To clarify for future reference, I do think it’s likely (80%+) that at some point over the next 5 years there will be a large reduction in investment in AI and a corresponding market crash in AI company stocks, etc, and that both will continue to be for at least three months.
Ie. I think we are heading for an AI winter.
It is not sustainable for the industry to invest 600+ billion dollars per year in infrastructure and teams in return for relatively little revenue and no resulting profit for major AI labs.
At the same time, I think that within the next 20 years tech companies could both develop robotics that self-navigate multiple domains and have automated major sectors of physical work. That would put society on a path to causing total extinction of current life on Earth. We should do everything we can to prevent it.
To clarify for future reference, I do think it’s likely (80%+) that at some point over the next 5 years there will be a large reduction in investment in AI and a corresponding market crash in AI company stocks, etc, and that both will continue to be for at least three months.
Update: I now think this is 90%+ likely to happen (from original prediction date).
Even if you know a certain market is a bubble, it’s not exactly trivial to exploit if you don’t know when it’s going to burst, which prices will be affected, and to what degree. “The market can remain irrational longer than you can remain solvent” and all that.
Personally, while I think that investment will decrease and companies will die off, I doubt there’s a true AI bubble, because there are so many articles about it being in a bubble that it couldn’t possibly be a big surprise for the markets if it popped, and therefore the hypothetical pop is already priced out of existence. I think it’s possible that some traders are waiting to pull the trigger on selling their shares once the market starts trending downwards, which would cause an abrupt drop and extra panic selling… but then it would correct itself pretty quickly if the prices weren’t actually inflated before the dip. (I’m not a financial expert so don’t take this that seriously)
Even if you know a certain market is a bubble, it’s not exactly trivial to exploit if you don’t know when it’s going to burst, which prices will be affected, and to what degree. “The market can remain irrational longer than you can remain solvent” and all that.
Yes, all of this. I didn’t know how to time this, and also good point that operationalising it in terms of AI stocks to target at what strike price could be tricky too.
If I could get the timing right, this makes sense. But I don’t have much of an edge in judging when the bubble would burst. And put options are expensive.
If someone here wants to make a 1:1 bet over the next three years, I’m happy to take them up on the offer.
I very much underestimated/missed the speed of tech leaders influencing the US government through the Trump election/presidency. Got caught flat-footed by this.
I still think it’s not unlikely for there to be an AI crash as described above within the next 4 years and 8 months but it could be from levels of investment much higher than where we are now. A “large reduction in investment” at that level looks a lot different than a large reduction in investment from the level that markets were at 4 months ago.
Noting Microsoft’s cancelling of data center deals. And the fact the ‘AGI’ labs are still losing cash, and with DeepSeek are competing increasingly on a commodity product.
I overreacted before IMO on the updating down to 40% (and undercompensated when updating down to 80%, which I soon after thought should have been 70%).
The leader in turns of large model revenue, OpenAI has basically failed to build something worth calling GPT-5, and Microsoft is now developing more models in-house to compete with them. If OpenAI fails on the effort to combine its existing models into something new and special (likely), that’s a blow to perception of the industry.
Igor Krawzcuk, an AI PhD researcher, just shared more specific predictions:
“I agree with ed that the next months are critical, and that the biggest players need to deliver. I think it will need to be plausible progress towards reasoning, as in planning, as in the type of stuff Prolog, SAT/SMT solvers etc. do.
I’m 80% certain that this literally can’t be done efficiently with current LLM/RL techniques (last I looked at neural comb-opt vs solvers, it was bad), the only hope being the kitchen sink of scale, foundation models, solvers and RL
…
If OpenAI/Anthropic/DeepMind can’t deliver on promises of reasoning and planning (Q*, Strawberry, AlphaCode/AlphaProof etc.) in the coming months, or if they try to polish more turds into gold (e.g., coming out with GPT-Reasoner, but only for specific business domains) over the next year, then I would be surprised to see the investments last to make it happen in this AI summer.”
https://x.com/TheGermanPole/status/1826179777452994657
To clarify for future reference, I do think it’s likely (80%+) that at some point over the next 5 years there will be a large reduction in investment in AI and a corresponding market crash in AI company stocks, etc, and that both will continue to be for at least three months.
Ie. I think we are heading for an AI winter. It is not sustainable for the industry to invest 600+ billion dollars per year in infrastructure and teams in return for relatively little revenue and no resulting profit for major AI labs.
At the same time, I think that within the next 20 years tech companies could both develop robotics that self-navigate multiple domains and have automated major sectors of physical work. That would put society on a path to causing total extinction of current life on Earth. We should do everything we can to prevent it.
Update: I now think this is 90%+ likely to happen (from original prediction date).
How many put options have you bought? You can make a killing if you are right.
Bet or Update.
Even if you know a certain market is a bubble, it’s not exactly trivial to exploit if you don’t know when it’s going to burst, which prices will be affected, and to what degree. “The market can remain irrational longer than you can remain solvent” and all that.
Personally, while I think that investment will decrease and companies will die off, I doubt there’s a true AI bubble, because there are so many articles about it being in a bubble that it couldn’t possibly be a big surprise for the markets if it popped, and therefore the hypothetical pop is already priced out of existence. I think it’s possible that some traders are waiting to pull the trigger on selling their shares once the market starts trending downwards, which would cause an abrupt drop and extra panic selling… but then it would correct itself pretty quickly if the prices weren’t actually inflated before the dip. (I’m not a financial expert so don’t take this that seriously)
Yes, all of this. I didn’t know how to time this, and also good point that operationalising it in terms of AI stocks to target at what strike price could be tricky too.
If I could get the timing right, this makes sense. But I don’t have much of an edge in judging when the bubble would burst. And put options are expensive.
If someone here wants to make a 1:1 bet over the next three years, I’m happy to take them up on the offer.
Update: reverting my forecast back to 80% chance likelihood for these reasons.
Update: 40% chance.
I very much underestimated/missed the speed of tech leaders influencing the US government through the Trump election/presidency. Got caught flat-footed by this.
I still think it’s not unlikely for there to be an AI crash as described above within the next 4 years and 8 months but it could be from levels of investment much higher than where we are now. A “large reduction in investment” at that level looks a lot different than a large reduction in investment from the level that markets were at 4 months ago.
Update: back up to 50% chance.
Noting Microsoft’s cancelling of data center deals. And the fact the ‘AGI’ labs are still losing cash, and with DeepSeek are competing increasingly on a commodity product.
Update: back up to 60% chance.
I overreacted before IMO on the updating down to 40% (and undercompensated when updating down to 80%, which I soon after thought should have been 70%).
The leader in turns of large model revenue, OpenAI has basically failed to build something worth calling GPT-5, and Microsoft is now developing more models in-house to compete with them. If OpenAI fails on the effort to combine its existing models into something new and special (likely), that’s a blow to perception of the industry.
A recession might also be coming this year, or at least in the next four years, which I made a prediction about before: https://bsky.app/profile/artificialbodies.net/post/3lbvf2ejcec2f
Igor Krawzcuk, an AI PhD researcher, just shared more specific predictions:
“I agree with ed that the next months are critical, and that the biggest players need to deliver. I think it will need to be plausible progress towards reasoning, as in planning, as in the type of stuff Prolog, SAT/SMT solvers etc. do.
I’m 80% certain that this literally can’t be done efficiently with current LLM/RL techniques (last I looked at neural comb-opt vs solvers, it was bad), the only hope being the kitchen sink of scale, foundation models, solvers and RL … If OpenAI/Anthropic/DeepMind can’t deliver on promises of reasoning and planning (Q*, Strawberry, AlphaCode/AlphaProof etc.) in the coming months, or if they try to polish more turds into gold (e.g., coming out with GPT-Reasoner, but only for specific business domains) over the next year, then I would be surprised to see the investments last to make it happen in this AI summer.” https://x.com/TheGermanPole/status/1826179777452994657