95% of Companies See 'Zero Return' on $30B Generative AI Spend

Except generative AI is mostly an arms race, with content being generated being processed by some other AI on the other side. And any humans unfortunate enough to be in the middle regretting being born.

The Trough of Disillusion. Though we definitely aren't down there yet, it's coming.

Man, if people aren’t on the plateau of productivity by now with genai, it’s their own damn fault. Trough of disillusionment was like, 2020 AI projects.

You just wait, when we achieve agi it’ll drive hype cycles at a speed humans have no chance of keeping up with. We will always effectively be in all points of the hype cycle at once. Money will wash randomly through the economy like soap through your laundry. You ain’t seen nothing yet.

Do you sell overpriced generative AI solutions, or do you consult them on how to pivot away from idiotic generative AI?

Started an entire consulting practice to get engineering teams and founders out of vibe coded pits. Even got a great domain for it - vibebusters

So far business is booming and clients are happy with both human interactions with senior engineers as well as a final deliverable on best practices for using AI to write code.

Curious to compare notes

Good thing consulting is one thing AI is decent at

> AI is improving employee productivity, but that's not leading to more business profit... how does that happen?

One trivial way is that the increase of productivity is less than the added cost of the tools. Which suggests that (either due to their own pricing, or just mis-judgement) the AI companies are mis-pricing their tools. If the tool adds $5000 in productivity, it should be priced at $4999, eventually -- the AI companies have every motivation to capture nearly all of the value, but they need to leave something, even if just a penny, for the purchasing company to motivate adoption. If they're pricing at $5001, there's no motivation to use the tool at all; but of course at $4998 they're leaving money on the table. There's no stable equilibrium here where the purchasing companies end up with a /significant/ increase in (productivity - cost of that productivity), of course.

Possible conclusion: most of the work that employees do has no direct impact on earnings.

This study was led by a PI in the MIT Media Lab who studies cameras and their impact on society.

There's a reason it has a catchy headline, there's a reason you needed to fill in an email form to get access to the study, and there's a reason why the 2nd author has an agentic AI startup.

I thought it was a low quality article with no data or in detail methods. MIT needs to do better. This is the second article of this type in the last few months that caught headlines.

Maybe they’re measuring productivity by flawed metrics. One could write 10x as much code, but that doesnt mean that will equate to more profit

I don't know?

For some reason, I'm thinking most of the money went to either inferencing costs or NVidia.

Are there really that many consultants floating around still? I remember the heyday of the 2000s and kind of thought the outside consultants were largely disappearing and nowadays companies have trained themselves to jump on the hype train without paying consultants to push them?

Grain of truth acknowledged, though much exaggerated -- to the point of forgetting history.

> No - you just got a glimpse of 2009 Google with autocomplete.

Go look at the kinds of "answers" you got in 2009 with Google's autocomplete.

Time to drop this convenient nicely-packaged narrative.

> These things don’t think, don’t learn, don’t adapt.

Perhaps some don't -- for some intentionally constructed definitions of these terms. Adding a feedback loop (chain of thought, etc) challenges even such definitions though.

> if you expect parrots to run your company, you get birdshite for returns.

If this is a reference to "stochastic parrots" metaphor, then I would encourage you to read these articles and HN comments below, which push-back against misunderstandings or overuse of that metaphor:

[1]: https://www.lesswrong.com/posts/HxRjHq3QG8vcYy4yy/the-stocha...

[2]: https://www.lesswrong.com/posts/7aHCZbofofA5JeKgb/memetic-ju...

[3]: https://news.ycombinator.com/item?id=44299996

[4]: https://news.ycombinator.com/item?id=44926540

[5]: https://news.ycombinator.com/item?id=44967655

[6]: https://news.ycombinator.com/item?id=43676755

[7]: https://news.ycombinator.com/item?id=43585572

[8]: https://news.ycombinator.com/item?id=42351348

While you are being downvoted here, I would like to express how much I liked how this thought summarized some of the pain points I have to deal with: (regardless of AI):

> they’re faithfully mirroring the mediocrity of the organisation

This is happening with to technologies / tools / etc...

The shovel business is good as long as the gold rush lasts. Once the gold rush is over, you're going to have to deal with a significant decrease in volume, unless you can find other customers.

Crypto's over, gaming isn't a large enough market to fill the hole, the only customers that could fill the demand would be military projects. Considering the arms race with China, and the many military applications of AI, that seems the most likely to me. That's not a pleasant thought, of course.

The alternative is a massive crash of the stock price, and considering the fact that NVIDIA makes up 8% of everyone's favorite index, that's not a very pleasant alternative either.

It seems to me that an ultra-financialized economy has trouble with controlled deceleration, once the hypetrain is on it's full-throttle until you hit a wall.

or steel and wood for making shovels, TSMC

I wouldn’t be surprised if 95% of companies knew this was a money pit but felt obligated to burn a pile of money on it so as not to hurt the stock price.

Yo what’s the next hype cycle that smart folks like us should be working on?

Prepare for the crash:

"Spending on AI data centers is so massive that it’s taken a bigger chunk of GDP growth than shopping" - https://fortune.com/2025/08/06/data-center-artificial-intell...

Good point. I wonder if the Windsurf folks saw the writing on the wall and cashed out when they could.

I would bet on Robotics in general, humanoids and other type robots

hahaaa! I lead a growth team for a genAI company and on Monday I said to the team "we need to start to put content together that proves our customers are having return and finding value, because we're entering the trough of disillusionment"

...I'll try not to sound desperate tho.

Gemini keeps being rather impressive though, even their iterative updates have improvements, though I'm seeing a significant slowdown in the improvements (both quantity and in how much they improve) suggestion a wall may be approaching.

That said, technologies like this can also go through a rollercoaster pattern itself. Lots of innovation and improvement, followed by very little improvement but lots of research, which then explodes more improvements.

I think LLMs have a better chance at following that pattern than computer vision did when that hype cycle was all the rage

Sam Altman way oversold GPT-5's capabilities, in that it doesn't feel like a big leap in capability from a user's perspective; however, the a idea of a trainable dynamic router enabling them to run inference using a lot less compute (in aggregate) to me seems like a major win. Just not necessarily a win for the user (a win for the electric grid and making OpenAI's models more cost competitive).

When OpenAI went from GPT-3.5-Turbo to GPT-4 it seemed massive, and there were no other steps in-between. And nobody else had a meaningful competitive model out yet.

When GPT-5 came out, it wasn't going from GPT-4 to GPT-5. Since GPT-4 there has been: 4o, o1, o3, o3-mini, o4-mini, o4-mini-high, GPT-4.1, and GPT-4.5. And many other models (Llama, DeepSeek, Gemini, etc) from competitors have been released too.

We'll probably never experience a GPT-3.5 to GPT-4 jump again. If GPT-5 was the first reasoning model, it would have seemed like that kind of jump, but it wasn't the first of anything. It is trying to unify all of the kinds of models OpenAI has offered, into one model family.

Perhaps just a trough of disillusionment for OpenAI. Anthropic and Google keep delivering.

If GPT-5 had been released last year instead, they could have probably kept the hype manageable. But they waited too long and too greedily, and the launch fell flat. And in some cases even negative as I’m seeing some bad PR about people who got too attached to their GPT-4o lovers and hate the new GPT-5.

> This is how America ends up being ahead of the rest of world with every new technology breakthrough.

Too young to remember GSM?

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That's an awfully simplistic way of seeing things. It always surprises me how disconnected from reality Americans are.

I’m not sure you can even generalise that much anymore. The US banking system is stuck in the dark ages compared to other countries, China is leading in electric cars, photovoltaics. and lots of other industries.

You could make that claim for the software industry, but I’m pretty sure a big part of the US moat is due to oligopolies, lock-in effects, or corruption in favour of billionaires and their ventures.

Like solar power? Or electric cars? Or drones?

Can you name some of those products?

One use case I'd love to see an easy plug-and-play solution for is a RAG build around companies vast internal documentation/wikis/codebase to help developers onboard and find information faster. I would love to see less of people trying to replace humans with language models and more of people trying to use language models to make humans jobs less frustrating.

Stock images. I’ve already seen trining courses (for compliance reasons) using AI videos. A bit cringey, but I imagine cheaper than shooting real people.

+50% productivity for 200$/mo is outstanding value! Most countries have 0-2% productivity growth per year!

I am working on a project that uses LLM to pull certain pieces of information from semi-structured documents and then categorize/file them under the correct account. it's about 95% accurate and we haven't even begun to fine tune it. i expect it will require human in the loop checks for the foreseeable future, but even with a human approval of each item, its going to save the clerical staff hundreds of hours per year. There are a lot of opportunities in automating/semi-automating processes like this, basically just information extraction and categorization tasks.

#5 is an enormous use case that when well implemented will permanently replace prescribed character arcs

It is uniquely susceptible because the gaming market is well acclimated to mediocre writing and one dimensional character development that’s tacked on to a software product, so the improvements of making “thinking” improvisational characters can be immense.

Another revenue potential you’ve missed is visual effects, where AI tools allow what were previously labor intensive and expensive projects to be completed in much less time and with less, but not no, human input per frame

AI Customer Service is very frustrating to work with as a end user.

> Replace junior developers with Claude Code or similar.

I don't know why everyone goes to "replacing". Were a bunch of computer programmers replaced when compilers came out that made writing machine code a lot easier? Of course not, they were more productive and accomplished a lot more, which made them more valuable, not less.

MS Copilot is quite useful for meeting minutes and summaries etc. Still not nearly as useful as good handwritten notes but saves loads of time.

The most important use for AI is for translation. Now anybody can communicate and serve customers and clients from everywhere in the world, and you can also translate all your customer-facing material into any language in the world.

That means you expand from millions to billions of potential customers.

Even “only sort of works” is too generous for point #2. A dozen Claude Code agents spamming out code is… something. But it still does not replace a human, at all, even a junior one. It’s something else entirely.

Part of the issue with all this AI hype is that I can't tell if you're joking or not. Most of those suggestions are horrible, 4 and 5 makes sense.

In healthcare, notes are directly correlated with $$$ for the hospital, because everything that is billed for must be documented with a mix of metrics (O2%, temp, lab results), events (orders, prescriptions, procedures) and notes (consultation notes, imaging interpretations, discharge summaries).

Billions get spent annually in administrative overhead focused on squeezing the most money out of these notes as possible. A tremendous expense can be justified to increase note quality (aka revenue, though 'accuracy/efficiency' is the trojan horse used to slip by regulators).

GenAI has a ton of potential there. Likewise on the insurance side, which has to wade through these notes and produce a very labor intensive paper trail of their own.

Eventually the AIs will just sling em-dashes at each other while we sit by pool.

Why do people so desperately want to see AI succeed? The financial investment explains it for some.

Because it's going to destroy knowledge work and the entire middle class.

We dont. People just tired of listening to the pipe dreams of these weirdos CEOs who sell AI.

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I think people want to see the mindless application of crappy LLM chatbots and AI summaries everywhere fail. At least that's my position. I would also like the notion that "development can be sped up 6-700% by applying AI" would go away.

Humans like knowing their next paycheck is safe. AI is a disruption to that feeling of security.

I wouldn't even call it a feature. It's enabling technology. I've never once said "I would like AI in [some product]." I say: "I would like to be able to [do this task]." If the company adds that feature to a product, I'll buy it. I don't care if the company used AI, traditional algorithms, or sorcery to make the feature work--I just care that it does what I want it to do.

Too many companies are just trying to spoon AI into their product somehow, as if AI itself is a desired feature, and are forgetting to find an actual user problem for it to actually solve.

I wouldn't mind it if it were presented as yet another tool in the box. Maybe have a one-time popup saying "Hey, there's this thing, here's a cool use case, go check it out on your own terms."

In reality, AI sparkles and logos and autocompletes are everywhere. It's distracting. It makes itself the star of the show instead of being a backup dancer to my work. It could very well have some useful applications, but that's for users to decide and adapt to their particular needs. The ham-fisted approach of shoving it into every UI front-and-center signals a gross sense of desperation, neediness, and entitlement. These companies need to learn how to STFU sometimes.

I like this take, in fact i feel a little uneasy when i see startups mention "MCP" on their landing pages! Its a protocol and its like saying we use HTTP here.

I could be wrong but, all in all, buy a .com for your "ai" product, such that you survive the Dot-ai bubble [1]

I Love LLM's though!! Amazing math and tech.

[1] - https://en.wikipedia.org/wiki/Dot-com_bubble

Agreed. We’ve got the potential to build real bicycles for the mind here and marketing departments are jumping right in to trying to sell people spandex cycling shorts.