The financial side of AI is big news this week.
Reuters is reporting that the Chinese AI bubble has burst, vaporising $480 billion dollars. And China has been comparatively sober with its AI deployment.
An Apollo report points out that, outside of the tech giants, there’s no sign of an AI productivity boom. And companies are starting to move AI spending from the “growth engine” column to the “cost centre” column, which is where line items go to get audited and eventually killed.
Then there’s the Open Markets Institute, pointing out that the big AI corps are spending far more than they earn as well as borrowing massively to cover the gap. Which is the business equivalent of stepping off a cliff and flapping your arms to stay up there.
Then yesterday, Anthropic (the Claude people) filed their S1 (IPO prospectus) where they admit that “We have a history of net losses and may not generate sufficient revenue to achieve or sustain profitability in the future” alongside a bunch of other similar nuggets.
Nobody knows how any of this ends. As the old dictum goes “markets can remain irrational a lot longer than you and I can remain solvent”. But if the companies selling this are telling investors the economics aren’t certain, you should treat them that way too.
Pricing, terms, even vendors can change quickly when the cheap money dries up. So, if you’re hooked on these tools, make sure you have a plan for when they disappear or double in price overnight.
Above all, make sure you can still do your job without them. Depending on goodwill from AI companies is not a business strategy (neither is cognitive offloading, but that’s for another email).
Colin