(edited to remove snark) Your comment seems to miss the point that the article does not (necessarily) have a problem with Zitron being insufferable/annoying/smug. It's that his predictions are verifiably wrong. It's one thing to be annoying and right. Zitron is annoying, but not right.
Yes? What happened to FAANG in last 3 years, they cut a fuck load of jobs, the raised rent/prices, then inflation, then experience surge in new category AI. 1 + 2, i.e. squeezing rock has limits. 3 is fundamentally not sustainable, i.e. AI revenue gap order of magnitude relative to spend. This like debt crisis, there's lot of levers to burn to maximize extraction and make ledger look good short term, but is fundamentally not long term sustainable. Articles arguing over minutiae / short term accuracy pointless, market can stay irrational than one can stay liquid blah, blah - I mean its useful for investing - but when talking about long term predictions he's just stating the obvious, the financials don't make sense within the business cycle current players are operating in.
Like one can believe AI is speciation event technology eventually, but still given actual constraints, i.e. literally not enough investors for $$$, not enough hardware, not enough infra over xyz time horizon that these companies carrying stupendous debt and mathematically guaranteed stranded / deprecated compute infra is only digging themselves deeper vs future competitors. Sure AI can eventually capture 30% of GDP and knowledge worker's life time achievement is worth a few $100 of compute or a few pennies in thinking sand. But ultimate winners is probably going to be some future startup that pays pennies for thinking sand not incumbent who paid magnitude more and simply can't operate profitably due to balance sheet.
Luu is pretty specific about the predictions Zitron is making, has taken the time to pull them out and date them, and they're both risible and not rescuable with vibes.
His point isn't that Google or Meta are doing well or have bright futures. Luu is generally critical of tech giant engineering and product culture. He's critical of Google in particular in this very article.
But the point of the article is that it's not enough to have directionally satisfying vibes. If you made concrete forward-looking predictions and they're catastrophically wrong, that matters. If you make backwards-looking predictions that were literally wrong the moment you published them, that matters even more.
"Did you read the article" is a frowned-upon response on HN. The better way to write that kind of response, per the guidelines, is "the article mentions that". So: the article mentions that.
I don't know if directed at me because I didn't ask if one read article.
> it's not enough
It's enough for some of us, like his broad predictions that work on timescale of business cycles seem directionally correct. Even considering we're dealing with fast hardware deprecation cycles it will take years to play out especially with investors and incumbents burning through accumulated war chest. Luu seem oblivious to notion that companies with trillions in market cap can certainly out manipulate fundamental short / medium term market sanity. Part of Zitron's rant I find similarly compelling is the danger of dismissing directionally "satisfying" vibes because $$$ can capture reporting distort reality, which is only going to lead to bigger/more painful correction because directionally "correct" was dismissed as merely directionally "satisfying."
Let’s say it’s fine to give emotionally based arguments the same credence as rational arguments. That’s a huge cede, and yet, it doesn’t change anything, let’s see here:
If my cousin kept ranting about my other cousin was going to go bankrupt and fail and it was 3 years later and their income was up 2x I think I’d stop listening.
I worked at Google from 2016 to 2022 and agree with everything he says and you say, modulo the companies who are 2-3x on revenue and profits are going to 0. I worry that both of you have found a real problem but misattributed it, and insisting emotional arguments are the same as rational prevents you from participating in real fixes (ex. metas problem isn’t AI, it’s that they have a god-king CEO who cannot be deposed and monopoly profits. Imagine a twin of you and Zitron but instead of AI it’s 2020-era VR. If they weren’t focused on how their emotional argument was fine, they’d be your compatriots in noticing something’s off in Big Tech. Instead, we don’t hear about them because that battle was fought and lost years ago, and they lost credibility due to imagining Meta was going to 0)
What if the cousin goes bankrupt in year 5?
Zitron gives timelines, and they don't come true --- in fact, the opposite thing happens. You can't come back to that with "well, it hasn't happened yet". By that logic, no prediction is ever wrong; wait long enough and maybe it'll come true. That can't possibly be the logic you'd hang your hat on here.
Thank you, I have attempted to modify my original reply with one a little less dickish.
> Luu is pretty specific about the predictions Zitron is making
He is not, though. He precisely points to imprecise predictions, decontextualize them so he misses the point of the ones this thread is focused on, analyzes them with even less precise rationales that don't really rebut the prediction, and points suggestively (enough that you seem to have got that suggestion) that this rebuttal destroys the main prediction of every Zitron piece, while saying otherwise several times at the end of the rationale.
Zitron's predictions aren't all very good, but this article isn't either.
Ah I understand what you're saying. Yes I agree that if you pull back to, "We're in a bubble," then you can say that Zitron is correct, at least fundamentally, despite being wildly inaccurate in almost every other prediction he makes.
But Zitron isn't just blogging about how we're in a bubble. The assertions he makes are not minutiae, he basically continuously says that all the big SW firms are walking corpses. He's not having a rational conversation about the long term prospects for companies who invest in AI. There is a population of people who (rightfully) hate Google et al and want them to fail, and he just stokes their anger and frustration.
He doesn't add anything substantial, and (as the article indicates), even when he brings economic figures into the conversation, he's frequently wrong or misrepresents them.
I edited while you were responding with second para. I think his analysis that existing investors are walking corpses (or economically exhausted/weakened) is substantial. You have new companies going into extreme debt and established companies burning war chests may actually is important, and also valid economic argument ESPECIALLY if you think think AI will be economically transformative. Like current players basically spent $1000 on a screw driver to do $10 of work. Some of them went $1000 into debt, some of them drained $1000, which is much of their savings/warchest. The incumbant players rationalize future has $100 or $1000, or of work, but these companies are going to be vs player buying $1 screw drivers, i.e. the compute deprecation curve makes spending $1000 on screwdrivers in the first place very detrimental/terminal vs future competition. Zitrons argument is broadly there even if there is $1000000 work in the future, companies that spend $1000 on screw drivers balance sheet is working on timescale where there is $100 of work, i.e. the economics is not in favor of incumbents. The economics might still be very favorite for future AI... but not for first round of players who has to recover from grossly overpaying.
He makes very specific predictions about specific companies and they are wrong.
You think we are in a bubble and that AI won't pay off for the companies investing in it.
While I'm sure there will be companies that invest badly the problem with your prediction is that the public hyperscalers (Google, Amazon and MS especially) are already seeing returns from their AI investments.
Look at the revenue growth - that is actual dollars coming through the door.
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Here's an exercise you should consider doing: instead of your $1000/$10 numbers, use real numbers for the major software companies investing heavily in AI.
Software companies aren't walking zombies for the same reason cabinet manufacturers aren't. Everyone can make their own cabinets, but few do, because they simply don't want to.
> The assertions he makes are not minutiae, he basically continuously says that all the big SW firms are walking corpses. He's not having a rational conversation about the long term prospects for companies who invest in AI.
...huh? How is it "not rational"? He's saying that, based on the financial information available, it appears AI doesn't actually make very much money given the capital investments. To the point that there may never be AI ROI.
I'm not sure how much this or that "prediction" matters. His arguments would be just as strong without them, perhaps stronger because they wouldn't give folks like Luu something to snipe at.At this juncture, the analysis seems sound. AI costs an absolute fortune and appears to make very little money, comparatively.
Is that irrational? IDGI. One needs look no further than Oracle to see a company in dire financial straits.
> One needs look no further than Oracle to see a company in dire financial straits.
Oracle had record revenue and profit in the most recent quarter.
That's quite a long way from "dire financial straits"
I do hope that works out for them. Sincerely, because the alternative is extremely grim for tech, and the economy as a whole.
https://www.theregister.com/ai-and-ml/2026/07/01/oracle-outl...
Have you ever read a 10K before?
It seems like the author of this piece hasn't.
He says:
> Stock market bettors aren't sure they like these odds. The company's stock is down more than 40 percent in the last month
The stock is down because of the increased interest load and the impact of that in the next couple of quarters, not because of doubts over Oracle's viability.
If there were significant doubts over its viability it would be down a lot more than 40%!
Hasn't AI been horrible for FAANG fundamentally?
- They've all been compelled to build the same horribly expensive AI infra, to serve similar models that have no ability to lock-in customers
- Google Search has to compete with LLMs
- Meta hasn't demonstrated a credible argument on how they're planning to use AI. AI 'friends' would kill their business model. Their saving grace ironically is that people absolutely hate interacting with AIs. Same goes for other AI assistants.
- Hyperscalers have to compete for the same hardware as AI companies, driving their costs up
- AI turned out to be excellent at both porting software to more optimized stacks and deleting the 'prestige' of building these ultra-inefficient microservice containerized stuff. I haven't read a single article about somebody bragging about this stuff. When it comes to tech (which is not AI), usually its about Zig, Rust and going native.
- So if customers really start feeling the heat of rising costs, they have a realistic path of optimizing their compute usage by using AI to rewrite the worst-offending components. I think one of the few things in which AI has demonstrated measurable economic value is rewriting software in Rust to be more efficient
> They've all been compelled to build the same horribly expensive AI infra, to serve similar models that have no ability to lock-in customers
Emphasis added, since having a horribly expensive AI infra allows offering enterprise contracts, which is a form of lock-in and has been pretty lucrative for GCP/Azure/AWS.
>Hasn't AI been horrible for FAANG fundamentally?
No. Net income is up quite a bit and profit margins maintained at Microsoft, Amazon, Alphabet, and Amazon. Meta net income is flat, but they are maintaining profit margins.
Zitron's claim is that much of that boost in profit for microsoft and alphabet and amazon is from only a few customers, specifically openAI and anthropic, and that those companies are buying and promising to buy lots of resources with money from investments from those same companies, and that largely this is unsustainable unless openai and anthropic can find a profitable business model.
And with both OpenAi and Anthropic are announcing record revenue growth to the point where Anthropic is now profitable this seems like it's going to work out fine for them.
Until they go public, no one will know except insiders, and they are not really talking. Do you want to buy a pink elephant?
Would they announce record losses and financial distress?
We'll see when they go public. Until then all these press releases are strategic messaging...
> Would they announce record losses and financial distress?
Of course not, but private investors get to see their books and investors are lining up to invest.
He is right about that. Those companies are subsidizing the use of their models and at some point they are going to have to make a profit. It is unsustainable the direction they are currently headed in many people don’t like the messenger of bad news, but someone’s gonna be caught holding the bag stay clear of the blast crater.
To be fair to Ed, I’d describe his usual argument (at least currently) as saying that Meta, MS, google are “mature” companies trying to be maintain the high valuations and growth of a young company, which they no longer are.
If you take this to be his argument, then dan’s numbers are more consistent ed’s claim.
Of the three Google is in the best position. Meta and MS are in trouble. Zuckerberg will survive because he has control of his company, but Nadella is not going to survive Copilot if it don’t work.
more consistent with? more consistent than?
Yes, “consistent with”. Thanks.
Are they? These companies have been caught tweaking their numbers. One example, not sure if cited by Zitron, or others, is that they build data centers through holding companies, who have to absorb the costs and massive capex based financial liabilites, so that the brand-name big-tech companies get to keep their expenses off their books. There have been trillions of debt discovered this way. Another issue is the apparently relentless progress of the hardware industry, needed to justify their super-high P/E ratios, measured against the fact, that to lessen the effect of HW amortization, hyperscalers opted to lengthen the depreciation timelines of their GPUs. So there is an apparent contradiction that new hardware needs to be both substantially better, and substantially the same, to make both stories true. I'm not a finance guy, and a lot of it is over my head, but even finance people keep asking the 'who's gonna pay for this' question. We're way past the belief that this is going to produce reasonable returns (as in a value for money kind of way), and hoping we can financially engineer ourselves out of this situation without having to feel the pain.
> These companies have been caught tweaking their numbers... they build data centers through holding companies, who have to absorb the costs and massive capex based financial liabilites, so that the brand-name big-tech companies get to keep their expenses off their books.
This is about as far from "tweaking their numbers" as you can get. It's a standard way infrastructure-heavy industries structure their investments and people would be asking questions if they didn't do this!
> hyperscalers opted to lengthen the depreciation timelines of their GPUs.
Yes and so they should! GPU depreciation timelines used to be 3 years!!
Google is famously still running 10 year old TPUs at 100% utilization, and 10 year old H100s are worth more now on the second hand market than they were when they were bought.
H100 spot prices have only dropped from $5 in May 24 to $3.20 now despite the release of the B200: https://semianalysis.com/gpu-pricing-index/
There are no ten year old H100s. The first production shipments happened exactly four years ago.
I'm pretty sure your claim about TPUs is similarly exaggerated, only a v1 (barely) qualifies and would have no utility today.
You are absolutely right, I apologize.
I think I was talking about A100 prices (which are still only 6 years old) and conflated a few different things there.
But A100 rental prices have climbed since 2024 (as far back as free account records show on https://semianalysis.com/gpu-pricing-index/).
Coreweave has announced they will keep A100s in use until 2029 which will be 9 years old then. I think that is where I got the 10yo number I had in my head.
On TPUs, I was also wrong on that, but less so. The quote is:
"seven and eight-year-old TPUs have 100 percent utilization."[1]
That was last year, so 8 or 9 year old TPUs now (assuming it is still true). Slight exaggeration there and I wish I'd looked it up before posting.
Despite this, my point (that 3 year depreciation schedules for GPUs was too short) remains correct I think.
[1] https://www.datacenterdynamics.com/en/news/google-says-tpu-d...