Almost lost amid the hullaballoo over Trump’s tariffs was what may be the start of the AI crash.
Nvidia (NVDA) has been nearly cut in half. ServiceNow (NOW) is down 35%. All the Cloud Czars are in bear markets, while the wider market isn’t down 20% (yet).
We may have a lot farther to go. Taking out the 2022 lows would mean a further drop of about 40% in the NASDAQ. Meta’s (META) low on that move took it below $100. It’s still over $500. We could easily get there within a few weeks. Hundreds of thousands of baby boomers, like me, who thought we were rich and old a month ago woke up today to find we’re just old.
If this was the AI crash, in other words, there’s a lot more pain to come. I made six figures in the year 2000. In 2002 and 2003 I made no figures, that is I brought in not a single cent from my writing. That’s when I wrote the first edition of my Moore’s Law book and started what became my Reluctant Detective series.
This time won’t be as bad. I stuck one-third of my assets into bonds and cash, anticipating something like this. I should have sold more but that’s life I guess.
The more important question is whether this really is the end of an era. Gary Marcus, who has taken a role in AI similar to my own late 1990s warnings about the dot bomb, says he has been proven right. Generative AI is a dud, scaling won’t save it, and his conclusion is stark. “LLMs are not the way. We definitely need something better.
So What Happens Now?
It’s important to ask what kind of a crash this is before we proceed. The COVID crash was made up in two years. The 2022 Tech Wreck was wiped away in a matter of months. It took about 3 years to recover from the Great Recession.
The Dot Bomb was something different. It took Amazon almost 9 years to recover from its dot com era high of $295 per share. An entire generation of software engineers wound up living in their moms’ basements. (Our moms were still alive then.) Many of today’s great open source projects had their roots in the wreckage, when programmers had nothing better to do.
Those coders are now retired. It’s their kids, and my kids, who will suffer the fallout from whatever has just begun.
But what has just begun? Are all the data centers being filled with Nvidia chips today going to lie fallow, like rusted oil wells in the early 1980s? So far, we don’t even have evidence of a slackening in demand, and it won’t come from this month’s earnings reports, because the crash began in late March.
The Road From Here
I predicted the downfall of Elon Musk and Sam Altman almost a month ago. Musk is still worth much more than he was in late January. Altman is reportedly still a billionaire.
Musk and Altman are the Avatars of the AI Boom, the two most associated with putting their money on red and spinning the wheel. They need to suffer a lot more pain before I can say this move down is over.
We also still have 14 deci-billionaires, including a WalMart heir, men worth over $100 billion. This tells me there’s still a lot of air in the balloon.
But some of that air should be there. The database computing era has delivered enormous productivity. Training databases, which is what you do to make AI applications, will deliver more. I see it here in the Netherlands every day. Everything is being done by phone, to a much greater extent than in the U.S., and it works.
There is a bottom to this pool. I can’t tell you where it is. I know we’re not there yet. But technologists have done great work in the last quarter-century and there’s still more to do.
A new boom is coming. My guess is it will come from DNA as a programming language. So buy Moderna (MRNA)?
