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It seems that AI and robots are all the rage these days. The future is all about AI and robots. I keep getting fed stories about these, some extremely optimistic, some extremely pessimistic. The following are a few big stories and comments from recent weeks.
AI Bubble or Bomb?
There’s a lot of concern that the investment craze in AI is forming a giant bubble. Others are more concerned. “This isn’t a bubble — it is a financial nuclear bomb,” Will Locket writes. “Let’s start with the truly gut-flipping findings of Julien Garran.
“Garran is an analyst for MacroStrategy Partnership, an independent research firm that advises 220 institutional clients. He also previously led UBS’s commodities strategy team. Needless to say, he understands his subject material. But his recent analysis discovered that the AI bubble was 17 times the size of the dot-com bubble and four times larger than the 2008 housing bubble!”
I’m no expert in this field and haven’t done a thorough financial analysis. However, this is basically right around what I was thinking.
The article makes several interesting points and claims. Some I agree with, while others are a bit different from how I see things. For example, he follows that up with this: “Garran pointed to the efficient compute frontier and the diminishing returns of AI, causing costs to skyrocket and progress to stagnate. This is why ChatGPT-3 cost $50 million, ChatGPT-4 cost $500 million, and ChatGPT-5 cost $5 billion, yet the improvement between these generations has been so slim it is almost unnoticeable. This wouldn’t be a problem if these AIs had reached a point of usefulness, but they haven’t. Like me, Garran points to the plethora of studies that prove AI deployments offer practically no benefit, aren’t profitable, and actually make companies less efficient. As such, the AI industry and the gargantuan investment behind it are a dead end, creating a bubble.” I’ve seen a lot of discussion of how AI is useful to people in certain fields. So, I can’t understand saying it isn’t. However, I do think the level of use is much smaller than AI proponents claim. Also, as I said, I’m not an expert in the field and would be curious to learn more about how AI makes companies less efficient.
Then there’s the matter of growing debt. Locket points out that a lot of the AI rise came from equity financing … but that has been changing. Here are three paragraphs on this opaque but concerning matter:
“Goldman Sachs has found that at least $141 billion of the $500 billion in capital expenses the AI industry has spent so far this year came from debt directly tied to the main corporate body through corporate credit issuances. To give you an idea of how insane that is, the entire AI industry capital expenditure in 2024 was $127 billion. In other words, the AI industry has taken on significantly more debt so far this year than it ever spent in total last year. This also means that we know that about 30% of the AI industry’s annual expenditure for this year came from “on the books” debt. This alone is a shockingly high figure that should be a blazing red flag!
“We don’t know how much of the capital expenditure comes from “off the books” debt raised through things like SPVs, but we still know it is frequent. We know that Meta is looking to raise $26 billion in debt through an SPV by the end of the year. This one deal equates to 5% of the total AI industry’s capital expenditure for this year. But that is just one deal, from one company, and financially speaking, every major AI company is in the same boat (it’s just that some are more secretive than others).
“This means we don’t know how much of that $500 billion capital annual expenditure actually came from debt — all we know is that it will likely be far higher than 30%. It could easily reach 40%, if not 50%.”
What would happen if this giant AI debt bubble pops is … super concerning.
Robot Armies
It’s hard to tell if Elon Musk was using the term “army” in a literal sense or a figurative sense on the Tesla conference call this week, but he did say it repeatedly. He explained that the huge potential pay package for him that could make him the world’s first trillionaire is not about the money. It’s all about having more control at Tesla. In particular, he emphasized that he didn’t want to build a robot army at Tesla and then have it taken away from him….
I saw one person comment on X/Twitter that if he wanted more shares so that he could have that extra power, he shouldn’t have sold so many shares to buy Twitter.
So, don’t worry, it’s not that he wants to dilute other people’s shares of Tesla or become a trillionaire. It’s just that he wants to strongly control Tesla and doesn’t want to be told what to do, and may or may not want to control an army of robots.
“I just don’t feel comfortable building a robot army here and then being ousted because of some asinine recommendations from ISS and Glass Lewis, who have no freakin’ clue. I mean, those guys are corporate terrorists,” Musk said.
Hello, Robots. Goodbye, Humans
And then there’s Amazon. The giant retailer reportedly plans to avoid hiring about 600,000 people, using robots instead. This is the plan just within the next two years.
“Documents reportedly show that Amazon’s robotics team is working towards automating 75 percent of the company’s entire operations, and expects to ditch 160,000 US roles that would otherwise be needed by 2027. This would save about 30 cents on every item that Amazon warehouses and delivers to customers, with automation efforts expected to save the company $12.6 billion from 2025 to 2027.”
Daron Acemoglu, winner of the Nobel Prize in economic science in 2024, contends that Amazon’s automation means “one of the biggest employers in the United States will become a net job destroyer, not a net job creator.”
Apparently, Amazon is workshopping ways to soften backlash to this. “Amazon has considered steps to improve its image as a ‘good corporate citizen’ in preparation for the anticipated backlash around job losses, according to The NYT, reporting that theScompany considered participating in community projects and avoiding terms like “automation” and “AI.” More vague terms like “advanced technology” were explored instead, and using the term “cobot” for robots that work alongside humans.
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