“TOAre we really in an AI bubble,” asked a reader of last month’s column about Nvidia’s seemingly unstoppable rise, “and how would we know?” Good question, so I asked an AI about it and they pointed me out investopedia, which is written by humans who know about these things. He told me that a bubble goes through five stages, something like Elisabeth Kübler-Ross said that people do it with pain. For investment bubbles, the five stages are displacement, boom, euphoria, profit taking and panic. So let’s see how this relates to our experience so far with AI.
First, the displacement. That’s easy: it was ChatGPT that didn’t work. When it appeared on November 30, 2022, the world went crazy. Then everyone realized, this That’s what all the buzz surrounding AI was about! And people were enchanted by the discovery that you could talk to a machine and it would respond (well, write to you) in coherent sentences. It was like the moment in the spring of 1993 when people saw Mosaicthe first proper web browser, and suddenly the penny dropped: then this That’s what that “Internet” thing was for. And then Netscape made its initial public offering in August 1995, when stocks went stratospheric and the first Internet bubble began to inflate.
Second stage: boom. The launch of ChatGPT revealed that all the big tech companies had been playing with this AI technology for years, but had been too afraid to tell the world due to the intrinsic weakness of the technology. However, once OpenAI, the creator of ChatGPT, let the cat out of the bag, fomo (fear of missing out) took over. And there was alarm because the other companies realized that Microsoft had beaten them to it by quietly investing in OpenAI and, in doing so, had gained privileged access to the powerful GPT-4 large multimodal model. Satya Nadella, the head of Microsoft, recklessly let slip that his intention had been to make Google “dance.” If that was really his plan, it worked: Google, which considered itself a leader in machine learning, launched its Bard chatbot. before it was ready and he withdrew amid cries of ridicule.
But the enthusiasm also sparked upheavals in the tech weeds, and suddenly we saw a proliferation of startups founded by entrepreneurs who saw the big “foundation” models of tech companies as platforms on which new things could be built – just like the entrepreneurs. I once saw the website as such foundational basis. These seedlings were funded by venture capitalists in the traditional way, but some of them received large investments from both technology companies and corporations like Nvidia that were manufacturing the hardware on which an AI future can supposedly be built.
The third stage of the cycle, euphoria, is what we are in now. Caution has been thrown to the wind and seemingly rational companies are betting colossal amounts of money on AI. Sam Altman, the head of OpenAI, started talking about raising $7 trillion from Middle East petrostates for a big push that would create AGI (artificial general intelligence). He’s also hedging his bets by partnering with Microsoft to spend $100 billion building the Stargate supercomputer. All this seems to be based on an article of faith; That is, all that is needed to create superintelligent machines is (a) infinitely more data and (b) infinitely more computing power. And the strange thing is that right now the world seems to be taking these fantasies at face value.
Which brings us to the fourth stage of the cycle: making profits. This is where astute traders detect that the process is becoming unhinged and begin to exit before the bubble bursts. Since no one is making real money yet from AI except those who build the hardware, there is very little profit to be made, except perhaps those who own shares of Nvidia or Apple, Amazon, Meta, Microsoft and Alphabet (nee Google). This generative AI is great for spending money, but not for producing returns on investment.
The fifth stage, panic, is yet to come. At some point, a bubble is punctured and a rapid downward curve begins as people frantically try to get out while they can. It is unclear what will trigger this process in the case of AI. It could be that governments will eventually tire of having uncontrollable corporate giants running around with investors’ money. Or that the shareholders come to the same conclusion. Or that we finally realize that AI technology is an environmental disaster in the making; The planet cannot be full of data centers.
But it will explode: nothing grows exponentially forever. So, back to the original question: are we stuck in an AI bubble? Is the Pope Catholic?
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what i have been reading
Creation theory
The state of culture, 2024 is an intriguing blog post by Ted Gioia.
pandemic awareness
Report from the consulting firm Cambridge Econometrics The economic burden of long Covid in the UK makes for sobering reading.
Deadly thoughts
Doc Searls, one of the largest on the web, has published the striking Death is a feature on his eponymous blog.