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He has also consistently demonstrated, at least to me, that he doesn't really understand how inference works from a technical perspective, which weakens much of his core thesis for why there should be a collapse.

I do value having some naysayers in the mix generally, because we do need balanced critique in what is otherwise a very frothy hype cycle. I just don't think he's making sound arguments, and that's even assuming you even agree with his premises in the first place.

My biggest gripe with his napkin math is that he treats inference gross margins as something novel that you can't compare to normal SaaS margins. He's right in part: the constant carousel of R&D costs from model training, related infrastructure buildout, and other adjacent costs required to stay competitive do change the analysis a bit.

But he takes this way too far when he says this is structurally different from normal SaaS margins. The business model definitely doesn't look like Dropbox, but it absolutely looks a lot like AWS, especially early AWS, CDNs, telecom, etc. I can speak to the telecom bit personally, since it's been over half of my professional career as an engineer and, in this specific case, also as a founder. You can have a brutally capital-intensive infra business where profitability depends on utilization, oversubscription, peak-capacity planning, segmentation, and recovering capex over time.

The math he presents gets even more questionable as we see explicit segmentation happening for cost-saving reasons. Many forward-thinking orgs are waking up to the fact that they don't need to use the best, most expensive model for every task. They can route easier tasks to cheaper models, use caching, batch non-urgent workloads, and reserve frontier models for the subset of work that actually needs frontier intelligence. That directly undermines his claim that providers always need to chase frontier intelligence in order to maintain current demand, utilization, and pricing curves.

He’s been continuously predicting that the collapse was just around the corner, that progress was slowing, and that there was no market for inference, since 2024.

The fact he’s never reflected on the glaring failures in his analysis tells what we need to know about his intellectual integrity. There’s truth in some of his words about financial risk, but if you can’t acknowledge that there’s upside too, you can’t evaluate risk properly either.

I find it difficult to take him seriously.

Productivity is not value. It's quite possible for you to experience productivity improvements, and actual value to not be created. That is what I think the most robust data is showing.

https://unessays.substack.com/p/talk-is-cheap

I do not disagree with what you are saying, but I honestly still believe that most of the utility we experience are honestly gonna become very boring very soon that we can just run local... Even if it's a bit more slow who cares, can just run in background while you work on other stuff yourself, read up on things, review other work...

It's not that the utility of it put in question. What is however a giant question mark is how the heck any of the big AI companies are ever gonna get that ROI? Given how many of us are becoming more and more fine with local models that run just fine especially on a good enough computer which most developers have anyway...

Even if we assume that everything you said holds true, how is that we as a crowd can make viable a service that eats some $300bn annually in infrastructure costs? Where would that money come from? Most tech companies these days are cutting their AI budgets because the per token pricing is killing them.

Zitron’s gonna keep playing the hits. People pay him money for his brain damaged takes on AI and he’s certainly not going to stop now. He is getting better at saying stuff that’s not immediately disprovable though so good on him.

I really like some good drama slop that reads like a thriller, it is entertaining. I don't take any of it THAT serious, but lately with the IPOs that are about to hit the indizes, he has gained a lot of attention. If you look around the internet, most people publish a negative angle on something and then extrapolate it into some grand conspiracy, which is really captivating. Its crazy when you enter some echo chamber you never engage with (movies, gaming, art/comics) and they have their own head cannon for why the world is bad and collapsing. It puts your echo chamber into perspective to see the same patterns of argumentation and presentation spin out in a different way

Every day people here debate whether or not there are any actual productivity gains from LLM, and it's only in the limited context of software development. While I understand that this place obviously skews heavily towards the software industry, the notion that LLMs are anywhere near as useful in other industries is hubristic (at best).

Yes. Zitron has been predicting and begging for collapse since 2024. It's not just his brand at this point. It's his entire identity. As such, he cannot back down, he cannot question himself, and he cannot accept any other viewpoint. And he will keep moving his goal posts until something happens that can make him go "aha! I told you guys!!"

This, combined with his extreme ignorance, makes him unreadable. The only reason people read his stuff is because it validates and confirms their own anti-AI beliefs. It's why every time he publishes an article, it reaches the front page in an hour or less.

> Zitron is begging for a collapse at this point

No, he's not, he's making tons of money every month from his Substack subscriptions. In fact, the AI bubble popping would be the worse thing ever for him, he would be out of a job.

Just like the who have predicated the US dollar will collapse any-moment-now and which pushed gold for decades.

Funny how people always say "oh, you are an AI lab, of course you are going to hype AI", but never "oh, you make sooo much money from predicting the collapse of the AI bubble..."

> undeniable, massive productivity gains

How are they undeniable? They're very deniable. One example is the (seemingly) increasing maintenance costs for AI-generated code[1]. Another is the cost incurred by everybody reading AI slop instead of actual communication.

I don't have hard data as to whether these cancel out the benefits, but it's not as rosy as some seem to think.

[1] After years of people understanding that LOC is not only a poor productivity metric but also a negative indicator of code quality (shorter code for the same thing is better), we now have people touting how many LOC their LLM agent is generating. It's like everyone forgot what LOC actually represents and what it means for long term maintenance costs.

> Zitron is begging for a collapse at this point

No.

> Yes, his macro analysis correctly identifies a massive financial risk but

So, he's right.

> but his incessant pessimism

Realism. You already said he's right.

> the incredible ground-level utility that many of us on HN celebrate every day through undeniable, massive productivity gains.

No.

> At this point I'm trying to believe

Why are you trying to believe at all when things are so great? I thought you were busy celebrating all that undeniable, massive productivity gains.

> the incredible ground-level utility that many of us on HN celebrate every day through undeniable, massive productivity gains.

Which LLM company are you affiliated with/evangelizing for? Please disclose.

Can you point to anything specific from the article that you'd describe as consistently wrong? Not disagreeing with you, but nothing popped out to me after skimming the article.

The quality of AI doomerism takes is matched only by the quality of AI boosterism takes. Ed's kind of interesting as a temperature sensor but I don't feel like you can really take anything he writes seriously.

Yeah they seem clickable because anything Anti-AI is a bit soothing right now, but he is constantly wrong and usually is pushing the angle of "these businesses aren't even profitable!"

Instantly close the tab as soon as the popup to subscribe to his newsletter pops up.

What if you phrase the question from "will AI ever be useful" (a term as utterly vague as "IT") to "will it ever be able to promise the financial gains these companies are hoping? Especially with local models eating their lunch :shrug:

And its been 3 years of AI boosters telling me that my job as a litigating attorney will not exist in 2 months. Yet here I am, gainfully employed.

I don't think whether "LLMs are actually changing the State of the Art" or not matters for anything he wrote.

If the AI companies need $X billion in revenue to stay afloat, it doesn't matter if 0.5% or 5% or 50% of that revenue is from transforming the State of the Art. It's 100% irrelevant: what matters is that, transformation or no, these companies won't have the income to pay their bills. And if they can't pay their bills, a whole lot of other companies can't either.

So again, transformation or no, it's still a house of cards waiting to collapse. The only thing that would change that is not more "transformation" ... it's a feature set that lets them multiply their current user base (or multiply how much they charge them) several times over.

He's got subscribers. Maybe the attitude is one he's found plays well with them.

I find it quite refreshing in some ways. Lots of people, when they start complaining about this or that aspect of this AI stuff, are wont to add in a little disclaimer that, despite all of the above, they actually really like AI and use it all the time. I assume this is to avoid the scenario of a bunch of pragmatic builders turning up and calmly shipping nuance in the comments (or whatever you call it these days when you get brigaded by a pile of angry keyboard warriors with chips on their shoulder) - and it sure is tiring having to wade through the equivocation.

That's a criticism that'd be hard to level at Zitron! Say what you like about the man, but he's unafraid to appear to take a side.

> until inference becomes much cheaper these companies cannot be profitable. Some mega-players will pay the API token price, but most will not.

This is often repeated but comes from ignorance mostly. You have * zero * reason to believe inference is costly other than just vibes. If you go by data and intuitions - the margins are high.

This kind of thinking really reinforces my belief that people have no idea and are using this whole [AI is not profitable and too costly] thing as a cathartic way to deal with immense progress.

Ed's posts are peak preaching to the choir, they're usually factually correct but he is really bad at convincing anyone who doesn't already strongly agree with him.

Given the way tone has been intentionally abused, particularly in this industry, I’ll take a few f bombs and the truth.

Agreed. If the arguments seem sound and well supported, then all we can do is attack the tone.

Agreed. I am open to the possibility of the bubble bursting or whatever, but this piece is like 3,000 words and cites everything as evidence the sky is falling. It's just as bad as the pro-AI grifters, just in the other direction.

Does the truth normally lie somewhere in the middle of it all?

The only "bubble" with AI is that the initial build out is cyclical, and many of the high flying chip stocks with no software arms (ala Nvidia's CUDA) will come back to Earth. I think anyone that thinks AI is going away or won't have massive impact (though maybe not in the doomsday scenario) are in complete denial.

> The current wave of AI unlocked language - the tools are now speaking and understanding. This, on its own, is astonishing progress. Language is the foundation of our culture and society; it is the very technology that got us, as a species, to where we are today.

This is fire erasure

/s

Uber used the classic triple-E philosophy of Microsoft and entered a market that was ripe for disruption -- many cities lacked reliable taxi service entirely, others were cartels that fixed prices. They undercut prices to an extreme degree, subsidized fares, and when it either drove local taxi companies out of business and spurred widespread adoption as the default, it had a captive market and duopoly with Lyft which allowed them to raise fares without losing any market share whatsoever.

It's a pretty classic business strategy, and not directly comparable to any of the AI companies. There's a reason people compare the current situation to the dotcom era and not Uber. Also, don't take Uber as an example of a slam-dunk VC success story and leave it at that -- plenty of dumb ideas get pitched and funded and go bankrupt for every Uber.

Totally agree, remember WeWork's S1 and the fall that followed. Don't think it's the same case, but it'll clarify a lot of things

Concur.

I'm collecting many kinds of predictions Ed Zitron made so that you can see for yourself whether he has a good track record.

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> While complex, generative AI is a technology that probabilistically generates answers, and has no "intelligence." It is inherently limited by its architecture, and in turn can only get "better" in a linear fashion. I see no signs that the transformer-based architecture can do significantly more than it currently does.

He wrote this in 2024 before reasoning models came out. Remember how ChatGPT was in 2024? Do you think this person is someone who gets predictions right?

> Furthermore, I hypothesize a race to the bottom in generative AI will significantly hamper OpenAI's ability to expand revenue, compounded by the fact that we're approaching the limits of transformer-based architecture.

He wrote this in 2024 and since then Anthropic's revenue increased by 160x to $40 B dollars a year and OpenAI's increased by 6x. Do you think this person gets predictions right still?

> I believe we're reaching the upper limits about what generative AI can do and how accurate its outputs can be,

He wrote this in 2024, do you really think we have reached upper limits? Huh?? What I'm using today is significantly more accurate and 2 tiers above what we had.

> And if there are true industry-changing possibilities waiting for us on the other side, I am yet to hear them outside of the fan fiction of Silicon Valley hucksters.

He says this about AI when we have with all honesty have had industry changing possibilities like agentic coding.

> There are indications that consumers have also lost interest. As pointed out by Alex Kantrowitz’ Big Technology newsletter, traffic to ChatGPT on both mobile and web has started to stagnate, if not decline. In January 2024, ChatGPT had 1.6 billion visits — 11% below the all-time peak of 1.8 billion. This makes it only modestly more popular than Bing, which had 1.3 billion unique visits during that period. On the mobile front, ChatGPT has an estimated 6.3 million US users — or 1.7 times less than the total of new Snapchat users added during Q4 2023.

He agrees with the claim that the consumer interest has declined. Since he said this, there was a 9x growth in active users.

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https://www.youtube.com/watch?v=_wStScmT748&t=1s

"AI Bubble Already Bursting?" (8 months back)

https://www.youtube.com/watch?v=T8ByoAt5gCA&t=1s

"A.I bubble is bursting with Ed Zitron" (1 year back)

He's been constantly crying bubble for years now.

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> AI video won’t get truly fixed just by waiting a year.

This is what he had said in 2024, and you just need to compare video from then and now to check whether the predictions came true. Why would anyone trust what this guy has to say?

Lol... in this case, cheese imports from China are much cheaper, just not quite as good.

And for those who are all "but dur CCP get all ur data" you can use things like AWS Bedrock (at least for earlier versions of Deepseek and Qwen for now) and have more familiar people get all your data. Or buy (at obnoxiously inflated prices) your own HW and not send your data to anyone.

> What's the point of arguing with any of this.

> It's like someone arguing that cheese isn't real

I agree with your first statement (any being you) because of your second statement.