IBM CEO says there is 'no way' spending on AI data centers will pay off
(businessinsider.com)595 points by nabla9 18 hours ago
595 points by nabla9 18 hours ago
That's a good question. During the .com boom everybody was investing in 'the internet' or at least in 'the web'. And lots of those companies went bust, quite a few spectacularly so. Since then everything that was promised and a lot more has been realized. Even so, a lot of those initial schemes were harebrained at best at the time and there is a fair chance that we will look in a similar way at the current AI offerings in 30 years time.
Short term is always disappointing, long term usually overperforms. Think back to the first person making a working transistor and what came of that.
I still don’t get it. What at a personal level is making Sam Altman make a suboptimal choice for himself if it is so obvious it won’t work out for him?
On a personal level it will work out for him just fine. All he has to do is siphon off a fraction of that money to himself and/or an entity that he controls.
He's like Elon Musk in that respect: always doubling the bet on the next round, it is a real life Martingale these guys are playing with society on the hook for the downside.
> And lots of those companies went bust, quite a few spectacularly so.
pets.com "selling dogfood on the internet" is the major example of the web boom then bust. (1)
But today, I can get dog food, cat food, other pet supplies with my weekly "online order" grocery delivery. Or I can get them from the big river megaretailer. I have a weekly delivery of coffee beans from a niche online supplier, and it usually comes with flyers for products like a beer or wine subscription or artisanal high-meat cat or dog foods.
So the idea of "selling dogfood on the internet" is now pervasive not extinct, the inflated expectation that went bust was that this niche was a billion-dollar idea and not a commodity where brand, efficiencies of scale and execution matter more.
At some point, I wonder if any of the big guys have considered becoming grid operators. The vision Google had for community fiber (Google Fiber, which mostly fizzled out due to regulatory hurdles) could be somewhat paralleled with the idea of operating a regional electrical grid.
Don’t worry. The same servers will be used for other computing purposes. And maybe that will be profitable. Maybe it will be beneficial to others. But This cycle of investment and loss is a version of distribution of wealth. Some benefit.
The banks and loaners always benefit.
I can't imagine everybody suddenly leaving AI like a broken toy and taking all special purpose AI chips offline. AI serves millions of people every day. It's here to stay even if it doesn't get any better than it is it already brings immense value to the users. It will keep being worth something.
Mind you IBM makes +7B from keeping old school enterprise hooked up on 30 plus year old tech like z/OS and Cobol and their own super outdated stack. their AI division is frankly embarrassing. of course they would say that. IBM is one of the most conservative, anti-progress leaches in the entire tech industry. I am glad they are missing out big time on the AI gold rush. to me if anything this is a green signal.
The spending will be more than paid off since the taxpayer is the lender of last resort There's too many funny names in the investors / creditors a lot of mountains in germany and similar ya know
There is something to be said about what the ROI is for normal (i.e. non AI/tech) companies using AI. AI can help automate things, robots have been replacing manufacturing jobs for decades but there is an ROI on that which I think is easier to see and count, less humans in the factory, etc. There seems to be a lot of exaggerated things being said these days with AI and the AI companies have only begun to raise rates, they won't go down.
The AI bubble will burst when normal companies start to not realize their revenue/profit goals and have to answer investor relations calls about that.
The second buyer will make truckloads of money, remember the data center and fiber network liquidation of 2001+ - smart investors collected the overcapacity and after a couple of years the money printer worked. This time it will be the same, only the single purpose hardware (LLM specific GPUs) will probably end on a landfill.
Consumer will eat it all. AI is very good at engaging content, and getting better by the day: it won't be the AGI we wanted, but maybe the AGI we've earned
Ctrl-F this thread for terms like: cost, margin
Is transistor density cost still the limit?
Cost model, Pricing model
What about more recyclable chips made out of carbon?
What else would solve for e.g. energy efficiency, thermal inefficiency, depreciation, and ewaste costs?
The investors in these companies and all this infrastructure are not so much concerned with whether any specific companies pays off with profits, necessarily.
They are gambling instead that these investments pay out it in a different way: by shattering high labour costs for intellectual labour and de-skilling our profession (and others like it) -- "proletarianising" in the 19th century sense.
Thereby increasing profits across the whole sector and breaking the bargaining power (and outsized political power, as well) of upper middle class technology workers.
Put another way this is an economy wide investment in a manner similar to early 20th century mass factory industrialization. It's not expected that today's big investments are tomorrow's winners, but nobody wants to be left behind in the transformation, and lots of political and economic power is highly interested in the idea of automating away the remnants of the Alvin Toffler "Information Economy" fantasy.
The question no one seems to be answering is what would be the EOL for these newer GPUs that are being churned out of NVDIA ? What % annual capital expenditures is refresh of GPUs. Will they be perpetually replaced as NVIDIA comes up with newer architectures and the AI companies chase the proverbial lure ?
I suppose it depends on your definition of "pay off".
It will pay off for the people investing in it, when the US government inevitably bails them out. There is a reason Zuckerberg, Huang, etc are so keen on attending White House dinners.
It certainly wont pay off for the American public.
A lot of you guys in the AI industry are going to lose your jobs. LLM and prompt ‘engineering’ experts won’t be able to score an AI job paying as well as a barista.
"yeah, there's no way spending in those data centers will pay off. However, let me show you this little trinket which runs z/OS and which is exactly what you need for these kinds of workloads. You can subscribe to it for the low introductory price of..."
IBM CEO is steering a broken ship and it's not improved course, not someone who's words you should take seriously.
1. The missed the AI wave (hired me to teach watson law only to lay me off 5 wks later, one cause of the serious talent issues over there)
2. They bought most of their data center (companies), they have no idea about building and operating one, not at the scale the "competitors" are operating at
His argument follows almost directly, and trivially, from his central premise: a 0% or 1% chance of reaching AGI.
Yeah, if you assume technology will stagnate over the next decade and AGI is essentially impossible, these investments will not be profitable. Sam Altman himself wouldn't dispute that. But it's a controversial premise, and one that there's no particular reason to think that the... CEO of IBM would have any insight into.
then it seems like neither Sam Altman (pro) or IBM (proxy con) have credible or even really interesting or insightful evidence, theories ... even suggestions for what's likely to happen? i.e. We should stop listening to all of them?
It's a very reasonable claim to make, but yes, average denizen of peanut gallery can spot this is a bubble from a mile way, doensn't need "insight" of napkin math done by some CEO that's not even in the industry.
Tho he's probably not too happy that they sold the server business to Lenovo, could at least earn something on selling shovels
we don't need AGI to use all that compute
we need businesses who are willing to pay for ai / compute at prices where both sides are making money
I for one could 10x my AI usage if the results on my side pan out. Spending $100 on ai today has ROI, will 10x that still have ROI for me in a couple years? probably, I expect agentic teams to increase in capability and more of my work. Then the question is can I turn that increase productivity into more revenues (>$1000 / month, one more client would cover this and then some)
IBM can be a hot mess, and the CEO may not be wrong about this. These things are not mutually exclusive.
IBM CEO has sour grapes.
IBM's HPC products were enterprise oriented slop products banked on their reputation, and the ROI torched their credibility when compute costs started getting taken seriously. Watson and other products got smeared into kafkaesque arbitrary branding for other product suites, and they were nearly all painful garbage - mobile device management standing out as a particularly grotesque system to use. Now, IBM lacks any legitimate competitive edge in any of the bajillion markets they tried to target, no credibility in any of their former flagship domains, and nearly every one of their products is hot garbage that costs too much, often by orders of magnitude, compared to similar functionality you can get from things like open source or even free software offered and serviced by other companies. They blew a ton of money on HPC before there was any legitimate reason to do so. Watson on Jeopardy was probably the last legitimately impressive thing they did, and all of their tech and expertise has been outclassed since.
If it is so obvious that it won’t pay off, why is every company investing in it? What alpha do you have that they don’t?