The month Generative AI lost its mojo
Mirrored from Marcus on AI for archival readability. Support the source by reading on the original site.
“WeWork’s IPO fell apart.
I’ve been calling OpenAI the (possible) WeWork of AI for a long time.
I will not be surprised if their IPO plans fall apart, too”
News, mostly just from the last few days:
OpenAI is leaning towards delaying its IPO until next year:
One rumor is that Altman was told he can’t get the valuation he wants:
Another rumor is that Altman is worried that the SpaceX IPO isn’t taking off. Also, per the Times, “….OpenAI’s advisers, in conversations with the company over the past week, …caution that it may not find much enthusiasm from retail investors for its own shares, two of the people involved said”. Still others have wondered whether OpenAI’s financials are solid enough yet. However you slice it, the delay reflects a lack of confidence.
As I long predicted, troubles with OpenAI may hurt other companies that they do business with. We are perhaps already seeing evidence for that
SpaceX, increasingly pitched as an AI play, has lost steam (up slightly for the day, but down 11.74% for the week), and its bonds are doing badly, too:
Nvidia is down over 8% over the last month; Oracle is down about 22% over the last month, CoreWeave is down a bit over 4% for the month, Microsoft 10% over the last month. SoftBank down about 12%. Chip company Cerebras is down 32% over the last month. See yesterday’s essay on the Fizzle
US AI policy is in shambles, drawing widespread scorn:
• Medical AI bull Eric Topol just posted this:
and there is this from Nobel Laureate Jennifer Doudna
• Backlash against AI is getting really intense for many reasons, as discussed for example yesterday by Paul Krugman:
Paul Krugman• Chinese models are gaining traction, fast.
As I have said before, over and over, LLMs are becoming a commodity.
None of this bodes well for the US AI industry.
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AI bulls of course will disagree. As Noah Smith pointed out, drawing on an excellent new report from et al, revenue is clearly up
But Smith’s conclusion that there is no bubble doesn’t follow. The chart he shared shows that revenue is up, not that profitability is , nor that it can be sustained, as I noted on X:
Smith fired back, pointing to what might be Anthropic’s first profitable quarter.
But he left a lot out. In focusing on Anthropic’s not yet confirmed spring quarter Smith ignored the fact that the spring quarter — which he selected post hoc and which looks different from all others — was (a) during peak tokenmaxxing, (b) before recent Chinese advances, and (c) in a quarter in which SpaceX gave Anthropic a big one-time subsidy, quite possibly larger than the profit.
And, again, the WSJ prediction of a positive quarter that Smith pointed to was speculation; it’s not at all clear that it will actually come to pass, given all that happened since then. With the decline of tokenmaxxing, the rise of Chinese models, and the U.S. government pause on Fable, June was not as kind to Anthropic as April and May were. So we’ll see.
Ed Elson’s overall take on Anthropic’s profitability, just posted, was this:
Even Polymarket sees it now; the game has changed:
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I tried to distill my basic argument yesterday in the FT. Here’s one part of it:
If the argument I laid out there is remotely correct, hyperscaling could prove to be among the biggest financial blunders in history.
P.S. An analogy worth considering:
P.P.S. Fun new interview:
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