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OpenAI is Lehman Brothers

Dec 27, 2024 - sherwood.news
The article draws parallels between the 2007 subprime mortgage crisis and the current state of the artificial intelligence (AI) industry, particularly focusing on the hype surrounding generative AI technologies. It highlights how, similar to the overvaluation of risky mortgage-backed securities, the AI sector is being propped up by significant investment and media enthusiasm despite fundamental issues. These issues include the lack of profitable applications, the high cost of running AI models, and the diminishing returns from training them due to data limitations and inherent model constraints. The article warns that as AI companies like OpenAI and Anthropic face financial pressures and potentially raise prices, the sustainability of AI integrations will be threatened, potentially leading to a collapse similar to the one experienced by Lehman Brothers.

The author argues that the media's infatuation with AI, particularly with companies like OpenAI, overlooks the technology's limitations and financial unsustainability. The piece suggests that the AI industry's reliance on venture capital and unprofitable pricing models could lead to a crisis, as companies may struggle to maintain operations without raising costs. This could result in a downturn for startups dependent on AI models and a loss of venture capital interest in the sector. The article concludes by suggesting that the eventual realization of AI's limitations could lead to significant repercussions for the tech industry, akin to the fallout from the subprime mortgage crisis.

Key takeaways:

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  • The 2007 subprime mortgage crisis was exacerbated by the herd mentality of markets and high credit ratings for risky mortgage-backed securities.
  • There are parallels between the subprime mortgage crisis and the current AI investment boom, with concerns about unsustainable business models and market distortions.
  • Generative AI faces significant challenges, including a lack of killer apps, issues with data limitations, and financial sustainability concerns.
  • The potential financial instability of AI companies could lead to a broader impact on the tech industry, similar to the fallout from the subprime mortgage crisis.
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