I've been following AI as an industry closely.
There are a lot of...let's call them "warning sign."
My first eyebrow raise was when they'd only talk about "revenue" and never "profits." That was basically a giant neon sign saying "we aren't making money."
Then, the circular deals came to light. How the AI companies, Hyperscalers, and GPU makers are just trading the same cash.
Then, I found blogs following AI and their public dealings. And it seems they endlessly needed to do funding rounds in the multiple of billions. Suggesting they are constantly running out of cash.
Then, you get specific things. Like, how OpenAI and Anthrophic both lost users immensely when they tried to become profitable, with exodus to competitors. It suggested their business model can't work. There is an article called the Subprime AI Crisis that summarizes this pretty well.
And then, I learned most analysts believe Anthrophic loses 13-26 dollars for every dollar they receive. That's absolutely abysmal.
And then, I learned that this is all due to AI making a bet that its losing. It bet they could make tokens cheap enough and usage widespread enough that they could force profitability when the time came.
Instead, most companies revert their AI implementations within 1 year and, while per token cost has gone down, the total amount of tokens needed for the models consumers demand has gone us faster. Thus, costs have skyrocketed.
And you see it everywhere too. SoraAI going under after 6 months, despite it being sold as the end of Hollywood. Then, you got xAI buying up tons of compute saying tons of users are eating it all up...then they cancel free tier and suddenly lease a lion share of their compute to Anthrophic. Says to me that they couldn't convert users and now has a ton of compute burning a hole in their pocket.
Everything just feels like a ponzi scheme for the VCs. Where their new money is being used to handle their old debt. And, sure, Uber and Netflix did similar, but they were lightweight, flexible businesses with a path to profitability. AI seems to have no way to become profitable, is mired in fixed assets, and the cost of materials will only get worse as token numbers inflate and GPUs cost ever more.
And I didn't even touch how many other tech companies have admitted to encourage employees to "tokkenmaxx" to maximize their bills to the main AI creators to keep their figures up.
xAI is going public next month. It's tied to SpaceX and Musk somehow still has investor sycophants so that will likely go well. 'Cept I can't shake an Enron situation happening where, one day, this industry comes crashing down and dropping the Stock Mark 10,000 points