{"id":21525,"date":"2024-08-08T16:41:49","date_gmt":"2024-08-08T15:41:49","guid":{"rendered":"https:\/\/interface.media\/?p=21525"},"modified":"2024-08-08T16:41:58","modified_gmt":"2024-08-08T15:41:58","slug":"is-this-the-beginning-of-the-end-for-generative-ai-hype","status":"publish","type":"post","link":"https:\/\/interface.media\/blog\/2024\/08\/08\/is-this-the-beginning-of-the-end-for-generative-ai-hype\/","title":{"rendered":"Is this the beginning of the end for generative AI hype?"},"content":{"rendered":"\n

Alarm bells are ringing<\/a> in the artificial intelligence (AI) sector. After almost two years of fervent excitement, controversy, and billions of dollars in capital expenditure, it seems as though investors may be turning against<\/a> the all-consuming rise of generative AI.\u00a0<\/p>\n\n\n\n

The market for artificial intelligence eclipsed $184 billion already this year, a considerable jump of nearly $50 billion compared with 2023. Now, however, as the panic spreads, it seems as though the AI bubble might be about to burst. <\/p>\n\n\n\n

NVIDIA\u2019s stock price and the big AI wobble <\/h3>\n\n\n\n

The stock market is currently having a bad time. All three US stock market indexes fell sharply on Monday after similar dips shook Europe and Asia. The dive has ostensibly been due to poor growth outlook in the US and a disappointing job market outlook, but, as Brian Merchant at Blood in the Machine <\/em>points out, \u201ca selloff of AI-invested tech companies is partly to blame.\u201d <\/p>\n\n\n\n

Going back to the start of this month, you’ll find the biggest canary (a $3 trillion canary, to be specific) gasping for air at the bottom of the coal mine. US chipmaker Nvidia has ridden the AI demand wave to become the world\u2019s most valuable company. However, it seems like the chip giant\u2019s fortunes may be reversing as, once buoyed by the rising tide of AI excitement, the company lost around $900 billion<\/a> in market value at the start of August.\u00a0\u00a0<\/p>\n\n\n\n

Sean Williams at the Motley Fool notes that \u201cinvestors have, without fail, overestimated the adoption and utility of every perceived-to-be game-changing technology or trend for three decades.\u201d Now, it seems as though reality has caught up with the \u201csensational bull market\u201d, as the commercial value of AI is increasingly called into question. <\/p>\n\n\n\n

Too much speculation, not enough accumulation <\/h3>\n\n\n\n

Despite publishing an article on the 1st of August predicting that AI investment will hit $200 billion globally by the start of next year<\/a> (citing the fact that \u201cinnovations in electricity and personal computers unleashed investment booms of as much as 2% of US GDP), Goldman Sachs also (to less fanfare) released a report in June that calls into question whether investors should tolerate the worrying ratio between generative AI spending and the technology\u2019s actual benefits. \u201cTech giants and beyond are set to spend over $1tn on AI capex in coming years, with so far little to show for it,\u201d notes their report<\/a>.\u00a0<\/p>\n\n\n\n

Some of the experts Goldman Sachs spoke to criticised the timeline within which generative AI will deliver returns. \u201cGiven the focus and architecture of generative AI technology today… truly transformative changes won\u2019t happen quickly and few\u2014if any\u2014will likely occur within the next 10 years,\u201d said economist Daron Acemoglu. <\/p>\n\n\n\n

Others, including Global co-head of single stock research at Goldman Sachs itself, called into question generative AI\u2019s fundamental capacity for solving problems big enough to justify the amount of money being spent to shove it all down our throats. \u201cAI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn\u2019t designed to do,\u201d he said. <\/p>\n\n\n\n

As Merchant noted earlier this week, things are \u201cstarting to look bleak for the most-hyped Silicon Valley technology since the iPhone.\u201d <\/p>\n\n\n\n

Cold feet on Wall Street<\/h3>\n\n\n\n

However, none of this really matters if tech giants can convince their investors that the upfront costs will be worth it. I mean, Uber has managed to convince venture capitalists to keep pouring money into a business model that\u2019s basically \u201ctaxis but more exploitative\u201d for over a decade with no sign that its model will ever be sustainable<\/a>. And yet, the money keeps on coming.\u00a0<\/p>\n\n\n\n

Surely, the wonders of AI can convince investors to keep investment chugging along in the vague hope that something good will come of it (or, more likely, a raging case of sunk cost fallacy)? <\/p>\n\n\n\n

The fact that the world\u2019s biggest tech giants are struggling to do just that is probably the most damning evidence of just how cooked AI\u2019s goose might be. <\/p>\n\n\n\n

According to an article in Bloomberg<\/a> from the start of August, major tech firms, including Amazon., Microsoft, Meta, and Alphabet \u201chad one job heading into this earnings season: show that the billions of dollars they\u2019ve each sunk into the infrastructure propelling the artificial intelligence boom is translating into real sales. In the eyes of Wall Street, they disappointed.\u201d\u00a0<\/p>\n\n\n\n

Not in it for the long haul <\/h3>\n\n\n\n

Microsoft said that investors should expect AI monetization in “the next 15 years and beyond” \u2014 a tough pill to swallow given how much of a dent generative AI has been putting in Microsoft\u2019s otherwise stellar sustainability efforts. Google CEO Sundar Pichai revealed that capital expenditure in Q2 grew from $6.9 billion to $13 billion year on year, then struggled to justify the expense to investors.  Meta CFO, Susan Li, warned that investors should expect “significant capex growth” this year. By the end of the year, the company expects to spend up to $40 billion on AI research and product development, according to Business Insider.<\/em><\/p>\n\n\n\n

Essentially, AI is almost unfathomably expensive. The daily server costs for OpenAI are around $1 million. The technology consumes eye-watering amounts of electricity at a time when we need to be drawing down on our energy usage, not cranking it up to eleven. Training and developing new AI models also requires paying the most talented programmers in the world very large amounts of money. OpenAI could reportedly lose $5 billion this year alone. All for the promise that generative AI could, one day, be profitable. Personally, it doesn\u2019t seem like sub-par email summaries and really weird porn are going to cut it. For once, the Wall Street guys and I seem to be in agreement.  <\/p>\n\n\n\n

Shares in all major tech giants lurched downwards in the days following each one revealing the sheer scale of capital expenditure they had planned to support their continued generative AI efforts. However, it might not matter. As Merchant observes, \u201cbig tech has absolutely convinced itself that generative AI is the future, and thus far they\u2019re apparently unwilling to listen to anyone else.\u201d\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Firings, frosty earnings calls, and freefalling share prices all point to the beginning of the end for the AI spending craze, as the benefits of the technology fail to materialise. <\/p>\n","protected":false},"author":480,"featured_media":21526,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"apple_news_api_created_at":"2024-08-08T15:41:54Z","apple_news_api_id":"fe31a7db-1e11-4636-8733-b2d719935597","apple_news_api_modified_at":"2024-08-08T15:41:54Z","apple_news_api_revision":"AAAAAAAAAAD\/\/\/\/\/\/\/\/\/\/w==","apple_news_api_share_url":"https:\/\/apple.news\/A_jGn2x4RRjaHM7LXGZNVlw","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":""},"categories":[3],"tags":[],"topic":[614],"class_list":["post-21525","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-interface","topic-data-ai"],"acf":[],"apple_news_notices":[],"yoast_head":"\nIs this the beginning of the end for generative AI hype? 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