVIDIA. They are the only ones making any money from AI and the gold rush analogy is intuitively appealing. So long as everyone believes there is gold to be found they will keep panning for gold and NVIDIA has a monopoly in picks and shovels. 

 

Big Tech have been cornering the market in AI chips and also funding start-ups and partnering with OpenAI. 

And with their massive user-base it seems logical that if AI-enhancements make their products more valuable then they will make money (although question is whether they will make enough money to justify their huge capex spend). 

 

The problem is that incumbents rarely come up with anything revolutionary. Doing so would mean cannibalizing their existing technologies and products and also as companies mature they become less dynamic and more focused on efficiency and monetization than innovation. And a lot of their investment is defensive in nature. Good for them. But bad for everyone else because it is blocking progress. 

 

 

[Malmqky]

2 hours ago, mattee2264 said:

I don't think anyone can really claim that AI is within their circle of competence.  But at the same time no-one wants to miss out. 

I don't really work with AI as part of my software dev job, but know quite a few people who work at FAANG doing cutting edge ML research, working directly on Bard, FB’s offering, Microsoft’s OpenAI integration, etc.
 

I think they’d all agree with you - a lot of the AI work being done is defensive in nature and the actual feasibility isn’t certain yet. 

 

And don’t get me started on these random Fortune 500 companies implementing AI. What a joke.

 

It’ll be interesting once the dust clears.

[UK]

This piece is good: https://stratechery.com/2024/ai-integration-and-modularization/

[mattee2264]

Something that Big Tech should be very worried about at the advent of a new technology is you cannot control people.

Fat salaries are not enough. Bright young things are always going to want to take the first class training they've had places like Meta, Google, OpenAI and start their own companies. Being a "founder" is considered very cool by the kids. 

 

[UK]

https://www.bloomberg.com/news/articles/2024-06-21/softbank-s-son-aims-to-create-super-ai-in-new-investment-drive?embedded-checkout=true

 

But after grappling with his failures over the past year, during which his entrepreneurial father passed away, Son said he woke up with an epiphany Friday morning. “I had my answer,” Son told shareholders gathered at an annual meeting. “I made some checks, and I see my path forward.”

“This is what I was born to do — to realize ASI,” Son said, without elaborating on what his next plans might be. “Watch me, I will make it happen.”

SoftBank is working on a plan to deploy some $100 billion into AI-related chips in a project dubbed Izanagi, Bloomberg reported in February.

 

[mattee2264]

https://www.theatlantic.com/technology/archive/2024/07/thrive-ai-health-huffington-altman-faith/678984/?gift=bQgJMMVzeo8RHHcE1_KM0dnShzV9_FNXfV9x6vixORQ&utm_source=copy-link&utm_medium=social&utm_campaign=share

 

This article is a bit waffly but its basic premise is fascinating:

 

"Faith is not a bad thing. We need faith as a powerful motivating force for progress and a way to expand our vision of what is possible. But faith, in the wrong context, is dangerous, especially when it is blind. An industry powered by blind faith seems particularly troubling. Blind faith gives those who stand to profit an enormous amount of leverage; it opens up space for delusion and for grifters looking to make a quick buck.

 

The greatest trick of a faith-based industry is that it effortlessly and constantly moves the goal posts, resisting evaluation and sidestepping criticism. The promise of something glorious, just out of reach, continues to string unwitting people along. All while half-baked visions promise salvation that may never come."

 

Reminds me of the concept of religion stocks. And when you think about it there are so many reinforcing factors. 

 

-The dizzying ascent of technology stocks and especially NVIDIA seemingly confirming the promise of AI 

-The huge investments by "smart money" aka the tech giants in AI technology

-The proliferation of Chat GPT which has enchanted consumers and business people alike 

-Sam Altman's masterful balancing act of downplaying the current capabilities while making seemingly profound pronouncements about future possibilities

-The chorus of companies mentioning AI at every single opportunity in earnings calls and presentations and company literature

-The appeal to greed as companies dream about the possibility of laying off half their workforces and increasing profits 

-The appeal to fear as workers worry about losing their jobs so figure they may as well invest in the technology that will eventually displace them

 

And I am sure there are lots of others I have missed out. 

[UK]

https://www.bloomberg.com/news/articles/2024-09-03/shorts-are-circling-some-of-the-ai-boom-s-biggest-question-marks

[mattee2264]

Something I am trying to get my head around is the impact of all the AI spend on Mag7 profitability.

 

For NVIDIA It is quite obvious. The AI capex of the other Mag7 members is NVIDIA's revenue and so long as they keep spending on NVIDIA chips at any price then NVIDIA will continue to enjoy insane margins and revenue growth.

 

But I am wondering if there is also a benefit to the cloud divisions of Amazon Google and Microsoft. Presumably AI's insane computing and data requirements is increasing demand for cloud and therefore giving a boost to cloud growth? And cloud remains the biggest growth driver for Amazon Google and Microsoft who without it would be mature companies that would struggle to grow at double digit rates. 

 

If you look at the Q3 results of Mag7 members cloud growth is still incredibly strong and helping to justify multiples of around 40-50x earnings. 

And earning power is massive even without much in the way of contribution from nascent AI products. 

 

In the event that the AI investment boom turns to bust due to overcapacity and insufficient returns on all the associated capex then will the earning power of the other Mag7 members (as well as NVIDIA) take a hit? 

 

Or is this overwhelmed by the massive non-AI tailwind because over the world companies increasingly switch from on-premises software/hardware to cloud?