AI Boom or Bust? – #122

Are we in an AI bubble?

Steve reviews analysis on CapEx, AI revenues, OAI+ANT burn rates. AI revenue has to reach $trillions per annum within the next few years (an increase of > 10x; compare total global software revenue of $1.5T today), or else the current CapEx spend will turn out to be a huge misallocation.

Separately, even if total AI revenue reaches these levels, OAI and ANT could still be overvalued due to revenue/margin compression from competition with other US or Chinese labs.

Chapter Markers:

• (00:00) - Conference Takeaways
• (03:21) - AI Capability Leap
• (07:36) - Both Things True
• (08:46) - CapEx Debt Risks
• (10:31) - Trillion Revenue Hurdle
• (18:32) - Spend Plateau Signals
• (31:45) - IPO and Bubble Fallout

–

Steve Hsu is Professor of Theoretical Physics and of Computational Mathematics, Science, and Engineering at Michigan State University. Previously, he was Senior Vice President for Research and Innovation at MSU and Director of the Institute of Theoretical Science at the University of Oregon. Hsu is a startup founder (SuperFocus.ai, SafeWeb, Genomic Prediction, Othram) and advisor to venture capital and other investment firms. He was educated at Caltech and Berkeley, was a Harvard Junior Fellow, and has held faculty positions at Yale, the University of Oregon, and MSU. Please send any questions or suggestions to [email protected] or Steve on X @hsu_steve.

Announcing this for some friends at Mechanize - a startup that builds environments for training and evaluating frontier LLMs. Its customers include the top AI labs, and it has contributed to the breakthrough in coding capabilities of frontier models.

Mechanize is hiring!

https://mechanize.work/b/hsu

Compensation is extremely competitive. For technical roles, $300-500k. They are also seeking smart generalists.

For example:

Research Engineer, Alignment: Build evals that test for misaligned model behaviors $500K salary

Puzzle Maker: Design interesting and original puzzles that LLMs can’t yet solve $300K salary

Mechanize understands that my readership is highly selected. There is a VERY GOOD CHANCE you will be interviewed if you apply via the link above.