[alangibson]

I think you're playing a different game than the Sam Altmans of the world. The level of investment and profit they are looking for can only be justified by creating AGI.

The > 100 P/E ratios we are already seeing can't be justified by something as quotidian as the exceptionally good productivity tools you're talking about.

[JumpCrisscross]

> level of investment and profit they are looking for can only be justified by creating AGI

What are you basing this on?

IT outsourcing is a $500+ billion industry. If OpenAI et al can run even a 10% margin, that business alone justifies their valuation.

[HarHarVeryFunny]

It seems you are missing a lot of "ifs" in that hypothetical!

Nobody knows how things like coding assistants or other AI applications will pan out. Maybe it'll be Oracle selling Meta-licenced solutions that gets the lion's share of the market. Maybe custom coding goes away for many business applications as off-the-shelf solutions get smarter.

A future where all that AI (or some hypothetical AGI) changes is work being done by humans to the same work being done by machines seems way too linear.

[JumpCrisscross]

> you are missing a lot of "ifs" in that hypothetical

The big one being I'm not assuming AGI. Low-level coding tasks, the kind frequently outsourced, are within the realm of being competitive with offshoring with known methods. My point is we don't need to assume AGI for these valuations to make sense.

[HarHarVeryFunny]

Current AI coding assistants are best at writing functions or adding minor features to an existing code base. They are not agentic systems that can develop an entire solution from scratch given a specification, which in my experience is more typcical of the work that is being outsourced. AI is a tool, whose full-cycle productivity benefit seems questionable. It is not a replacement for a human.

[JumpCrisscross]

> they are not agentic systems that can develop an entire solution from scratch given a specification, which in my experience is more typcical of the work that is being outsourced

If there is one domain where we're seeing tangible progress from AI, it's in working towards this goal. Difficult projects aren't in scope. But most tech, especially most tech branded IT, is not difficult. Everyone doesn't need an inventory or customer-complaint system designed from scratch. Current AI is good at cutting through that cruft.

[ehnto]

There have been off the shelf solutions for so many common software use cases, for decades now. I think the reason we still see so much custom software is that the devil is always in the details, and strict details are not an LLMs strong suit.

LLMs are in my opinion hamstrung at the starting gate in regards to replacing software teams, as they would need to be able to understand complex business requirements perfectly, which we know they cannot. Humans can't either. It takes a business requirements/integration logic/code generation pipeline and I think the industry is focused on code generation and not that integration step.

I think there needs to be a re-imaging of how software is built by and for interaction with AI if it were to ever take over from human software teams, rather than trying to get AI to reflect what humans do.

[senko]

There are a number of agentic systems that can develop more complex solutions. Just a few off the top of my head: Pythagora, Devin, OpenHands, Fume, Tusk, Replit, Codebuff, Vly. I'm sure I've missed a bunch.

Are they good enough to replace a human yet? Questionable[0], but they are improving.

[0] You wouldn't believe how low the outsourcing contractors' quality can go. Easily surpassed by current AI systems :) That's a very low bar tho.

[netdevnet]

I don't know what's your experience with outsourcing. But people outsource full projects not the writing of a couple of methods. With LLMs still unable to fully understand relatively simple stuff, you can't expect them to deliver a project whose specification (like most software projects) contains ambiguities that only an experienced dev can detect and ask deep questions about the intention and purpose of the project. LLMs are nowhere near that. To be able to handle external uncertainty and turn it into certainty, to explain why technical decisions were made, to understand the purpose of a project and how it matches the project. To handle the overall uncertainties of writing code with other's people's code. All this is stuff outsourced teams do well. But LLMs won't be anywhere near good for at least a decade. I am calling it

[Barrin92]

if the AI business is a bit more mundane than Altman thinks and there's diminishing returns the market is going to be even more commodified than it already is and you're not going to make any margins or somehow own the entire market. That's already the case, Anthropic works about as well, there's other companies a few months behind, open source is like a year behind.

That's literally Zucc's entire play, in 5 years this stuff is going to be so abundant you'll get access to good enough models for pennies and he'll win because he can slap ads on it, and openAI sits there on its gargantuan research costs.

[netdevnet]

genius move by Mark, this could make them the google of LLMs

[gizajob]

Yeah I keep thinking this - how is Nvidia worth $3.5Trillion for making code autocomplete for coders

[drawnwren]

Nvidia was not the best example. They get to moon in the case that any AI exponential hits. Most others have less of a wide probability distribution.

[HarHarVeryFunny]

I'm not sure about that. NVIDIA seems to stay in a dominant position as long as the race to AI remains intact, but the path to it seems unsure. They are selling a general purpose AI-accelerator that supports the unknown path.

Once massively useful AI has been achieved, or it's been determined that LLMs are it, then it becomes a race to the bottom as GOOG/MSFT/AMZN/META/etc design/deploy more specialized accelerators to deliver this final form solution as cheaply as possible.

[BeefWellington]

Yeah they're the shovel sellers of this particular goldrush.

Most other businesses trying to actually use LLMs are the riskier ones, including OpenAI, IMO (though OpenAI is perhaps the least risky due to brand recognition).

[lokimedes]

Or they become the Webvan/pets.com of the bubble.

[zeusk]

Nvidia is more likely to become CSCO or INTC but as far as I can tell, that's still a few years off - unless ofcourse there is weakness in broader economy that accelerates the pressure on investors.

[gizajob]

I’d say it’s more about the fact that they make useful products rather than brand recognition.