If AI bubble means ‘collectively over-estimating the impact of AI on financial outcomes’, then yes, we are in an AI bubble.
Here are some quick thoughts:
# LLMs are unpredictable, fuzzy, and probabilistic. Hence, they can not be relied upon to achieve critical business outcomes where more accuracy and some accountability is needed.
# In SaaS, the marginal cost for one more user is minimal. A large part of the cost is tied to Customer Support. But in LLMs-based software, the compute cost keeps rising with token usage.
# Chat GPT’s conversion (from free to paid users) is 5%. This is abysmally low and it points towards a possibility that people are not getting outcomes they’d pay for.
# LLMs are very cool. But where businesses are struggling is achieving ROI on them. In most of the cases, there is no concrete $ savings using AI, yet.
# Even in the most straightforward use-case which is coding, AI is still not moving the needle massively. Tech leaders often report that the AI-generated code is 10-30% and it often needs a lot of debugging. There’s no way AI is taking away coders’ jobs.
# LLMs are trained on the data from the internet. With the rise of AI slop on the web, further training on already regurgitated data implies that LLMs will hit a plateau eventually. A better route for fundamental model creators could be to explore other frameworks apart from Transformers, and that pursuit to hit jackpot might take a while.
# AGI seems to be a high vanity pursuit. LLMs have a long way to go still, and AGI looks like too big of a leap, a moonshot.
# OpenAI, the company at the frontier of it all, is releasing product updates to acquire more users and increase their retention. A company that genuinely believed it can achieve AGI would solely focus on it, rather than these non-fundamental updates like these B2C use-cases.
As per my understanding, AI leaders are hyping up the impact of AI. VC’s are investing in anything that sounds like AI, to avoid missing out on any upside. And founders are having fun building ‘cutting edge’ products and raise funding.
Even if their startups fail, they’ll get to write “Ex-Sequoia funded startup” on LinkedIn and get in a big-tech company. It’s a win-win for founders and early stage VCs and a jackpot for ‘shovel sellers’ like Nvidia and YouTube AI gurus.
And don’t get me wrong, I am not saying all of this is not good: this is what it is. Humans are greedy and irrational, that’s why markets go up and the crash, and bubbles form and burst, and because of the greed, the world keeps moving.