Ironically, I find myself with a grin on my face as I read the recent media reports about how the data processing demand behind AI is beyond the scope of financial sustainability.
For several years I have asserted, accurately, the business model for social media was never feasible because the data processing demand needed for the scale of simultaneous users was beyond the capabilities of the revenue side of the equation. I have been told by all the high-horse experts on the matter how wrong I am. However, each story they write about the prohibitive cost of AI proves I was not wrong.
CTH watches the tokenization and subscription fees for various AI model use with the same perspective CTH viewed over a decade of false claims within the financial market that told lies about social media viability and data processing costs.
Now, we watch the seemingly exponential growth of AI capabilities and associated costs with the same pragmatic perspective.
Robotic pool cleaners were introduced two generations ago. Did the pool cleaner business dry up? No, it expanded. Robotic vacuums broke into the popular household appliance market five years ago, you probably have one, did it eliminate maid services? No, still growing.
AI can now write its own code to generate outputs. Are software developers getting fired? No, demand for software designers and engineers is up 15% in the past year.
The mainframe approach, the one AI brain to run all systems, will never work – it is cost prohibitive (see first paragraph – wash, rinse, repeat). Deny this reality at your own investment risk. If needed, politely absorb the ridicule – for it matters not.
CTH predicts AI will become a localized and optimized sub-set for each sector of the economy, requiring each major organization and corporation to adopt specific cost/benefit data libraries and networks for use and functionality.
At scale, a thousand coders each working on Gemini, ChatGPT, Anthropic, Grok, etc. will become 100,000+ software designers working inside companies to create personalized, targeted, bespoke AI data systems and networks; each system specifically tailored to the industry or sector of business. The intranet of internets will happen again.
Creating and selling AI system networks and integration functions that are personally tailored to highly specific company functions, creates an entirely new sector of the technology industry that has not even begun yet. [There’s an investment opportunity there]
Will AI robots replace some repetitive human functions? Yes, the ice rink Zamboni will likely not have a steering wheel, just an emergency joystick. A reference for a comparative industrial scale Roomba vacuum, or the robotic pool cleaners. However, at scale the robotic industry is slower than human efficiency in almost all sectors that matter; the cost benefit analysis will limit growth. The maid service sector will not be impacted any more than the software developers (see chart above).
It is not an issue to fear some AI task efficiencies will grant more time available that will be filled with alternate task capabilities. Human productivity will increase in certain sectors of the economy, but humans will not lose work opportunities. Blue collar jobs will continue to expand as each of the hardware tools developed will need manufacturing, installation, maintenance and monitoring.
The further downstream the worker is from a repetitive function within the [XXXX] industry, the more irreplaceable they become; remember that.
As to the bigger picture of fully developed AI and the intersection of information and knowledge; yes, the automation of AI can present an issue. However, all AI concerns can be mitigated so long as multiple, alternative AI systems exist within the larger information realm.
As a nation we need dozens of different AI models each competing within the industry for the best AI product. As long as we have multiple AI systems, alternatives to the hive-mind, we do not need to fear the AI network as a source of information. If we don’t like the AI outputs, we can switch to an alternate AI provider.
If the subscription cost of the AI is too high, then as long as we have a competitive market where a lesser expensive, perhaps bespoke, AI option can exist, we should be okay. Let the free-and-fair market decide.
If AI outputs don’t offer empirical truth or real value to the end user, we should be fine as long as consumers have alternative options available. AI providers should be information providers in the same concept as cell phone providers. The key is to have multiple, competing AI systems available for industrial, business, professional and personal use.
On the upside of this information worry dynamic -in the pragmatic and optimistic perspective- we have the cost limiting nature of a massive singular AI information network.
A single AI central brain handling over 360 million users at once, all requiring identical responses that update with every tiny change in a multi-trillion datapoint-per-millisecond data stream, is far beyond the capacity of any computational AI system. The costs tied to such a setup are only now becoming clear, and AI business models are starting to fall apart in real time. This is a hard truth that isn’t going to change.
Within the AI business, those who can carefully write AI input instructions to achieve maximum value in AI output -industry by industry- will become increasingly more valuable. Those who can train AI to be cost effective -and provide materially beneficial outputs- within their granular sector of business, within each company, will become priceless to the organization. Wage rates will follow competency.
As noted by David Sacks in this segment highlighted below, the one key about AI to emphasize is the need for multiple competing models. If China (hive mind) has their model, and Europe (another hive mind) has their model, and the United States (entrepreneurial competitiveness) has multiple competitive models – we will win and simultaneously we will retain freedom.
What we don’t want is a singular AI model to win the support of the United States government and then end up with an AI regulatory system where they start defining terms of “safety” to eliminate information adverse to the interests of the government that regulates it. Both China and Europe will predictably do that.
Sundance, I will NEVER forget your prescient and informative thoughts on the backroom overhead enabling online platform operations.
This post, like many, arrives like a refreshing wind on the Sahara. THANK YOU! 🙂
AI is the latest Boom-buzz… like the gold rush, Dot.coms and platform shoes in California. Every normal, abnormal, malevolent, Globalist-wannabee, banker, and crazy person is flowing out of the woodwork based on speculation, opportunity, and greed. We are going to see the best and worst of humanity on display in everything, everywhere, all at once with trillions at stake.
Sundance’s prescription is so SPOT-ON. We must harness our Hamiltonian DNA and create a distinctly unique American approach that tailors AI’s operations and offerings to our God-Given Human AND Spiritual needs and rights.
I have NO idea what that even looks like. I do have boundless hope that we can unleash our inherent Goodness and Make It Happen for the benefit of all. It’s what AMERICA DOES! 🙂
Stop the bus I want to get off.
At some point, the bus will be stopped because the off-ramp is already provided. The fears of technology being inherently suspect or destabilizing miss the point entirely. Almost any system created by man can be destabilizing (witness pharmaceuticals and how they’ve branched from healing to population control). The medicines aren’t the culprits, but rather those with other agendas who’ve misused them. The pharmaceuticals are simply the means.
And AI provides an enormous new means to those who harbor other agendas. Imagine a world where AI is ubiquitous, characterized passively not only by information sharing, but aggressively with facial and voice recognition. What might that lead to?:
“Then I saw another beast rising out of the earth. It had two horns like a lamb and it spoke like a dragon. It exercises all the authority of the first beast in its presence…And it was allowed to give breath to the image of the beast, so that the image of the beast might even speak and might cause those who would not worship the image of the beast to be slain.” [Revelation 13:11-12; 15-16]
The problem, as I said, is not technological advancement, but moral and ethical decay. People like Bill Gates and his fellow travelers favor population control motivated not by feelings of superiority (they have none, as even what little conscience they still retain must constantly inform them) but hatred of the image of God. And their chains are pulled by those who hate them as much as the rest of us but have made the necessary false promises to make them into the useful idiots they have become. And it is because of THAT surrender to their own moral and ethical decay – their “fallenness” – that AI, though just another technological advancement, will likely be the final nail in the final chapter of the Age of Man before the Lord returns to this earth.
There. What’s the point of shying away from the hard truth, when you might otherwise point a few people to the off-ramp provided by Christ? 😉
J
YES! Our Soul, Conscience, and Decisions are the governors that guide us through any human challenge in His Creation. And the best part is that Our Unique American Constitution recognizes our Individual Sovereignty to take and succeed on this path! 🙂
“AI” is mostly a hoax. Much like quantum computers.
There are LLMs, which are essentially just nested “near” regular expressions. They have no reasoning ability at all. Any resemblance to reason is just the logic built into their source material.
“Reasoning” models are basically the same LISP style decision trees developed back in the 70s with an LLM running on top of it.
All of these are useless for any significant business application.
YCombinator is a good source for info on this since everyone is a software engineer. None of us are particularly impressed with AI.
I am not aware of a single business process that has been solved by “AI”. Most “AI” tools that are doing absolutely anything are just plain hard coded automation. I’ve been doing that for 20+ years. A spell checker is not AI but if it was a new feature in 2026 the company would call it AI.
Climate hoax to AI hoax. I have already seen mention of AI credit systems.
So is your issue the labeling? What is used in Military targeting? Automation?
… that’s about like saying a car is like a chariot because they both have wheels and have horsepower…
Specifically, you’re describing an expert system – human knowledge deterministically coded into a process which then can take new input and apply that process. That’s very 90s, though I worked LISP (lots of incredibly silly parentheses) earlier than that. Yes, the new stuff is built on the same principles of set theory but not just that — if I described Python as an object-oriented Pascal-y LISP it’d be a beginning.
LLMs themselves are neural nets (sets of linear models likened to neurons, backpropagating to improve dynamically) and so they are ‘just’ correlation machines – but many many such neurons. The latest ones aren’t disclosed but the version prior are about 2 trillion parameters. That’s not hand-coded, nor is it anything anyone was doing 20 years ago.
That said, all that leads straight into Sundance’s point. The public-facing chatty things are for show and wow and they are massively too computationally inefficient to be some sort of lazy button for the planet.
People doing real things have much smaller and more tightly trained models based on solid information (not internet blather) and increasingly I’m seeing people spend as much text telling “AI”what -not -to do as what to do, both for precision and to limit context/expenditure. A helper to correlate someone’s CAT scan against every CAT scan accessible to it does not need to know yesterday’s baseball stats or how to make a comparison between Luther’s Small Catechism and the by-laws of the ELCA. You don’t want it to; you want to know if that bright spot means something serious.
(Unserious detour – you also don’t want your door to have Genuine People Personality – “All the doors in this spaceship have a cheerful and sunny disposition. It is their pleasure to open for you, and their satisfaction to close again with the knowledge of a job well done.” – D. Adams was foresightful here)
As with all ‘cool new’ especially tech first there is a rush in all directions and then a crunch as only the fruitful ones remain, followed by a consolidation as the whales devour prosperous minnows. We are not quite at the end of Act I but Act II is taking shape. If you’re following this from a personal investment perspective, take your gains…
“What we don’t want is a singular AI model to win the support of the United States government and then end up with an AI regulatory system where they start defining terms of “safety” to eliminate information adverse to the interests of the government that regulates it. Both China and Europe will predictably do that.”
If the Democrat-Communist Party ever steals another National Election and the Executive Branch, we will immediately and ultimately become pawns of their Chy-na paymasters (God forbid).
Quis custodiet ipsos custodes?
or, wouldn’t it be ‘fun’ if the sort of minds that work this stuff ‘playfully’ built either a human or secondary AI backstop controller? Good news if they’re a TReeper, not so much if they’re handing the reins off to PRC or WEF or some such.
Jack Gamble from Nobody Special Finance has been screaming for years that the AI bubble is largely a giant circular accounting scam. According to him, Nvidia, CoreWeave, et al are going to go down hard.
In my area, they’re talking about building data centers in King of Prussia and Conshohocken (business friendly Montco communities just outside the city). Nobody wants them. Josh Shapiro, our gov who wants the Dem nomination for POTUS, has come out in favor of them. We’ll see what happens.
It is. NVidia “invests” 100b in CoreWeave, CoreWeave commits to buy 100b of Nvidia cards. NVida’s valuation goes up 100b, CoreWeave valuation goes up 100b.
This has happened about ten to fifteen times with several of them, especially NVidia and ChatGPT.
And when the crash happens, you will get to bail them out.
Josh Shapiro won’t get close to the Dem nomination because he is a Jew.
Kamala will easily win the nomination.
Modular versus centralized.
Individual liberty versus Globalization(big govt)
Pulling turnips because the govt says so or self actualization.
Same old battle, same foes. Rise and rise again until lambs become lions.
What is starting to be of concern is another economic bubble centered around AI and data centers……thoughts Sundance?
Great post, Sundance, as always.
“all AI concerns can be mitigated so long as multiple, alternative AI systems exist within the larger information realm.”
Let’s pray that is the case.
(I’m afraid I can’t let you do that.)
Fifth paragraph:
<Robotic pool cleaners were introduced two generations ago. Did the pool cleaner business dry up?>
🙂 🙂 🙂 🙂
Wet dream ?
There’s always the need for a ‘pool boy’. 🙂
… almost skimmed over that one.
AI=Solyndra.
This is little different from the nuclear power projection excess in the 1970’s that is about to be repeated today. The cost will be grossly underestimated, the demand grossly exaggerated, and plant after plant cancelled. Don’t worry about data centers too greatly, few under discussion will be built and operated.
Without the regulations, there would not have been the huge cost increases. We are still the world’s largest nuclear power producer. When is there low demand for electricity? Could be the fossil industry. I’m not a greenie btw. Concur re data centers.
I’m an old school engineer and software developer who has adopted AI tools as mandated by corporate. First it was Copilot, now it is Anthropic/Claude. My token usage this month of May was $0.93. That’s right, and it was worth it! I asked Claude very specific things that I didn’t want to do but could do, and it did it. Such savings! So impress! Will I have a job for a few more years? Gotta ask a question: How many C and C++ programmers, at a system engineer level with background in electrical engineering and advanced mathematics are there? Today? Do you want to pay him or (unlikely) her a decent low six figure salary, or do you want to bank on Claude to keep your 160+ Linux servers running custom company software?
Yet to see Claude or Qwen manage to fix a bug or integrate a new feature into existing code sets. Doubt it is forthcoming.
The problem with code has always been design and not planning for or correctly dealing with potentially conflicting inputs. Claude is atrocious with this. Any update would create more problems than it would fix.
From my perspective, keep the grognards like your C/C++ guy forever, because only he can guide the tools to come up with things that have a lifespan vs. being useless the minute they need to be touched, read, or probably even tested.
The people at risk and already being impacted are the single-digit-per-hour overseas people who … charitably, can usually sort of manage to type code out that compiles and maybe works if it’s described to the point where you could’ve done it yourself, and if you have an army of similarly-awesome testers to follow similarly pre-understood scripts, AND you have the aforementioned experts actually overseeing things to make sure it happens on time and works.
Since the generative tools can churn out both the software and the testing and are moving into the ‘doing’ and ‘coordinating’ stage the manual code-banger is looking like the pool secretary redux. In your scenario the current risk is the tools’ overwillingness to generate *something* even if the prompting is garbage and waste a bunch of energy producing perfectly compiling worse-than-nothing. At least the cheapo guy will stop dead in his tracks when faced with uncertainty, which if your process/training has him alert the right people right away isn’t so bad.
The biggest hurdle I see in Ai Sundance is our infrastructure.
The idiots like Al Gore and Greta have made it so we didn’t build electrical infrastructure.
We shut down coal plants, didn’t expand on Nuclear tech and acted like the freak doomsayers so we didn’t expand our energy needs.
All of this stuff should’ve been in place and expanded on years ago.
The greeny weenies hurt our economy.
We have a lot of catching up to China in the energy sector.
I ask people to not be afraid of Ai or data centers because these things are coming anyways.
We might as well accept it and use it to our advantage like those who were the tech greats of the past.
Agreed. Existing electrical generation and grids in the US do not have the capacity to support a massive increase in data centers. Same goes for water usage.
Transmission lines cost some USD 3 to 5 Million / mile and take from 3 to 10 years from proposal to completion ( permitting, enviro impact studies, land acquisition, access road construction, etc ).
The backlog on large transformers is about 4 years. Similar for HV switchgear. All required to build new power plants, interconnect them to the grid, and distribute that power. Unless the data centers are built alongside the (new) generation, which could take 3 to 10 years for gas plants or more for nuclear. The only way to avoid the transmission line issue is to co-locate generation nearby the data center.
There is no presently known load profile for these AI data centers. Hard to plan for that. It is estimated to require some 12% of total US generation by 2028. That’s about 140-150 GW of all existing US generation. But is it 24/7, 12/7 demand or what?
https://tech-insider.org/ai-data-center-power-crisis-2026/
The idea that all of this AI / Data Center stuff is going to happen in short order ignores the reality of feeding them. Building them is one thing. Supplying them is quite another.
Problems create business opportunities. As Sundance stated, we’re an entrepreneurial society. Very smart people from all over the world are trying to solve the energy, cooling, chip size and water useage problems. Those who are successful will profit immensely.
What is the “problem” and who asked for it?
This reminds me of the video industry screaming the VCR would kill Hollywood. It did not. It made the total market increase exponentially.
Same thing with CDs. And with home theater systems.
Basically, it’s fear of the unknown and companies talking their book.
Hollywood is dead now. Who goes to the movies anymore?
Not because of the VCR.
I travel some international and I think AI has improved the experience.
I have to enter my flight itinerary on a government app before I leave. Instead of waiting in long lines for immigration and customs I breeze right through. My photo gets taken and I’m done.
People will squawk about privacy but the old days of handing a simple ID are done. We need to know who the person really is and that requires biometrics.
Classical Greek sources describe a working steam turbine, and descriptions of a steam powered device appear as early as 20-30 BC. Although humans were experimenting with steam power at least three decades before the birth of Christ, it would be another 1,800 years before the steam engine ushered in the Industrial Revolution.
When I look at the developing AI industry, particularly in regards to its prohibitive- perhaps currently unsustainable- costs and the small but growing skepticism and resistance to it, I think about those 1,800 years. That is not to say that it will take 18 centuries for AI to revolutionize human civilization, but the Greek turbine is a reminder that technological development is not linear, that its potential is not always guaranteed to lead to adoption by and integration into society, and that the very conditions which create technological innovation can sometimes prevent those innovations from having practical impacts.
I use various AI platforms daily and it’s the most amazing new tool I’ve had in my 55 years. That said it has a long way to go. It’s in its infancy. But it’s getting there, rapidly.
Just as the Articles of Confederation and the Republic was scrapped, so too will competing AI models. Social media wasn’t economically feasible until ad revenue and the sale of user data.
“the business model for social media was never feasible because the data processing demand needed for the scale of simultaneous users was beyond the capabilities of the revenue side of the equation.”
Much like the plot of the movie The Accountant. Crazy Eddie Antar and the Panama Pump. The ONLY reason the financials worked was because there was a secret source of cash keeping it afloat. Also much like the Ukraine money laundry, aka Paul’s Laundromat in The Accountant.
Excellent piece on AI and how it will develop in the real market, as opposed to the fairy tale fever dream that is being promoted.
why did s. colbert stay on air while losing millions/yr?
it’s not about money.
if ‘those who cannot be named’ need more money, they print it
it’s about the end game – total control
and the ‘true’ holy grail?
unaliving 7.5 billion of us
the 5 d’s.
they want the entirety of the world’s population:
1. dumb
2. diseased
3. drugged
4. destitute
5. dead
multiple vectors are being employed each and every day to accomplish all 5
a new book on amazon explains it all in great detail
and i’m VERY close with the author
wink, wink
Late readers won’t need the sleep aid tonight. SD thanks for calming the masses. Us Treepers got inside traders info that is invaluable. 😎🙏🏽 God Bless the USA
I like your vision of our model, but to date, we’ve seen just the opposite in every sector experiencing corporate buy outs and mergers.
Just about every good or service in America has fewer choices than that of just a few years ago. COVID seemed to accelerate the matter. I’m hoping you are correct, SD.
AI is being used by high schoolers and college students to literally think for them. They use it to do their research (and it is not always correct). Research shows that 50 to 60% of the info. is incorrect. Students themselves tell me this too. I have seen info. they obtained from AI that I know is not correct. They use it to write their papers. Not all of the students but a lot do. I see it because the same info. is used in the same format in their papers. At the same time, I have had students tell me they can’t stand AI and they don’t use it. I have heard some really disturbing stories from students about other students’ use of AI.
Correct. It’s not labor replacement but thought replacement which present the problem.
Is this any different than news sources that are biased or incorrect? Or search engines like Google, DuckDuckGo, and Brave? Or should people not have used microfilm at the library that opened up access to information? As long as there’s not one arbiter of information, competing LLMs is a great thing. Think about how controlled everything was on the internet just a few years ago.
My daughter is in business school, and one of her teachers is making the student’s write an essay using AI. The teacher is trying to help them learn how to use it. To me, this is a very valuable thing to be learning.
Pre 9/11 and google search, the internet had no control and was fantastic.
Thank you Sundance for this post. I am not technologically savvy enough to keep up with all of this. I feel now that I have at least a framework for understanding what is happening with AI.
And what makes America great is the entrepreneurial spirit. LLM AI using I/O Oracle will not be the end all, there will be and currently are innovations that will make those LLMs, using dinosaur Oracle, a sunk or stranded cost. There are individuals using fractal computing on a $ 4,000 Apple mini that do the same thing as these LLM monstrosities, in 1/90th of the time. Palantir, Meta, Oracle, Alphabet et al will not adjust because they are the typical large corporation who are not nimble nor innovative so they buy off politicians to keep the AI bubble inflated.
FTA: Creating and selling AI system networks and integration functions that are personally tailored to highly specific company functions, creates an entirely new sector of the technology industry that has not even begun yet. [There’s an investment opportunity there]
Yes. There is investment opportunity here. I made one recently. [Good call on the situation, SD]
Investment opportunity: Uipath
Sundance thanks for this insightful assessment of this complex important AI issue. My own gut and logic believe and hope you are correct with regard to jobs and our freedom. Diverse systems are critical and I believe Trump believes the same.
I also found the group chat you shared to be very valuable. Sacks clearly most level headed of the group.