‘Major AI labs can only justify their high valuations by developing very powerful, very general AI systems’ is a claim I sometimes hear. That is, many seem to expect ‘if no AGI in n years, then the bubble pops’.
However, I think just revolutionizing tech is likely enough to justify current valuation levels (and maybe as much as 4x current valuations; maybe even more?), given the market caps of other large tech companies (even if we exclude NVIDIA, which we may want to do because their current market cap is more heavily tied to the AI boom than others). After all, these are still ‘only’ 12-figure valuations in a sector where many of the major players have broken a trillion. A 12-figure valuation is consistent with ‘future major player of the kind that already exists’ and not ‘potential god emperor of the solar system’.
Using these big tech companies as a reference point and assuming very limited further capabilities progress (eg no TAI, AGI, [your favorite way to talk about very general, ~human level systems]), the major LLM companies still don’t obviously look overvalued to me. The tech pie by itself is big enough (and the current state of the tech looks, to me, sufficient to massively disrupt that entire sector), that if they capture enough of the sector (even if it takes a while), we won’t see a significant correction.
(there’s a nearby but unrelated point about whether the fundamentals of these companies look sound in a conventional sense, which I don’t mean to weigh in on here)
[recovering from a concussion so apologies if this is especially poorly written or unclear]
However, I think just revolutionizing tech is likely enough to justify current valuation levels (and maybe as much as 4x current valuations; maybe even more?)
This is true, but I think current valuations of frontier companies are still premised on AI continuing to scale. I expect that if you locked capabilities at current levels, you would see a huge drop in frontier company evaluations, and a huge increase in AI startup and existing tech-company valuations.
Really? I would expect valuations to briefly stall out and then continue to grow when it became clear that the labs have a big lead when it comes to elicitation, scaffolding, etc.
I would also expect existing big-tech valuations to grow in this scenario—just not startups (although maybe they get a bump in the short term).
Can you say more about why you expect this? Trying to see if the answer is [real disagreement] or [Oli has superior knowledge of economics] (and also learn something, in the latter case).
the labs have a big lead when it comes to elicitation, scaffolding, etc.
They don’t have a big lead here, so that’s why. This domain isn’t that deep and many other people have already made scaffolds that are better than what the labs make. E.g. Claude Code is a much smaller coding project where the best 5-person startup would probably quickly outperform Anthropic. On many benchmarks Claude Code is among the worst performing scaffolds (this part is honestly surprising to me and I don’t quite know what’s up).
I would also expect existing big-tech valuations to grow in this scenario—just not startups (although maybe they get a bump in the short term).
Seems like there would be a ton of AI startups to make, and big-tech is decent-ish at innovating in new spaces, but startups have historically still played a huge role in that.
Wow that is surprising! Even after considering the suite of caveats one applies to benchmarks as evidence, I am very surprised.
All things considered I think I still lean harder on self-reports from lab and non-lab technical staff regarding the elicitation delta, but I’m much less confident than before.
[I suspect we may have other less interesting disagreement about how economically useful current systems could be if more effort were put toward juicing them, but happy to talk about that some other time; just mentioning this for completeness or something.]
‘Major AI labs can only justify their high valuations by developing very powerful, very general AI systems’ is a claim I sometimes hear. That is, many seem to expect ‘if no AGI in n years, then the bubble pops’.
However, I think just revolutionizing tech is likely enough to justify current valuation levels (and maybe as much as 4x current valuations; maybe even more?), given the market caps of other large tech companies (even if we exclude NVIDIA, which we may want to do because their current market cap is more heavily tied to the AI boom than others). After all, these are still ‘only’ 12-figure valuations in a sector where many of the major players have broken a trillion. A 12-figure valuation is consistent with ‘future major player of the kind that already exists’ and not ‘potential god emperor of the solar system’.
Using these big tech companies as a reference point and assuming very limited further capabilities progress (eg no TAI, AGI, [your favorite way to talk about very general, ~human level systems]), the major LLM companies still don’t obviously look overvalued to me. The tech pie by itself is big enough (and the current state of the tech looks, to me, sufficient to massively disrupt that entire sector), that if they capture enough of the sector (even if it takes a while), we won’t see a significant correction.
(there’s a nearby but unrelated point about whether the fundamentals of these companies look sound in a conventional sense, which I don’t mean to weigh in on here)
[recovering from a concussion so apologies if this is especially poorly written or unclear]
This is true, but I think current valuations of frontier companies are still premised on AI continuing to scale. I expect that if you locked capabilities at current levels, you would see a huge drop in frontier company evaluations, and a huge increase in AI startup and existing tech-company valuations.
Really? I would expect valuations to briefly stall out and then continue to grow when it became clear that the labs have a big lead when it comes to elicitation, scaffolding, etc.
I would also expect existing big-tech valuations to grow in this scenario—just not startups (although maybe they get a bump in the short term).
Can you say more about why you expect this? Trying to see if the answer is [real disagreement] or [Oli has superior knowledge of economics] (and also learn something, in the latter case).
They don’t have a big lead here, so that’s why. This domain isn’t that deep and many other people have already made scaffolds that are better than what the labs make. E.g. Claude Code is a much smaller coding project where the best 5-person startup would probably quickly outperform Anthropic. On many benchmarks Claude Code is among the worst performing scaffolds (this part is honestly surprising to me and I don’t quite know what’s up).
Seems like there would be a ton of AI startups to make, and big-tech is decent-ish at innovating in new spaces, but startups have historically still played a huge role in that.
Wow that is surprising! Even after considering the suite of caveats one applies to benchmarks as evidence, I am very surprised.
All things considered I think I still lean harder on self-reports from lab and non-lab technical staff regarding the elicitation delta, but I’m much less confident than before.
[I suspect we may have other less interesting disagreement about how economically useful current systems could be if more effort were put toward juicing them, but happy to talk about that some other time; just mentioning this for completeness or something.]