🤖 Generative AI is the next Silicon Valley bubble cycle

“I've been using a lot of different tools the last couple of months, and I'm kind of getting to the point that I feel that much of what's happening is underhyped rather than overhyped.”

“what happened with fiber is there was a big build out of over capacity, but then the number of applications kept growing until that capacity got used. And I think we're probably going to see something like that here”

“So is this like the dark fiber of this era where we're just going to build so much capacity that there's just going to be not enough jobs to run on it in your mind?”

“we're at this point right now, and I would argue a bit of a cycle that there looks to be a bubble. And what I mean by that is that there's a lot of inefficient spending going on”

“We're seeing four, five, six hundred million dollar deals get done on zero revenue, two, three million dollars in revenue.”

“I think there's a mania going on with AI, both in terms of the size of these rounds and the valuations. It's like 2021 for a lot of AI companies. We're not participating in that craziness.”

“the AI deals, one thing that might be interesting is if you pulled the AI deals out, I bet those numbers would be more akin to what they were two or three years ago”

“So yeah, again, it's part of the hype cycle and we all kind of fell for it. The only winner here is NVIDIA. I think the loser here are most of the VCs who pumped in hundreds of millions to billions of dollars and ran those stuff too early.”

“That will play out in AI as well. It's just that we're at the beginning of the hype cycle, right?”

“Now, I don't think that's necessarily a rational behavior. I think that's more of evidence of a mania going on.”

“But if that's really where things are headed, then does the $100 million to train models today really make sense if training those same models can be done for $5 million in 18 to 24 months?”

“Constraint makes for great art. Constraint makes for great startups. You need to have pressure on a startup for them to deliver. You cannot give startups five years of runway and expect it's gonna work.”

“The truth of the matter is almost all those companies went to zero, even though you got a couple bets right. You got the internet right. You got search right. But you didn't have to invest a dollar in search until 2003 and you would have captured 98, 99% of the value.”

“So whoever's putting money in thinking they know what the fuck they're doing, you might as well just light it on fire, go to Vegas and have some fun with it, because you will get more enjoyment from that than you will from making these kinds of investments.”

“The AI startups, there's a lot of interesting things happening in there and money is being pushed at them by VCs. It's very frothy, arguably bubbly.”

“And if you see, if you gauge the sentiment, the hedge funds and family offices right now are just giddy about AI. And it turns out if you look at the 13Fs, they're all long NVIDIA and AMD.”

“But at least there's a reason now to believe that, say, dozens of unicorns could be created in the next couple of years.”

“And so we'll create this massively bubble-ific, you know, index of AI stuff. But some number of these things with some great leaders will emerge and will accrue extraordinary value across many industries.”

“If you look at 70% of the last YC class was ready, all AI startups. I'm sure the next one will probably be 95%.”

“And after all of this money that's been burned in crypto land and NFTs and all of this Web 3 nonsense, to yet again whip up the next hype cycle, I think doesn't serve us well.”

“And then also we have this really interesting AI wave happening now, and there's a lot of opportunities to invest in that new cycle.”

“If you're a founder and you build one feature on top of the open AI API, now all of a sudden you're going to market yourself as an AI company.”

“But, you know, when I look at $10 or $11 billion, you know, let's put it in context. Meta is going to spend $20 billion in one year alone on ARVR.”

“And so the 500-odd companies, Jason, you mentioned, will get a lot of it and it'll get torched because most of them probably won't amount to much of anything in the short term.”

“Now, at the same time, I do think that if AI is the next wave, and the next sort of platform opportunity, as we all think it is, I do think that places more of an emphasis on technical skills and I was, I was literally just having this conversation at Kraft that gee, maybe the next hire we should make at Kraft should be someone who's really deep technically so they can help go deeper on technical due diligence of AI companies.”

“So you're right, they may take this money and misallocate it into these companies that are just rebranding themselves.”

“there is this friggin tidal wave of AI companies and there is this incredible amount of lubricant in the dry powder that's sitting on the side of the market right now that all these venture funds raised in the last two years that is going to lubricate all these AI companies into every vertical in every market.”

“AI is already the hot thing. Everyone's kind of looking at this now.”

“I don't think it's about being a hype cycle. I think it's about the investment opportunity against fundamentally rewriting all compute tools, because if all compute tools ultimately can use this capability in their interface and in their modeling, then it very much changes everything.”

“And I think the problem with the hype cycle is that you're going to have to marry it with an economic model for VCs to really make money.”

“Well, it's definitely the next VC hype cycle. Everyone's kind of glomming on to this because VC really right now needs a savior. Just look at the public markets, everything we're investing in is in the toilets. So we all really want to believe that this is going to be the next wave.”

“And as you guys know, there's an absolute frigging tidal wave of people trying to start companies that are leveraging tools and generative AI to kind of reinvent everything from workplace tools, enterprise software, all the way through to media, games and entertainment.”

“And as a result, my guess is the next hype cycle, the next bubble cycle in Silicon Valley will absolutely be this generative AI business concept.”