Without Data Centers, Gdp Growth Was 0.1% in the First Half of 2025

Well sure, but the more complex your measurements are the worse you make it. Rather than looking for more nuance, we should look for stricter approaches to avoid those issues.

> Inflation is easily gamed by manipulating the basket of goods used to determine it.

Just turn the tariffs on and off again.

do you live in the same reality as me?

Tons of articles posted here talk about economy topics but not inflation or GDP or unemployment

As to banks, there's a LOT more stuff considered in monetary policy, like domestic consumption/investment, gov spending/taxes, net exports/imports.

populist politics focus on unemployment and inflation but even Trump campaigned on reducing government spending which in fact is bad for unemployment but apparently more important to Americans regardless

This is just factually false. If you think central banks only look at those your are either uniformed or willingly ignorant.

For the media it might be a bit more true if you only consider short term news media. But what do expect, them to do a 3h 'state of the economy' everyday? Tons of other media is covering lots of things.

It is true that none of the LLM providers are profitable though, so there is some number above free that they need to charge and I am not convinced that number is compelling

A) Huge straw man, since it isn't the same people making those points. None of those need the other to be true to cause issues, they are independent concerns.

B) You're missing a few things like:

1. The hardware overhang of edge compute (especially phones) may make the centralized compute investments irrelevant as more efficient LLMs (or whatever replaces them) are released.

2. Hardware depreciates quickly. Are these massive data centers really going to earn their money back before a more efficient architecture makes them obsolete? Look at all the NPUs on phones which are useless with most current LLMs due to insufficient RAM. Maybe analogue compute takes off, or giant FPGAs, which can do on a single board what is done with a rack at the moment. We are nowhere near a stable model architecture, or stable optimal compute architecture. Follow the trajectory of bitcoin and etherium mining here to see what we can expect.

3. How does one company earn back their R&D when the moment it is released, competition puts out comparable models within 6 months, possibly by using the very service that was provided to generate training data.

Good looking, powerful, reliable car?

Because they probably would have to pay a lot more to make this profitable at the levels current valuations and investments indicate. And the barrier for private persons to pay is much larger than for companies. I don't think anyone has a really solid handle on the economics here yet, as the field is changing very quickly.

But there is a big difference here compared to most software companies. The product does cost significant money per additional customer and usage.

There is a real product here. And you can likely earn money with it. But the question is "how much money?", and whether these huge data center investments will actually pay off.

Because all numbers point towards it being incredibly far away from being profitable? We also pay for Google Workspace and at 10 euro a month we get Gemini Pro. So while we might pay for it, it’s more of a free addon, we would’ve paid 10 without it too.

You can also do a simple analysis on the Anthropic Max plan and how it successively gets more and more limited, they don’t have the OpenAI VC flow to burn so I believe it’s a indicator of what’s to come, and I could of course be wrong.

It becomes feasible when people are willing to pay more than it costs to run it. But I think this will be a pretty uphill battle, as many use cases are hard to monetize (eg proofreading) and for many use cases you will feel pressure from smaller models (you don't need the most expensive SOTA model to generate an email). There is probably just a very limited amount of use cases that are in the goldilocks zone with their difficulty so that people will be willing to pay for them, AND AI is able to solve them. I think programming might be one of them.

And yet 90% of AI companies do not break a profit. If it was economically feasible, big corps would start cashing in immediately and halt development. They have gone deep with AI so now must go deeper to get to that cashing-in point.

We would also need to know how many people are willing to pay for it, on a consumer level. Additionally business will need to see real ROI for using it.

At the moment everyone is trying their best to implement it, but it remains to be clear if it actually increases a company's profitability. Time will tell, and I think there are a lot of things obfuscating the reality right now that the market will eventually make clear.

Additionally the economics of training new models may not work out, another detail that's currently obfuscated by venture capital footing the bill.

Surely, Oracle could make up for its unit losses with volume, just like SNL's "Change Bank"

The technology obviously has merrits. When the bubble pops LLMs won't go away, just like the dotcom crash didn't spell the end of the internet.

The issue isn't that there aren't good business models or value creation, it's that anything related to AI currently has valuations that are unsustainably high given the current limits of the technology. That leads to economic activity that just couldn't exist without those valuations. And once the hype cools down the valuations will go closer to reality, leaving a lot of companies unviable, and many more will have to severely cut back spending to remain viable.

Or maybe the entire AI market pulls a Tesla and just stays at valuations that aren't justified by normal market fundamentals. Or maybe the technology adapts fast enough to keep up with the hype and can actually deliver on everything that's promised. This doesn't have to come down, it's just very likely that it will.

Similarly, economists have predicted 9 of the past 7 recessions.

I'm not saying they won't (the "if" is an important word in the sentence), it's just that datacentre growth is not the same as AI growth. It's related, but it is, by definition, temporary as datacentres are soon completed.

There's obviously evidence people use LLMs. That's not necessarily the same as people paying a noticeable fraction of all their money to use them in perpetuity. And even if "normal" people do start taking out $50 subscriptions as a matter of course, commoditisation could push that price down as could "dumping" of cheap models from overseas. A breakthrough in being able to run "good enough" models very cheaply, or even locally, would also make expensive cloud AI subscriptions a hard sell. And expensive subscriptions are the only way this pans out.

It hasn't yet been shown that AI is a gas that will fill all the available capacity, and keep it filled. If bread were 10 times cheaper, would you buy 10x as much? That has more or less happened to food availability in the West over the last 200 years and OpenBread and BunVidia don't dominate the economy.

None of that is sure to happen, and maybe the AI hype train is right and huge expensive LLMs specifically drive a gigantic productivity boom¹ and are worth, say, 0.2*GDP forever. But if it isn't, and it turns out $5 a month gets you all people actually need, it's going to be untidy.

¹: in which case, why is GDP not growing from the AI we already have?

People like LLMs, will they pay for LLMs to offset the investments? Will they pay enough so these companies can stay afloat when the slush funds inevitably run dry?

Will LLMs create a significant shift in productivity where its usage will create enough overall value to the economy to justify the hoovering of capital from other industries?

Those are the unknowns, I don't think many people are saying that LLMs have no value like NFTs, it's that the money being pushed onto this novelty is such an absurd amount that it might pull down everything else if/when it's discovered that there won't be enough value generated to compensate for trillions of USD in investments. Hence the comparison to the dotcom bubble, we came out of that with the infrastructure for the current internet even though it was painful for a lot of people when it crashed, will we have a 2nd internet-esque revolution after this whole thing crashes?

The technology is definitely valuable, and quite fantastic from a technical standpoint, is it going to lift all the other boats in the rest of the economy like the internet did though? No one can tell that yet.

You don't think it's a bigger assumption that plowing hundreds of billions of dollars into a novel and often misunderstood technology is going to net out positive? We're not talking "people like feeds of cat photos" money and risk here, we're talking about a bubble with the potential to tank the entire economy. On top of that, it's also a higher disruptive technology that should it ramp as quickly as it might will lead to massive amounts of societal strife at a time where we're already stretched a little thin to say the least. "What do you mean Credit Default Swaps don't work? They've been functioning perfectly well these past few years and so far the impacts have only been positive. Tons of people are getting mortgages on houses they weren't in the past, it's the American dream!"

> GPUs aren't built in the US, though. I wonder, what percentage of all the stuff in a typical datacenter is actually made in the US

Does that matter? So many things these days aren't physically made in the US. So US companies don't get the profits and aren't needed?

The actual "made in" part is a small fraction of the total earnings. See how much an iPhone costs to make vs how much it gets sold for.

The margins collected by Nvidia end up in the US. And Nvidia and its employees get paid in the US. Only a small part of the revenue is outside the US.

That's not true; it also measures government spending (e.g. on building infrastructure), which cannot be taxed because it makes no sense for the government to tax its own spending. Gross Private Product is the GDP equivalent that only includes taxable (private) activity.

Unless you have a transaction tax, this isn't really so. As a contrived example, company A buys thing from company B and sells it to company C, who sells it to company B, all at the same price. There's no profit anywhere in this system (so no tax), but there is economic activity (so, GDP).

In France they count illegal drug trafficking and illegal prostitution in the GDP, I doubt these are taxed...

I’m not saying don’t tax them or let them influence politics.

I’m saying letting them go to space or turning sand into intelligence is infinitely better than buying land and charging us rent (what most rich people have done in history).

I think if you want the public to accept that the government will be a better shepherd of this money than a decentralized smattering of individuals then the government should provide evidence for this, once it actually opens up from a dysfunctional shutdown.

At least in the American context everything from California High Speed rail to bloated defense spending has shown that VC’s are much better shepherds of their own money.

I'm a big AI supporter.

I'm just waiting for the slop to be so metastasized that our terminally ill "social networks" finally die, alongside with it.

Of course i'll be proven terribly wrong. But hey. hope.

> how in your face it is due to the hype cycle,

I'm really struggling with this one. I think AI (generative and not) is surely fascinating. I should by rights be all up in it. I could definitely get it, I don't think I'm stupid in terms of technology. Regardless of the damage the laser-focus on one thing might (or might not) be doing to rest of industry (and the effect on society, which to be honest, I am conflicted on if we can blame the technology). And yet so much of it is all so...tedious and fake somehow, and just even keeping up with headlines is exhausting let along engaging with every LinkedIn "next huge thing that if you don't do you should find a bridge to live under soon".

It's like that guy who tells you constantly how rich and cool he is. Bro, if you're that cool, let your cool speak for itself. But I'm not sure I want to lend you a grand for your new car.

The slop is real. Especially when I see promoters of platforms for vibe coders. They don't understand the implications of lack of security in potentially viral apps. It's easy to consider them as WMDs.

People have the same password across services. They share personal information. In a geopolitical climate as today's, where the currency of war is disruption, it can wreak havoc.

Hating a tool? And software developers with emotions ? (I get it for the artists :-p)

In my opinion AI makes visible more structural issues that were always there, but we could ignore. People addicted to various stuff (being substances or social networks or watching sports), social communities disappearing (no more going to the pub, stay at home with your TV), growing inequality (because capital is not taxed as labor), strange beliefs (all the conspiracy theories, which existed before) and others.

Find a use for the new tool to improve the situation if you can, but I think that hating tools can lead you on dark paths.

I see you've got the same treatment I often do. I tried to help, even with science on our side, it's not much that I can do, but it's from the heart:) Cheers!

> when the production has such catastrophic shortfall that it shows itself to be ponzi without tangible value or benefit.

Indeed, the scale matters a lot. With that said, a ponzi always has beneficiaries.

> Such things historically always trigger other cascading failures.

With the help of war or without, it's up to the beneficiaries.

This is just a very expensive buyback. At the heart this is all Nvidia doing round about the same mechanism of pushing the share price up. This started out as a useful idea, and it’s mutated into something that is destroying the economy

If the tech companies spent the money on stock buybacks, it would not have disappeared. It would have been reinvested elsewhere.