> absent the AI boom we would probably have lower interest rates [and] electricity prices, thus some additional growth in other sectors.
In other words, the AI hype comes at the cost of lower growth rates in other sectors of the economy?
It makes sense, since investor money is spent exactly once. If it goes to AI then it doesn't go elsewhere. And if it didn't go to AI then it would go elsewhere.
Sad for folks outside tech. But at least they can AI generate cat pictures now, and watch their tech friend use AI tooling to write software.
It’s worth noting that pretty much all the growth in AI / Data centres is an accounting trick as well.
Nvidia just announced it’s investing X billion dollars into OpenAI who will turn around and spend 98% of that on Nvidia chips, so GDP rises, stocks rise but actual free market activity? Not so much
GDP is a known silly metric, but it's easy to define and measure, so we keep using it.
I'm often reminded of the quote: "A man marries his housekeeper and that country’s GDP falls".
GDP is uncomfortably linked to granularity of measurement as well as the number of times money changes hands to accomplish a task. Split a pipeline over more businesses boundaries and suddenly GDP is "bigger" despite no change in value or utility.
They also spent a good chunk of that money on AMD stock, which is a trade that instantly became profitable the moment they announced it, without them ever doing anything.
A broad overview number is going to lack nuance, yes.
There's a ton more of more nuanced measures, many of which get reported too, but don't make a splash as a broad overview economic health indicator because the observations need to be paired with an explanation of the observation, and then you're in the business section and not on the front page.
More like we know that people can always find an obscure enough number to support what they want to do. There's a lot of value in having simple metrics that are hard to game.
Reducing companies to a stock price has always seemed similar to me. Especially when they so often jump about by big percentages in a day.
There's 10,000 people and 200 facilities in 32 countries and suddenly that's all worth 10% more, no, 6% less, wait, it's holding in a reverse double-sigma split backflip indication, it'll be up when the markets open. Head explode.gif.
It's ok. Domestic steel and aluminum production were at an all time high, finished goods production nearly doubled, and we rolled several million tons of newly built ships off the dry docks and into the water. Oh wait, those numbers were so shit that we should actively deny their existence let alone relevance.
I don’t know why everyone’s confident that the investments won’t pay off. Every such post in HN is such a way. 800 million weekly active users from ChatGPT implies that people actually like LLM’s and likely the growth will still keep increasing. Every signal points to this - so investment in data centers make sense?
History doesn't repeat itself, but it rhymes. Callbacks to the infrastructure laid out during dotcom bubble, i.e Cisco, and all of the networking infrastructure. Likewise, internal memos at Oracle indicate they're losing money on their hardware. Anecdotal and hand wavy; but there are plenty of signals out there that it won't pay off. I'm not arguing one way or the other, but there are plenty of arguments for it to not succeed in a way that's required to justify the mind boggling growth we've been experiencing.
Building the datacentres may be massively "productive" in GDP terms (servers! GPU! Power plants! Electrical inspection!), but when they're completed, that activity will cease. Datacentres don't employ many people directly and mostly consume only electricity.
So if the action of datacentre building shows up as essentially the only GDP growth, but what later happens in the datacentres fails to take its place or exceed it, there will be a dip.
Whether LLMs grinding away can prop up all GDP growth from now on remains to be seen. People use them when they're free, but people also collected AOL discs for tree decorations because they were free.
The question is if it is economically feasible. People can enjoy generating funny AI images to share with their friends, but it might not be economically feasible to invest $100B to give them this toy. There is a question of how much value using GenAI generates for the economy.
People also like pizza. How many million weekly active consumers of pizza? how about rice?
Really what people like here is cheap stuff and having a job that pays money to buy it. chatgpt so far loses boatloads of money. Soon they jack up prices, add adds, and people realize that it was all trained on them & threatens their job. So really right now chatgpt is sweating hard to make itself too big to fail.
Forget profitability, the major Western LLM providers still have profoundly negative gross margins
I think it will only be economically sound as a business if you're Google and can start serving ads OR when we switch over from GPUs to wildly more efficient TPUs/ASICs
All the data center CapEx is going into compute that will be obsolete once that happens
We have hit a plateau for many months for the performance of LLMs. Anthropic recently released 4.5, and while it improved on some contexts, it failed to make a commit message for me a few times on a workflow I had. 3.5 to 4 had close to zero failure rates on this workflow and it was surprising to see 4.5 fail. It seems that gains in certain benchmarks will affect quality elsewhere.
LLMs are very useful, I can’t see myself walking back to the old way of doing things. But the amounts invested expect major breakthrough that we are not anywhere near. It’s a gamble and that’s what innovation is; but you gamble on a small portion of your wealth. Not your house and certainly you do not gamble a huge country like the US on a single thing.
They like them when they’re free and/or cheap. But will that be sustainable? The answer to that question is far less certain. Maybe Ads will save them, maybe royalties, maybe price hikes. But it’s far from certain at least.
Forget profitability, the major Western LLM providers still have profoundly negative gross margins. What would that 800M userbase look like if free tier users had to pay the bill for inference and training costs?
I think it will only be economically sound as a business if you're Google and can start serving ads OR when we switch over from GPUs to wildly more efficient TPUs/ASICs
All the data center CapEx is going into compute that will be obsolete once that happens
Reminds me of many discussions in Ireland like "if we didn't have big tech giants, we'd have a government budget deficit". Sure, but we do have big tech giants. If I didn't have a job, I'd be poor.
Oh well, I guess we have another once-in-a-lifetime economic crisis ahead of us. Ready your tax dollars, prepare the bailouts! We've got some billionaires to save.
I am surprised that Taiwan and China are not mentioned in the article or in these comments. Given the threat that China will get to Taiwan and capture control over the unrivaled TSMC, investing into silicon while we can is pure and simple de-risking in a de-globalizing world.
Isn't this normal? That if you stripped whatever is currently hot from the economy, the rest would be... lackluster? For one, any "special effort" investment money is pouring in there instead of somewhere else, or many somewhere elses?
This is another way that bubbles form, a cabal of cross-dealing giants that don't have solid revenue to ground the valuations is a very scary position.
I believe that a lot of AI is real, but the realness of AI's impact on the economy does not prevent a bubble. The dot com bubble didn't make the internet any less real or impactful on everyone's lives. So it feels like very scary times ahead.
Also, the devaluation of the dollar is an extremely tricky situation for the US. Morgan Stanley puts it at 10% less value in 2025, and another 10% drop by the end of 2026:
I was never scared with the inflation during Biden because it seemed like we would be on track to put the economy in the right position, because it was global and the US was doing so much better than the rest of the world. But now, it feels like the US is intentionally entering recession and choosing a future of poverty.
If AI were real, companies would charge market price for it now and reduce the price as model training costs fell over time. That is how things worked in microcomputer market between the '80s and '90s as hardware prices fell and software became commoditized. Giving it away for peanuts in the hope that prices can be raised 10x later is destined for failure.
Over the last few years I've been drifting away from focusing on pure technology plays. Somehow I feel like maybe that might save my bacon someday ... or maybe AI will completely consume the world and we'll all be left behind.
[+] [-] teiferer|5 months ago|reply
In other words, the AI hype comes at the cost of lower growth rates in other sectors of the economy?
It makes sense, since investor money is spent exactly once. If it goes to AI then it doesn't go elsewhere. And if it didn't go to AI then it would go elsewhere.
Sad for folks outside tech. But at least they can AI generate cat pictures now, and watch their tech friend use AI tooling to write software.
[+] [-] oytis|5 months ago|reply
[+] [-] lifeisstillgood|5 months ago|reply
Nvidia just announced it’s investing X billion dollars into OpenAI who will turn around and spend 98% of that on Nvidia chips, so GDP rises, stocks rise but actual free market activity? Not so much
[+] [-] B-Con|5 months ago|reply
I'm often reminded of the quote: "A man marries his housekeeper and that country’s GDP falls".
GDP is uncomfortably linked to granularity of measurement as well as the number of times money changes hands to accomplish a task. Split a pipeline over more businesses boundaries and suddenly GDP is "bigger" despite no change in value or utility.
[+] [-] ChadNauseam|5 months ago|reply
[+] [-] whazor|5 months ago|reply
[+] [-] aurareturn|5 months ago|reply
In this case, it is coming from investors like Microsoft, Softbank, Saudis, ChatGPT subscriptions, etc.
[+] [-] imtringued|5 months ago|reply
[+] [-] kubb|5 months ago|reply
Inflation, unemployment, GDP.
It’s like we’re incapable of nuance on a societal level.
[+] [-] toast0|5 months ago|reply
There's a ton more of more nuanced measures, many of which get reported too, but don't make a splash as a broad overview economic health indicator because the observations need to be paired with an explanation of the observation, and then you're in the business section and not on the front page.
[+] [-] scrollop|5 months ago|reply
If you're an economist or analyst, I have a feeling it's a little more nuanced than you're stating.
If you mean "for the average person" or "what the media reports for the average person", then, "duh".
The normal distribution of IQ in the general population would cause a general media company to limit it's complexity of data reported.
[+] [-] lmm|5 months ago|reply
[+] [-] grues-dinner|5 months ago|reply
There's 10,000 people and 200 facilities in 32 countries and suddenly that's all worth 10% more, no, 6% less, wait, it's holding in a reverse double-sigma split backflip indication, it'll be up when the markets open. Head explode.gif.
[+] [-] apexalpha|5 months ago|reply
Pretty sure most other countries do, too.
[+] [-] swyx|5 months ago|reply
[+] [-] NoMoreNicksLeft|5 months ago|reply
[+] [-] simianwords|5 months ago|reply
[+] [-] wowohwow|5 months ago|reply
[+] [-] grues-dinner|5 months ago|reply
So if the action of datacentre building shows up as essentially the only GDP growth, but what later happens in the datacentres fails to take its place or exceed it, there will be a dip.
Whether LLMs grinding away can prop up all GDP growth from now on remains to be seen. People use them when they're free, but people also collected AOL discs for tree decorations because they were free.
[+] [-] matusp|5 months ago|reply
[+] [-] throwaway290|5 months ago|reply
People also like pizza. How many million weekly active consumers of pizza? how about rice?
Really what people like here is cheap stuff and having a job that pays money to buy it. chatgpt so far loses boatloads of money. Soon they jack up prices, add adds, and people realize that it was all trained on them & threatens their job. So really right now chatgpt is sweating hard to make itself too big to fail.
https://news.ycombinator.com/item?id=45511368
[+] [-] lm28469|5 months ago|reply
800m total users, 25m paying customers... Most people use free accounts and would likely never pay any substantial amount of money for them
https://www.theverge.com/openai/640894/chatgpt-has-hit-20-mi...
[+] [-] nylonstrung|5 months ago|reply
I think it will only be economically sound as a business if you're Google and can start serving ads OR when we switch over from GPUs to wildly more efficient TPUs/ASICs
All the data center CapEx is going into compute that will be obsolete once that happens
[+] [-] csomar|5 months ago|reply
LLMs are very useful, I can’t see myself walking back to the old way of doing things. But the amounts invested expect major breakthrough that we are not anywhere near. It’s a gamble and that’s what innovation is; but you gamble on a small portion of your wealth. Not your house and certainly you do not gamble a huge country like the US on a single thing.
[+] [-] techpression|5 months ago|reply
[+] [-] nylonstrung|5 months ago|reply
I think it will only be economically sound as a business if you're Google and can start serving ads OR when we switch over from GPUs to wildly more efficient TPUs/ASICs
All the data center CapEx is going into compute that will be obsolete once that happens
[+] [-] schnitzelstoat|5 months ago|reply
That alone will be a monumental shakeup for the industry.
[+] [-] catmanjan|5 months ago|reply
[+] [-] Animats|5 months ago|reply
[+] [-] freetonik|5 months ago|reply
[+] [-] netfortius|5 months ago|reply
[+] [-] skywal_l|5 months ago|reply
[+] [-] zundunka|5 months ago|reply
[+] [-] floppiplopp|5 months ago|reply
[+] [-] stkdump|5 months ago|reply
[+] [-] creer|5 months ago|reply
[+] [-] unknown|5 months ago|reply
[deleted]
[+] [-] aussieguy1234|5 months ago|reply
[+] [-] justlikereddit|5 months ago|reply
[+] [-] grafmax|5 months ago|reply
[+] [-] ottomanbob|5 months ago|reply
[+] [-] epistasis|5 months ago|reply
https://www.bloomberg.com/news/features/2025-10-07/openai-s-...
This is another way that bubbles form, a cabal of cross-dealing giants that don't have solid revenue to ground the valuations is a very scary position.
I believe that a lot of AI is real, but the realness of AI's impact on the economy does not prevent a bubble. The dot com bubble didn't make the internet any less real or impactful on everyone's lives. So it feels like very scary times ahead.
Also, the devaluation of the dollar is an extremely tricky situation for the US. Morgan Stanley puts it at 10% less value in 2025, and another 10% drop by the end of 2026:
https://www.morganstanley.com/insights/articles/us-dollar-de...
I was never scared with the inflation during Biden because it seemed like we would be on track to put the economy in the right position, because it was global and the US was doing so much better than the rest of the world. But now, it feels like the US is intentionally entering recession and choosing a future of poverty.
[+] [-] hiimkeks|5 months ago|reply
https://pluralistic.net/2025/09/27/econopocalypse/
[+] [-] rixed|5 months ago|reply
https://unherd.com/2025/02/why-trumps-tariffs-are-a-masterpl...
[+] [-] rchaud|5 months ago|reply
[+] [-] grumpy-de-sre|5 months ago|reply
[+] [-] mgh2|5 months ago|reply
[+] [-] ciconia|5 months ago|reply
[+] [-] throawayonthe|5 months ago|reply
[+] [-] kermatt|5 months ago|reply