- cross-posted to:
- usa@lemmy.ml
- cross-posted to:
- usa@lemmy.ml
cross-posted from: https://lemmy.ml/post/54396848
If you want to know whether artificial intelligence is a gigantic economic bubble, don’t just take pundits’ word for it. Major investors are now moving their money to try to protect themselves from the AI bubble popping.
For an industry that we’re told is central to our collective future, the artificial intelligence (AI) industry increasingly seems to be built on a combination of artificially inflated hopes and bad accounting.
The industry’s critics have been raising concerns about its finances for a while: the fact that most of its flagship firms are grossly unprofitable, that they’ve had to jack up their prices to try break even (leading their business customers to pump the brakes on using their products), or that many of the eye-popping investment announcements that are meant to show demand for AI is strong have actually been circular financing — meaning different AI firms cycling money to and from each other.
But none of it has seemed to slow the industry’s boom or the relentless hype machine behind it. Until now, anyway. It used to be that you mostly heard concerns about the industry’s underlying economics in newspapers, blogs, social media posts, and podcasts, and that those concerns went completely unreflected in the markets. But these concerns seem now to have finally bled over into investors’ thinking.
One of the “leaders” of the industry posted an $80 billion loss this year. Wall Street is not nervous enough about AI.
An $80 billion loss so far. That was only for the first half of the year!
I agree with the general story but that example is not a great one, 90% of it is an accounting adjustment as a result of their share price going up. This would actually happen in a case where a company was being successful. What happens is the startup gets say $100m in cash in return for 1000 shares, valued at $100 each. Then later when the startup is doing well their share price is now worth $500 each, they still owe the same number of shares, but the value of the shares they owe is now $500m, so on paper that is a $400m loss. They don’t actually pay or owe that in cash, they just owe x number of shares to the creditors, which they have to hand over at some point. So that is not actually a direct problem with the business model.
But otherwise in general yes it’s a house of cards
That’s not how shares work at all!
You can’t turn them into the company at market value, you have to sell it to other people to cash out. The only time a company buys its shares is when they do a buyback, but that wouldn’t be a debt on the balance sheet.
The shareholders are just the company owners.
Well the description is literally what is behind the $72 billion reported loss
That’s not the case with anthropic, though. They are simply burning money while not making a profit.
Number of AI companies making a profit: 0
(No, NVIDIA doesn’t count)
The specific example you used, of Anthropic’s $80 billion loss, does match the explanation, though. It should be closer to $8 billion before the accounting adjustment, which is still a loss, but the other $72 billion is just numbers changing in a spreadsheet, not actual cash going one way or another.