On top of everything else going on, AI is about to have its first market crash.
OpenAI is seeking $6.5 billion of new investment based on a $150 billion valuation. The money’s not coming.
Most of the executive team has quit and Sam Altman, who ran them all out in the course of turning OpenAI into a for-profit company, is still making promises he can’t keep. At the same time, he’s releasing code he admits is “deeply flawed.”
As I’ve written many times now, what has been called “Generative AI” has fundamental flaws. It’s not intelligence, it’s just generative. It can deliver value, if the data it’s based on is honest. It can tell you what is inside the database, just like Google. Generative AIcan do this in several ways, including video and code, and with several types of input, including voice. It can be automated, adjusting control systems faster than any operator.
But it’s not intelligence.
The bigger you make a Large Language Model, the more these flaws become obvious. Since the first ChatGPT release, each subsequent iteration has cost more but delivered less improvement. At the same time the energy costs of training and running the models have become obvious. Re-opening Three Mile Island should be a clue that these costs are not sustainable.
What Comes Next?
People will play with the results, but most won’t pay, as Microsoft is learning. That stock is going to be seriously hurt, as are Nvidia (NVDA), Meta Platforms (META), AMD (AMD), Dell (DELL), Oracle (ORCL), Tesla (TSLA), and everyone else (GOOGL) in the space, whether they’re guilty of any stupidity or not. Dan Ives needs to put away his clown suit.
Amazon stock will fall. Apple stock will fall. Not as much as the others, because they still have profitable businesses to sustain them. But when a crash hits everything falls.
Expectations for AI need to be adjusted. That will take time.
Money should go first to those companies that have delivered productivity gains to customers, and profits to shareholders. ServiceNow and Adobe seem to be doing that, but I want a deep dive on their numbers before committing to them. In any case, I won’t be putting out new money until that deep dive is completed, and I certainly won’t be paying today’s price.
Investors need to understand that Generative AI is a tool. It’s not AI. It’s Generative. It generates different types of output than a regular database call. But it’s still just a database call. The rule of Garbage In, Garbage Out still applies.
If companies want to play with huge models and make promises they can’t keep, they shouldn’t do it with the public’s money.
