Discussion
AI Bubble Teetering on the Brink as OpenAI Admits to Massive Financial Failure in Leaked Documents
Financial Times reveals that OpenAI’s annualized revenue is roughly $20 billion lower than previously expected:
https://futurism.com/future-society/ai-financial-bubble-openai-billions-failure
@cstross This is shaping up to be the longest Wile E. Coyote moment in my lifetime! About the only thing that's obvious by now is the collapse of asset prices and credit markets will be sudden and catastrophic. My money is still on Oracle imploding first, but who really knows? The math ain't been mathing for years, yet the crisis keeps on not happening. 🤷🏻♂️
@cstross But surely their super intelligent internal LLMs that are way better than anything the rest of us have seen so far (and that are also totally sentient and with emotions of their own) will EASILY come up with a business plan to save the company.
Right?
After all, any other outcome would mean they've been lying to us all this time...
@cstross On the personal upside, maybe I'll be able to drop some money on a new laptop without spending nearly double what it would have cost me before the tulip farmers sucked up all the silicon foundry capacity. On the downside, Iwonder what my pension fund is going to look like when the tulips get blight.
@cstross
As I posted previously, the only reason they started talking about AI as a national security priority that needs government regulations instead of it being a private corporate endeavor when the c-suite executives realized they were going to need a public bailout.
Now that so many have gone public and the markets have overvalued their IPO’s, even those of us on a pension will get to feel the financial pain of their foolhardiness
@cstross Their CEO is just a liar and a used car salesman. But that is what Americans love. We’ve elected one as president.. TWICE!
@cstross Maybe the "bad things" we have to put up with include the bankruptcy of OpenAI and the jailing of Sam Altman? Although, you know, he's such a great prognosticator that I'm sure he would have told us about it by now....
@Dtraslerwriting What I'm worried about is a global financial crisis as bad as 2008, when a couple of trillion dollars of assets evaporate overnight and investors go broke. Taking down everything *else* they've used as security for loans to shovel into the AI Mammon's maw.
@cstross @Dtraslerwriting Sure. I suppose it'll be heavier than 2008. But there's nothing we can do to prevent the bubble bursting. That's a thing a bubble always does. And fascist/conservative/liberal politics will do nothing, except socialize the losses like with european austerity policy.
@cstross
Idk why, but your toot gives me kinda Oracle vibes…
I would love for it to be a couple of trillion dollars. My back-of-the-envelope estimate was around 30 trillion, and that was about a year ago so it’s probably more now. The lowest estimate I’ve seen from a real economist was 15, the highest was 40.
Wiping even $15 T off the US stock market is going to have a catastrophic impact on pension funds, which have all been pushed to higher-risk investments due to the poor returns of everything else.
@david_chisnall @cstross @Dtraslerwriting comparing https://stockanalysis.com/list/ai-stocks/ to https://siblisresearch.com/data/us-stock-market-value/ is terrifying indeed.
@david_chisnall @cstross @Dtraslerwriting pension funds haven't been forced into this. Their owners have opted, time and again, to chase "market beating" returns so that they can reduce the amount of funding required by governments and corporations. It's extra-hard to beat the market when you comprise a substantial fraction of the market, of course.
Warren Buffett was one of the few people to identify this problem, many years ago.
@david_chisnall @cstross @Dtraslerwriting that includes Australia. My pension fund sharemarket options have lost money over the last 12 months, a tiny percentage but definitely losing money. Even more so taking inflation into account.
I switched to the most conservative, cash-heavy option because I'm too old to recover from even a 20% fall.
The fallout from a crash is going to be catastrophic. Even a soft landing will be ugly.
Especially the government debt from bailing the fuckers out.
@david_chisnall @cstross @Dtraslerwriting So many of these problems would be simply solved by taxing the rich at the same rate as the poor
@david_chisnall @cstross @Dtraslerwriting
That would be apocalyptic. Like government collapse levels of bad, potentially.
@rk @david_chisnall @cstross @Dtraslerwriting this is why i've been talking for the past year or so about Great Depression 2
an opinion i arrived at just looking at AI bubble economics
we're already in pre-recession. it's gonna be bad. get to know your neighbours.
@davidgerard @rk @david_chisnall @cstross @Dtraslerwriting And the problem will be compounded by Trump’s disastrous policies.
@qhstone @davidgerard @rk @david_chisnall @Dtraslerwriting Worse than that! In 2008, the US govt was led by George W. Bush, who was deeply insular and incurious but at least wasn't trying to loot the treasury. Trump will have *no* compunction about making the crisis worse if he can personally profit from it, and his understanding of economics is risibly poor and will prove an obstacle to survival.
He'll be worse than Herbert Hoover.
@cstross @qhstone @davidgerard @david_chisnall @Dtraslerwriting
Hoover was an idiot but by God he at least *tried* to help.
@rk @qhstone @davidgerard @david_chisnall @Dtraslerwriting Trump will try to help too! That is, he'll help himself.
@davidgerard @rk @david_chisnall @cstross @Dtraslerwriting the AI bubble plus the tariff madness, the fuel crisis, and the huge cuts to government spending… it’s going to be ugly
@cstross @Dtraslerwriting "As bad as 2008" is some Altman-level optimism about the future. It will be an order of magnitude worse.
@cstross
On that note I'm scared of shifty back door bailout crap where the US gov takes some ownership of these pigs with our money. Also smelling like 2008.
@Dtraslerwriting
@cstross Isn't it weird that there was a crisis in 2008 and the people who work in the financial sector are not DESPERATE to avoid it happening again? I really don't understand the big money stuff, so I'm grateful there are people who can lay it out for me, but if their whole business runs on this stuff, why are they not more...you know...responsible? Do they make money on the up AND the down? How? Why?
Also, love your books. Wish more people listened to you.
@Dtraslerwriting @cstross Why would they be desperate to AVOID it happening again? The ones who caused it to happen made out like bandits. (Actually way better than any bandits.)
The ones to blame got billions in bailouts. While shafting everyone else.
From the point of view of the extremely wealthy, both of those are wins.
So of course they're going to want to repeat it again and again as often as they can.
@isaackuo @Dtraslerwriting Absolutely this. 2008 was in hindsight the first test-run of disaster capitalism at home in the first-world leading economies. Led to austerity, mafia-style bust-outs, socializing losses and privatizing profits, and all the rest of our current malaise. History will mark it as the beginning of the end of the western system's ascendancy.
Do they make money on the up AND the down?
Yes, many of them. On the way down, shorts and put options make you money. But there’s more to it than that.
A lot of these people think the6 are smarter than all of the other investors in the market. And you can make a lot of money in a bubble as long as you get out before the crash. If you think you are better at predicting the timing of the crash, the best strategy is to keep investing and watching the line go up and get out just before the crash. Part of the problem is that everyone who does this inflates the bubble.
And, after a crash, whoever has spare liquidity wins. 2008 showed a lot of rich people that you can make an absolute killing during a crash because there are loads of undervalued assets available. The same thing happened in the 2020 crash. Pretty much anything you bought in the middle of 2020 went up by at least 50% in the next year or two, a lot of things doubled within a year.
Even the Great Depression was like this. People who bought stocks on the margin (borrowed to invest) lost everything. Richer people who invested their own money weathered it and were fine a few years later. The richest, who had either free cash or assets they could borrow against after the crash bought up a load of undervalued shares and made a big pile of money.
@david_chisnall @Dtraslerwriting @cstross that's true as long as the dollar can survive and remain reputable as a reserve currency. I have a feeling there are more things about to collide here.
@cararemixed @david_chisnall @Dtraslerwriting The dollar is already devaluing slowly since Trump was re-elected: it's down about 10%. If it follows the example of Sterling during the sunset of the British Empire it'll be down 40% by the end, even without a single big crash. But we may well see more than one sudden -10% jolt over the next decade if Trump really screws the pooch. We're in uncharted territory as the end of the British Empire didn't directly coincide with an energy transition.
@Dtraslerwriting You forget that 2008 was 18 years ago. The folks who made policy in senior management back then have mostly retired (a 40-yo would now be 58). Also, the crisis back then emerged from derivatives trading—a totally different market sector—and Trump and his party have done their best to trash the regulations intended to stop such speculation happening again.
@cstross
I'm a layman in these things, so please bear with me if I get this wrong: The other day I read about some hedge fund (?) making an investment vehicle out of like 50000 GPU chips. This looks to me like we're also getting into derived financial instruments here.
@musevg @Dtraslerwriting Correct! It's all a grift. A lot of the AI bros running the show today got started in cryptocurrency startups before this, then pivoted to AI as the next big bubble opportunity.
@cstross I am missing a dance emoji on my server.
@cstross Have people ever waited for a bubble to burst with such glee?
"I cannot wait to see all these fucking tulips GONE!"
@cstross Shatter the company.
@zzclaybourne I'd rather see the entire C-suite banged up in Bernie Madoff's cell, across the aisle from Donald Trump, but alas, that seems unlikely.
@cstross Keep hope alive.
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@cstross "tomayto, tomahto"...