The Large Language Mammon

Max Read's recent post on the AI bubble is a succint synopsis of the zeitgeist. Equity valuations are at nosebleed levels, AGI cometh only in the minds of zealots, and billions of dollars have been allocated to data center capex. I was inspired by reading Max to revisit a previous post of mine - There Is No Bubble - because a lot of the dynamic he observes I have also alluded to, and want to elaborate upon.

Ever since the release of ChatGPT and the consequent AGI marketing push, retail and institutional investors alike have been smitten. If capex has been holding up the American economy in the real world, the promise of AGI has been emboldening its animal spirits. After all, it's a seductive message: the Fourth Industrial Revolution is imminent and, much like Adventists, we must prepare.

Perhaps the AI 2027 guys will be right and we'll all have egg on our faces (and be out of a job on our way to becoming Soylent). Perhaps my skepticism will be retroactively considered heresy and Roko's basilisk will turn every atom in my body into paper clips and torture my soul for eternity. Perhaps not. Regardless, I don't really care about all that. Perhaps it all comes to pass. Neat.

What I do find interesting is the massive investment into data centers. If the "AI bubble" does "pop" - whether that means Nvidia's stock price is back below $100, there are fewer AI posts on Hacker News, or people's latent psychosis stops getting triggered by chatbots - the hardware has already been bought and the data centers already built. CUDA ain't going nowhere. Machine learning research will plod along. Palantir will continue to be inspired by Minority Report. Mark Zuckerberg may start dressing as a nerd again.

The Big Tech companies have historically been asset-light despite their crazy revenues, which is why these past few years have been so incredible. If this mythical bubble everyone keeps talking about does pop, somebody is going to have to figure out what to do with all these GPUs. Nature abhors a vacuum and I don't expect investors will take kindly to their billion-dollar monuments collecting dust and attracting mice.

OK Matt, so the bubble pops and equity valuations plummet. The economy enters recession as investors lose faith in deploying capital, consumer spending pulls back because people don't feel as rich anymore, and we finally see fewer AI posts on Hacker News. Happy now? Not really. I don't really care about all that.

What I will say, though - which I outlined in a different post where I humblebragged about my six girlfriends - is that whatever "correction" happens will be temporary. Line Go Up is the American civic religion. Lyn Alden does a better job explaining this than I ever will, so if you're a dork like me read her work. Suffice to say, the Market will find a new muse to pine after, conveniently forgetting its previous soulmates in crypto, the Metaverse, and AI. Capital will continue accumulating, just as animals in an ecosystem maximize their fitness while they forage. America thinks it invented hustle culture but Nature has been on that grind for aeons.

As Mark Fisher discovered, the big C ain't going nowhere. You can't kill the Market and its hunger is matched only by Mammon's. The gears of time spin on as the data centers whirr and the money printer brrs.