AI needs $6T in annual revenue to justify data centre boom(thenationalnews.com) |
AI needs $6T in annual revenue to justify data centre boom(thenationalnews.com) |
Models are getting cheaper, and more efficient, but I don't see how they cross the threshold of full autonomous intelligence in the way that an employee needs to be fully accountable for their actions.
A perfect ouroboros.
like in the good old days
In terms of personal life, I certainly find AI tools pretty useful especially given how awful Google is now, and coding tools are indispensable at work.
But taking those bespoke contraptions to market is not something I want to out effort into. Especially when anyone can just clone it with AI.
The AI revolution might not show up so easily in GDP.
Now are there useful applications of these tools (not gods) that might justify a sizeable new tech market? Absolutely yes! Is that market ever be going to be worth trillions a year? LOL hell no.
So where is the value? Have you built that one application you always wished existed but it wasn't available?
One of the things that was promised in 2024 was a "deflationary spiral" for physical goods and the economy in general because of insane efficiencies that AI would supposedly bring. I believed that whole-heartedly and I was a huge AI fanboi even as my artists friends and Lib Arts friends were complaining.
We're in almost October 2026 now and they're nowhere in sight. We have a bunch of unreliable agents that do clerical and design work here and there, but where are all the industrial productivity boosts? If AI were so good, large industries and factories should be adopting them as a never-before-seen scale. Where are they?
But go and talk to small companies. What they are able to pull off is just incredible. More features in shorter time. Improved UX and client satisfaction.
On a society level 6 months is nothing. This will take about 10 years to penetrate all organizations I assume.
Since Fedora moves old releases to some mirror it's a nightmare to update old installs.
Now I did it very conveniently. Did I build a space ship with the help of ChatGPT? No. Is it useful to me? Yes.
I'm doing many much cooler things that I haven't released yet but I am launching projects I never dreamed I could do as a solo dev in 2-3 months.
Wouldn't have been possible.
But hey, you can now close yourself off even more and not interact with anyone or learn to have a dumb bash script for a menial task. Woopie, totally worth it!
Warehouse and factory labor is the next largest market for AI/robotics, at about $7T/year globally.
The bubble question is really about the target year. Will these companies start on a trajectory where AI begins eating these massive markets before investors lose faith?
To me it looks like one of these is true:
(1) this is indeed a bubble, and AI will turn into a useful tool integrated into everything but fall short of expectations. We'll see some significant multiple compression in the share prices of these core AI companies, but they'll remain good investments in the long term.
(2) this is a real transformation, the investment was worth it, and these companies will earn massive revenue while causing Depression-era levels of unemployment (24% if half of knowledge workers and factory/warehouse workers can get jobs).
Basically, the revenue required to justify the infra spend requires that they start eating existing industries, because that's certainly not going to come from ChatGPT/Claude subscriptions.
For example, the article suggests $1T from enterprise productivity tooling. A quick Google suggests the global enterprise productivity tooling market is only worth about $0.1T right now.
Do we really expect all the world’s corporations to suddenly up their annual spend by 1,000% on average? Why?
> Bain forecasts that annual spending on AI infrastructure might hit $1.5 trillion by 2031.
So maybe in 5yrs it will need enough revenue to cover $1.5T in capex spend globally in a year, investments which as the article mentions is also being supported by governments in "the UAE, Saudi Arabia, the EU, South Korea and the US". ... Or spending growth could lower over the next couple years to be more realistic.
I think their claim they can make, assuming their evidence is true, is
"AI needs $6T in annual revenue for every investment in AI to be profitable"
I think some people will make a lot of money and more people will lose a lot of money.
Most of those investing know this, they are taking the risk of losing a lot to attempt to be one of the ones that make a lot.
A lot of early internet tech companies went bust, a few became extremely successful. At the time I would see high valuations and ask "Yes, but how do they make money". Most of those with an unclear answer to that question are not around now. The ones who had a tangible plan to make money, even if they were making a loss at the time, tended to survive.
There is a lot of Dumb money going into AI, when that is the dumb money of wealthy individuals, I am more than happy to let them receive no return while paying for infrastructure. There's a problem when the dumb money comes from dumb individuals who are routing money from others who do not have a say in how it gets invested.
That is not an AI specific problem, that is a problem where people can make decisions where others carry the risk without their consent. That is the problem that needs to be met head on.
> forecasts that annual spending on AI infrastructure might hit $1.5 trillion by 2031.
> ...
> sustaining this level of investment would require an AI market approaching $6 trillion annually
What happens when the adoption of AI destroys the middle 60% of the bell curve of programmers and technologists? How will the middle class of people spend money on products/services if they don’t have a job?
We can’t both create wealth and destroy jobs with nothing to replace them.
America has little to no manufacturing base.
Technology and finance has been its differentiator economically speaking for job creation. Both are at risk from AI adoption. Businesses have to sell to someone, and at the moment it’s not clear — if the stated goals of revenue are to be believed, how that can happen.
───────────────────────────────────────────────────────────────────────────────
Language Files Lines Blanks Comments Code Complexity
───────────────────────────────────────────────────────────────────────────────
TypeScript 10,705 2,445,724 191,695 71,737 2,182,292 167,330
JSON 1,435 604,218 58 0 604,160 0
Rust 1,260 718,912 56,372 57,773 604,767 65,562
Markdown 1,087 162,160 36,375 0 125,785 0
SQL 1,046 129,795 6,142 7,389 116,264 1,344
Python 705 168,359 22,710 23,235 122,414 17,962
JavaScript 657 209,397 8,824 7,587 192,986 45,383
───────────────────────────────────────────────────────────────────────────────
Total 19,009 4,903,248 353,289 186,252 4,363,707 326,094
───────────────────────────────────────────────────────────────────────────────
Estimated Cost to Develop (organic) $179,262,721
Estimated Schedule Effort (organic) 98.79 months
Estimated People Required (organic) 161.19
───────────────────────────────────────────────────────────────────────────────
Processed 206,138,543 bytes, 206.139 megabytes (SI)
───────────────────────────────────────────────────────────────────────────────Reason I ask is sure, you did this but since few people are paying true cost, if prices rises by 10x, is it still worth it?
Consumer-focused services, which includes subscriptions and advertising revenue, is seen to contribute $200 billion to $400 billion
So not $6T of ARR subscription sales, but $6T of "economic enablement". By 2031, the global economy is estimated to add another $40T of economic activity to GDP. So AI needs to account for 15% of that.
His latest newsletter (from today) also talks about this: https://www.wheresyoured.at/dead-money/
I guess either we get human level AGI so it can do human like jobs, or they'll have to trim those plans a good bit?
OTOH, this price crash will increase demand for inference. Maybe some data centres will go bankrupt, but the scavengers won't be selling off used TPU's for cheap, they'll operate those data centers to sell you tokens for cheap.
I don't care how good AI is at something like software development or whatever task. If customers were paying real prices for usage would any of us be using it?
Any data out there on how far off enterprise API pricing is from actual compute COGS for these models right now?
2. Global GDP will be ~$165T by 2031
3. This is not $6T of ChatGPT subscription revenue. The article actually specifically says of the $6T, $200-$400B would be subscription and AI app revenue in 2031.
4. The $6T figure is AI "economic enablement". Drugs, robotics, research, coding, manufacturing, materials, etc...
*https://blogs.lse.ac.uk/businessreview/2026/09/22/how-americ...
Chatgptd emails are not adding value anywhere
Very few professions if any get anything remotely like the value coders get from LLMs right now Maybe lawyers or doctors but it's just way too risky error wise A comma off in a legal doc can end your career
This of course hinges on the big if: does AI create wealth? I think yes, but maybe not $6 trillion of it in five years.
There is also the question of time scale. Growing a market takes time. Assuming the numbers above are the right order of magnitude, we are not going from 0.1 to 1 in a year. So even if the number would make sense over longer time frames, it can still be unsustainable for a significant amount of time before that.
Like the Internet at the end if the 1990s, basically.
At a time when corporate CEOs are largely saying that they can't see that AI has improved office productivity at all, why should we believe that a killer productivity application of genai that's amazing enough to justify an order of magnitude increase in enterprise spending on productivity tools is just around the corner?
For example, if I'm a landlord that uses AI to more intelligently price rental increases to maximize profit without attrition, I have created more revenue but not more wealth.
However, customers coming up with the money is the easy half of the problem. The hard part is having them pay you.
Wikipedia's valuation is on the small side of {number of people on the internet worldwide} * {peak price of Encyclopaedia Britannica} † despite containing a lot more content.
LLMs can only chase high margins while they're ahead of their competitors; the moment the investment stalls, open weighs catch up, they loose their edge. Cloud compute providers still win on supplying inference, but there too competition will likely lower margins, not justify huge valuations.
NVIDIA may remain as valuable as today, but their P/E ratio will likely shrink a lot even while keeping up the price.
Model makers still have a problem here even if the tech is so useful it rapidly grows the economy: "free" is right behind them almost immediately after they stop.
* under the assumption the tech is real; there's plenty of people here on Hacker News who still dismiss it as a "scam"
† that would be about 13 trillion USD, from what I read
If they keep replacing employees with AI, that is indeed the direction.
Eventually this merry-go-round runs into some issues if we don’t figure out a way to make this huge productivity boom work.
Because spend on "enterprise productivity tooling" (or whatever category they want to place AI spend in) can now increasingly offset human labor cost.
Still though, the thesis seems based on an assumption that the companies would experience either major growth or major efficiency gain, neither of which really pass the smell test to me. Option 1 growth - money has to come from somewhere ultimately? Option 2 efficiency - put into profit rather than simple offset to AI provider?
Or the AI providers get companies hooked with subsidized pricing that unwinds later and you end up with the Uber/AirBNB situation of market capture and good product reverting to mean level of price/quality over time. Tinfoil hat thinks it ultimately gets squeezed out of retail investors in index funds.
They already figured they would need trillions revenue. So they paint an economic where such amount is plausible.
AI is not a replacement for powerpoint and excel. You can't substitute those.
White collar worker salaries is ~$30T+ global.
productivity tooling replaces employees
Hard to see how Google or Facebook keeps their advertising models in that environment. There aren't enough construction workers and data scientists to buy everything.
Who re these people?
because AI is gonna make them so much more productive of course. /s
“Being right at the wrong time is as good as being wrong” - Howard Marx
What you consider “losing money” I might consider “choosing not to participate in an ongoing global financial scam at the cost of my retirement growing slightly slower for a while”.
I don’t even disagree with some or even a lot of his takes, it’s just he is singularly a content generator with a track to run on. Look at his previous work, it’s much of the same kind of attempts at being relevant. To me he’s nothing more than a drive time radio host, shouting about something just to fill the air
Just for fun, I'll join in myself and make two bold half-hearted predictions that will surely be wrong:
- Zitron is wrong about the details, but right about the ultimate fate of the AI companies. Turns out AI is useful after all, it just isn't able to justify trillions of dollars in expenses. Shit falls through hard. Probably not an AI winter, but more like the dotcom bubble, as many have already predicted for years. Everything looks rosey right up until the first domino falls.
- The AI safety doomers are right, just not any time soon. Turns out our depth of understanding what intelligence really means was severely lacking; it's hard to quantify and we never had so many things testing it. Eventually, we really do discover why LLMs emergent capabilities really are inherently limited in ways that just make their ability to meaningfully "escape" less scary, and maybe architectures emerge without these limitations, just not yet. The fight with LLMs and malicious use winds up looking a lot more like a supercharged version of the current fights we have with dumber bots. Everyone winds up having to fight LLMs with LLMs, and this new world eventually pushes both good and bad new legislation in its wake, finally actually pushing responsibility for AI misfires, but probably in a way that is at least as bad as it is good, creating chilling effects and harming competition unnecessarily, because that's just how things go. Maybe we eventually do crack true super intelligence where it's a full superset of human mental facilities, and then geopolitics maybe gets as interesting as it ever has been in history. Probably not in a way that is fun for people living through it.
I can't blame Zitron. It's fun to pretend to be able to predict the future. I still broadly agree that the financials don't really seem to make that much sense even if he clearly keeps getting the details wrong.
I kinda hope corpos with a bunch of money and plenty of normies adopt AI so developers don't get bled (as) dry, esp. given the recent OpenAI changes which I feel like Anthropic is soon to follow.
Edit: explanation of the downvotes would be nice. Dan Luu made a fairly factual article there that explores some of Zitron's claims. And personally I don't see how it's bad to wish for wider adoption of AI so the big orgs get their fill of profit (since enough inference could help fund R&D better) and developers don't have to bear that burden.
I don't think that nobody seems to mind that. Pro-AI people make fun of doomers because of their failed predictions of apocalypse at least since GPT-2 days.
Play positive sum games.
My point was that AI isn't some productivity software thing. The addressable market is white collar work that can be done on a computer.
You think its implausible for AI to replace some fraction of white collar workers? To me this is directionally exactly where this is heading?
If this does or doesn't happen with AI kinda depends how fast it makes multiple different sections of the population unemployed, rather than just one group like "software developer" or "vehicle driver".
It took maybe a century and a half for the modern consumer economy to appear. And it didn't happen until money started being shared into the wider economy for political reasons, not technological ones.
Meanwhile the enclosure of common land was catastrophic for rural populations. Sources of food and pasture disappeared as the Big Houses took them over and turned them into huge single family estates.
Heh, got fired from my old company for reasons not connected to AI. Then couldn't find job. AI suggested one that is perfect for me, helped me put up webpage (I can do everything from electronics/firmware/backend/iot/cad, but nice webpage is not something I can do easily), then helps me every day to learn new things and make useful products I always wanted to make. And I found something safe for now from AI and big companies - making old equipment work with new systems. No one will touch it, because you have only small projects here and can't extract a lot of value at once, but a single person who can do anything with some help from AI can carve out a whole niche.
I think such solution - thousands of small niches by small entrepreneurs (1 person companies) who can use AI for some small skill they are lacking - are our future and they will absolutely extract a lot of money from people, who hope to make some more money with small optimisations of already working businesses. One example of such small optimisation - making a slightly better wood drying controller for small woodmill owner. He already put up small cabinet with cheap tuya controllers and needs to control them though atrocious app. Now I can make a small module that will add several more sensors, give him some simple dedicated control panel on webpage. Not even medium company would make such small product, because planning phase alone would cost more than what I can charge for whole system and do it in a week.
And it all started with one prompt - "Given my CV, what single person job would you recommend?"
1) This would make stocks worth a lot more and produce more dividends so everyone owning stock would get money to spend.
2) Governments effectively indirectly own ~40% of all business profits via corporate taxes, capital gains taxes, dividend taxes, sales taxes. So governments would also have more revenues to spend/redistribute (this depends on governments not wasting it, spending it on wars etc.)
That doesn't mean the wheels won't fall off, they fall off pretty regularly as is.
The difference between this loop and the previous loops, is that people making the tech used to be pretty straightforward ("invest in me, your money will let me make a machine that lets me fire 90% of my peasants and we can share in the savings"), while today they're all "invest in me, either this will kill everyone or just make the concept of money irrelevant, either way rotflmao".
I think CEOs could honestly say it a year ago, but by now the numbers of those who say so should be dwindling.
Recent surveys by BCG and others suggest things have changed.
Personally, I know many people in different fields who’ve seen crazy speed ups in many of their tasks.
I'm using claude to make gaming mod apps I never would have bothered to code before, but they have zero monetizable value. There is demand for sure, but somewhat ironically, copyright/IP/TOS law stands in the way. The thing which committed the biggest copyright infringement in human history lets me make another thing which I can't release because of copyright law. I'd get cease-and-desisted instantly if I did so.
And employees self-reporting that they saved time doesn't necessarily mean they actually save time. Humans are famously crap at estimating that sort of thing.
Anecdotally, I've seen management using AI to produce more and more flashy looking dashboards and interactive displays of various metrics. Will this help our bottom line?
LLMs can use PowerPoint, but also LLMs can write the raw document file directly without the software. One time I asked for a letter and what came out was it doing that.
What really matters with this though is reading other people's documents, whatever format they happen to be in. PowerPoint isn't the only game in town for creating slide decks, but if you want to be sure you can read all the ones sent to you, it used to be the case you'd need a copy.
Used to be. Now the AI can read and summarise the slides for you.
("AI, expand these bullet points into a slide deck" -> "AI, condense this slide deck into bullet points", as the meme goes).
I very much can.
That applies to most software.
This doesn't solve the problem of "Who gets paid now, and for what?" at all. If anything it makes it worse.
But also the car business is far larger than the horse business ever was. It is not zero-sum; every time Henry Ford's factory spit out a new model T, real wealth was being created.
Money is just a standin for wealth. If we suddenly doubled the amount of wealth in the world, we could just print more dollars to match - or the existing dollars would just become worth twice as much.
That said, this came too late for investors in the dot-com boom. AI investors may find themselves in a similar situation.
which yes, will completely destroy the consumer economy and social structures and current forms of governance