I think you're conflating the impact of a small bubble on a narrow market space with our current situation. The current bubble is larger than anything ever seen before, and is now encompassing nearly the entire economy.
New datacenter builds are so far along the curve of diminishing returns it's absurd. No one is going to want to pay to run a datacenter that costs 10x as much to run for the same compute.
And the problem is with all these "freed" resources, the entire pipeline will be affected. No one will want to buy any new silicon if they can buy a B200 for $1000. We could potentially see a decade or more of stagnation in the chip sector, or even significant regressions in capabilities as foundries are shut down due to lack of demand.
The impact of what is coming scares me to my core. I don't think we're going to bounce back from this any time soon.
I think actually it's quite the opposite and you're the one conflating the impacts on a narrow market space with the larger economy. Right now, AI dominates growth in the stock market and demand for chips, but it is by no means encompassing the whole economy. Neither the stock market nor the chip sector are the entire economy. My grocery store isn't going to go out of business if Anthropic does.
A lot of investors may lose money as a result of the bubble bursting, but that does not mean the underlying asset will be forever worthless, just that it didn't provide sufficient returns sufficiently quickly to justify the upfront investment for the investors that funded it, at the time they made that investment. A different investor who could afford to ride out a period of reduced demand might have an entirely different experience.
Imagine you take out a five year loan to buy a truck to deliver packages, but then for the first two years you operate it, gas prices are elevated so you struggle to make the payments on your loan and end up not making as much money as you had hoped to originally, perhaps even to the point you need to declare bankruptcy and sell of the vehicle. But if not and then gas prices drop back down and demand shoots up for the last three years of the loan, you could then make up the difference. If the first two years drive you into bankruptcy, that is difficult for you, but amortized over the entire five year loan period, the truck may actually have been a profitable investment for someone who could have afforded to ride out the first two years. And just because you go bankrupt doesn't mean the truck stops being a valuable asset, it's just that you don't end up benefiting personally from that value because your timing was bad. From a macro perspective, the overall economy doesn't suffer, except to the extent that it might have been more efficient to invest the capital that went into procuring the truck elsewhere during those first two years. But only possibly and only on the margins, because the truck remains a profitable investment over the course of its entire lifetime.
Don't confuse the success or failure of individual investors or businesses with the success or failure of the overall economy. Current data center build outs premised on fanciful projections of demand for LLMs may end up not being profitable in the short term while still being profitable over the entire productive lifetime of the asset, if sufficient demand is found elsewhere or if demand for LLMs picks up later. Similarly, I anticipate at worst we will see chip prices plateau for a while if there is a pullback in LLM demand, but we won't see them fall and they will continue to rise over the longer term as more demand is generated elsewhere.
As one small example: we have barely begun to scratch the surface of what we can achieve with robotics. Think about the demand for video processing if you have tens of thousands of robots stocking shelves in supermarkets generating video all day long. On board processing will of course be the obvious primary demand for chips, which doesn't benefit data centers, but central processing of video to extract useful data from the entire fleet will generate demand for data centers. As will large scale training jobs. Now multiply that thinking across the entire scope of industries where robotics may be useful for replacing human labor, and you're talking about an extremely significant amount of valuable computational work.
If it costs you more to generate the tokens that the market is willing to pay for those tokens, then not even bankruptcy will save any of the costs invested in one of these datacenters.
If the cutting edge OpenAI token prices are $80 per 1M token, and the open source tokens are $1 per 1M token, that's a huge gap of "this will never be able to make money under any scenario if the bubble bursts" that will catch a lot of these new datacenters. No one will run a datacenter that costs $5 per 1M token to sell at $1 per 1M token even if the debts are cleared.
The point being made here is that most of those costs are amortized capital costs, which get wiped in bankruptcy.
That $5 per 1M token doesn't literally cost $5 per 1M token. It's more like they had to build a datacenter for $500M that can service 100T tokens over its lifetime. They did this by borrowing money on the capital markets, and now they have to pay interest to those bondholders, interest that they can recoup with their $80/1MT prices. But if it turns out they can't charge $80 and have to charge $1, they won't be able to make those interest payments. They enter bankruptcy, the court wipes the debt clean, and now they don't have to pay interest, only the actual operating costs, which may be more like 50c/1MT. The company gets recapitalized with the new owners being largely the bondholders, the existing equity holders get wiped out, and they can compete with the commodity producers now.
You have land taxes and or rent, building upkeep, staffing costs, electricity, water, hardware replacement costs.
And new build DCs have blown all these costs through the roof justifying the decision because the price of compute is so high. When the prices come crashing down, the expenses will remain fixed where they are now.
In general the bondholders don't win unless they're holding senior secured debt. If they were expecting a return of 5% on their bonds, the fact that the company entered bankruptcy means that the profit it can generate is less than the 5% interest the bondholders were asking for. It may get recapitalized with them as the shareholders, but the profits on the new recapitalized company will be less than the interest previously owed to the bondholders, just by the fact that the company entered bankruptcy.
The two conditions where they could win are:
1. When they have liquidation preferences over the other bondholders. In this case, their claims come first at bankruptcy, which means they can end up owning the company at the expense of the other bondholders and stockholders. The company's overall profits might not be sufficient to generate a return at the interest rate of all bondholders, but it might generate returns over what a select group of bondholders would otherwise get.
2. When the company can't generate sufficient profits now, but their revenues and earnings are expected to grow over time. In this case, the new equity holders would take a significant haircut on the value of their investment at the time of bankruptcy, but improving financial positions means the value of their investment could grow to be worth significantly more than the bonds over time.
I can't rule out either of these for AI companies. The principals of many of the companies involved have a record of self-dealing that's very similar to #1 - it's illegal if it can be proven in court, but it's often very hard to prove, particularly if there are other parties involved. And the economics of AI are likely very similar to #2.
I'll believe it the day SpaceX - the AI company that is mostly making money selling datacenter compute using gas turbines for energy - takes a single day 90% or greater drop in stock price.
Currently nobody knows when the first big financial crisis is fully locked in. For example, if OpenAI can't close another round, and they default on their contracts with Oracle, there's your sign. Until then it looks like everybody is enjoying the communal hallucination.
Probably the next nvidia chip drop because the old chips where priced at their highest level at a depreciation of 5 years instead of the 2 year norm. What happens when the next chip is way better(hearing 67x better, not just the 10x from initial claims)? Well all those chips need to be dumped fast and depreciate that second and the datacenter gets bankrupted and parted out
They could potentially do another private bridge round, but for a company that was gearing up for the largest IPO in history a couple months ago, the reversal is a pretty bad sign. For investors that are looking for a fire sale, there's already smoke in the air.
They mean the roughly 25 year tech sector run that's now culminating in the irrational exuberance of AI. There have been some hits already and the result of those is market cap consolidation of the largest companies. Not sure what the number is but the the 10 largest companies make up a huge percent of the entire S&P and most have extreme exposure to the same risks. The sector has been boosted by the NVIDIA circular financing as well but at some point there is a limit. Although they are angling for a pre-bailout with all the AI is going to kill humanity fear mongering. The only savior for the sector will be the government, the question is if the government steps in before or after an organic collapse.
I mean the first AI financial crisis at an AI company. I did provide an example. First, the investor cash has to dry up, then the AI data centers have to start getting itchy about what those multi billion dollar contracts are actually worth.
We're already seeing repercussions from an economy that has been retooled not to actually produce anything of value, but to produce more air to fill up the largest economic bubble in the history of the world.
National debt through the roof, inflation through the roof, PHD and research programs gutted, non-ai startups dead and unfunded for the last 4 years. These are just a few things that have been sacrificed on the altar of this bubble - there's far more I haven't recounted.
We're already in a widespread long term economic collapse, but the delusion just hasn't broken yet.
The real question is why did they release this as a standalone unit for $1049 and then claim they couldn't sell it for less due to the RAM shortage - when that implies they could have released a dumb unit that depends on the Steam Deck or Steam Machine for far less?
You're asking why they couldn't completely change the product from a full-fledged VR machine into a headset in roughly a year, especially when they already sell a regular VR headset for $1,000?
They do not, in fact sell such a headset, in that it is permanently out of stock. You can risk buying it used for $1800…
It was released in 2019 and by comparison, sucks. A new index with new displays of the frame but without the things that make the frame expensive (ram) would be welcome.
It still shows the headset in stock in the US. The bundles, controllers, and lighthouses seem to be out of stock though, which is likely because they're a much more popular product (the controllers/lighthouses break quite often, and they're often used with other headsets as well).
If it can do innside out tracking its way more data efficent to have compute onboard. And if you already have a decent amount of compute you can scale it up just a little more to have. a fully standalone unit.
I'm not sure going from less than $50 of RAM and a $50 processor for foveated eye tracking to 16 GiB of RAM ($300) and a Snapdragon 8 ($200) is a "slight bump".
Yeah, can't wait for the AI hype bubble to finally end. Hey, we might even get some nice fast repurposed HBM from the scrappers reusing stuff from the bankruptcy auctions. :)
They've doing inside-out SLAM to map the environment and tracking your eyes for foveated rendering at the same time. That's fairly heavy - I think the compute required would necessitate a much higher speed connection with a desktop and a fair bit of CPU time, so it's probably cheaper and easier to put the compute right in the headset instead of scaling up the connection.
Also, they probably landed on this rough design a few years ago - before the AI hyperscalers bought up all the RAM - so the economics changed a lot under their feet.
Maybe I'm misunderstanding - but I thought there's already "dumb" headsets doing foveated eye tracking, like the Pimax headsets. If that's the case, then you don't need $300 of ram and a $200 CPU to perform this locally.
I understand that thinking is difficult now that everybody offloads their thought to LLMs, but the math is very simple.
The cheapest comparable device with the same (or better) level of eye tracking is $1500 (i.e., 50% more than the Steam Frame)...and that was the price before the tariff war and Iran conflict jacked up prices.
While the ram may currently be $300, the CPU is not $200 unless you're including the custom processing units Valve is using to handle the eye tracking, which are (a) industry leading, and (b) made to spec in relatively small quantities and therefore more expensive (and given the limited chip capacity also affecting chip manufacturing, also significantly more expensive than they would normally be).
If foveated rendering was cheap, it would already be standard in every VR device.
I didn't say run in an air-gapped VM... Just as a means to better isolate the workloads I have running (some less trusted than others). Network connectivity and the associated vulnerabilities obviously remain.
No argument against VMs - just that they have a different risk profile and a different set of trade-offs than containers. They're not a silver bullet, but if they're working for you, then go for it.
It's more that Unix systems were timesharing systems, any user could run a daemon, but you didn't want users to have the ability to grab a port used by system services, not just because they could impersonate a system service on the network, but also because then you couldn't trust localhost services, either, as well as it just being a PITA. This is still true today; though vanishingly few Linux systems are multi-tenant, it's still common to implicitly trust a local service.
The theory behind the US having a large military is that it acts as a sort of fleet in being - that the US prefers other methods of engaging with countries, and having a stronger military precludes other countries from engaging militarily. In turn, having stable global relations and protected global trade provides the US with a huge economic boon to fund its large military.
That's the theory anyway - our Idiot King and his idiots have completely missed the point of the US military existing and are using it as a primary method of engagement, which is causing the economic boon used to fund the military to evaporate.
As an aside, it's not a huge issue, but China's military costs use different accounting than the US, and seem lower by comparison. Apples to apples, China probably spends about half what the US does on military.
> the US prefers other methods of engaging with countries, and having a stronger military precludes other countries from engaging militarily
If the US has such a strong military why are they always begging European countries to help them with their various totally-not-a-war "actions", like most recently in Iran?
Last time the UK got into something in the Middle East with the US we lost more people to "friendly fire" than enemy action. There's no real appetite for that any more.
> An MRI is great at identifying which ways your body doesn’t look like a textbook reference body, but it doesn’t necessarily tell you what those things are or whether they will ever cause you problems.
Its the doctors doing this, not the MRI.
There's this weird definition switch that always happens with the "overdiagnosis" defense where the information gets blamed for the overdiagnosis. An MRI doesn't provide any diagnosis in any sense of the definition. A doctor does.
Claiming an overdiagnosis defense is essentually implying the medical industry is worse for most than doing nothing.
Yeah, any doctor worth their salt is going to be diagnosing you based off of the MRI results and some other evidence.
But in the scenarios this article is talking about (Prenuvo, et al), these aren’t scans ordered by a doctor, and there is no other evidence. It is just a patient getting some MRI findings of unknown clinical significance dumped in their lap.
The problem isn’t an overdiagnosis by doctors. The problem is that there’s no doctor diagnosing anything in these instances.
New datacenter builds are so far along the curve of diminishing returns it's absurd. No one is going to want to pay to run a datacenter that costs 10x as much to run for the same compute.
And the problem is with all these "freed" resources, the entire pipeline will be affected. No one will want to buy any new silicon if they can buy a B200 for $1000. We could potentially see a decade or more of stagnation in the chip sector, or even significant regressions in capabilities as foundries are shut down due to lack of demand.
The impact of what is coming scares me to my core. I don't think we're going to bounce back from this any time soon.
reply