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Looks like you need a subscription for the article, but its in line with a lot i’ve heard. I know Ed Zitron has been reporting on the problems with the ‘AI’ industry for a while.
A more minor, but interesting point Zitron has made is that these companies have to run these gpu’s at full tilt, which gives them a highly shortened lifespan. So where i’d assumed a company has capital assets in these gpu’s, it might be better to think of these gpu’s as consumables, where only a limited number will actually be salvageable.
This could be an important point in distinguishing this event from the recovery from the Great Recession/GFC. After all was said and done, at least there were houses to be sold, and prices to be recovered. This point apparently went a long way to stabilising and recovering the US market afterwards. A stabilising force such as that doesn’t really exist in this instance, if the gpu’s are a transient and depreciated stock theres not much left. The server buildings themselves are fairly unique and may not repurpose well to other industries which could cause an even larger collapse in prices.
I think it’s less of a problem that they run at full tilt, more a problem that their value decreases significantly with age. In 4 or 5 years, they are out of date and not worth much. So there is a constant need to reinvest in newer faster gpus.
So, yes, if they collapse, then they can sell them but not for much. Even without a price collapse they are worth a good deal less. With a price collapse they will be worth much much less. Possibly close to worthless if the market is flooded.
Oh yeah, thats right!
i don’t think that’s true, they’re gpus not car engines :p
afaik graphics cards don’t mind if they run full tilt, same as ethereum and before that bitcoin mining, the issue is to do with heat and cold
turning your computer on and off is worse for it than running all the time at a steady temperature
Well, you know i’m not in the know on this stuff, so i won’t cleave to the position too hard. Apparently their use in the AI environment is notably heavier from their normal use cases, so it wears them out far more quickly.
I’m a little too busy to have a detailed look atm though sorry, maybe jump on to Ed Zitron’s wheres your ed at page if you have time. He might have something written up about it there. I remember hearing it on his podcast.
I don’t think most of the money invested in this bubble is going directly into GPUs
I think a lot is going into these gpus. But the point is, I assumed there would be resale value to the gpu’s, easing the costs of liquidations; mergers; and borrowing much like a house is. But it turns out they’re a far more quickly depreciating asset than i imagined, so the capital stock asset is likely a lot smaller than you’d imagine for being that companys primary tool.
Maybe houses isn’t the easiest analogy. Its as if a bus company’s, buses were being written off in half the time you’d expect. It decreases the capitalisation of the business. Or a woodworking company’s CNC wore out quicker than expected.
Its a minor point, but could become important in the recovery phase. As houses as long standing assets became important in a positive direction after the GFC.
*It also means cost per token is impacted
Most of what is resellable is IP but things move so quickly in tech it’s of limited value until as moated as advanced microchip fabs
I suspect most of it is going into speculative investment at this point
The AI economy is the one thing propping up the American economy. This has implications.
Just how bad is it going to be when the bubble bursts? I hope I still have a home…
well the good news is that you’ll probably keep your home, the ai bubble is almost entirely concentrated within super high value companies with shitloads of money
this isn’t like the dot com bubble which was mainly startups and isn’t like the financial crisis where people were gambling with obscenely huge debt risks
the biggest impact i’ve read is if the big tech companies stop spending money on ai and the bubble bursts so to speak the US immediately goes into recession because big tech is propping up the US economy at the moment
but this doesn’t mean much because the us should already be in recession
outside of that i don’t think the contagion will spread that far
big tech is propping up the US economy at the moment
Watching the market it is very clear that there’s something very weird going on… no matter what’s been happening over the past couple of months, the market keeps going up. The most obvious is when the US government shut down this week, the market kept going up.
Minsky moment. It’s a Jenga tower, 90% of the “value” in the stock market is hype.
