If you want to know whether artificial intelligence is a gigantic economic bubble, don’t just take pundits’ word for it. Major investors are now moving their money to try to protect themselves from the AI bubble popping.
For an industry that we’re told is central to our collective future, the artificial intelligence (AI) industry increasingly seems to be built on a combination of artificially inflated hopes and bad accounting.
The industry’s critics have been raising concerns about its finances for a while: the fact that most of its flagship firms are grossly unprofitable, that they’ve had to jack up their prices to try break even (leading their business customers to pump the brakes on using their products), or that many of the eye-popping investment announcements that are meant to show demand for AI is strong have actually been circular financing — meaning different AI firms cycling money to and from each other.
But none of it has seemed to slow the industry’s boom or the relentless hype machine behind it. Until now, anyway. It used to be that you mostly heard concerns about the industry’s underlying economics in newspapers, blogs, social media posts, and podcasts, and that those concerns went completely unreflected in the markets. But these concerns seem now to have finally bled over into investors’ thinking.
One early example I heard about slop code being bad was that if you have a process that is repeated, an LLM will not write a function that is broadly scoped so it can handle a significant number of related use cases, it will write different code for each instance, so when that process fails you have no idea which version is responsible. Seems like the kind of thing QA would flag.