The Other Bubble

Claims from this post (27)

In the order they appear in the post. Each quotation is the speaker’s words in this post. A label such as “Supported” or “Can’t be checked” is the claim’s current assessment; its page has the evidence and the reasons.

1. Assessment: Can’t be checkedSaid 2024-09-26

   “Because, let’s face it, every generative AI product we’ve seen from Big Tech has been underwhelming.”

   What we tested: Every generative AI product we have seen from Big Tech has been underwhelming.

2. Assessment: Can’t be checkedSaid 2024-09-26

   “As organizations build their own AI integrations — through either paying for compute for their own purpose-built solutions or by integrating OpenAI's GPT — there is likely to be some revenue growth in cloud providers.”

   What we tested: Cloud providers will likely see some revenue growth as organizations build their own AI integrations.

3. Assessment: ContradictedSaid 2024-09-26

   “That being said, we're yet to see this actually happen, outside of OpenAI's alleged $3.4 billion of yearly revenue (it still loses $5 billion a year), and generative AI's multi-billion dollar contribution to Amazon Web Services revenue over an indeterminate amount of time.”

   What we tested: Outside of OpenAI's alleged $3.4 billion of yearly revenue (while it still loses $5 billion a year) and generative AI's multi-billion dollar contribution to AWS revenue over an indeterminate period, we have yet to see revenue growth for cloud providers from organizations building their own AI integrations.

   What happened: Microsoft publicly attributed eight percentage points of Azure growth to AI services before the post. The same call describes organizations using Azure's model services, making this a counterexample under the ordinary reading of customer AI integrations. (Microsoft, 2024-06-30)

4. Assessment: Can’t be checkedSaid 2024-09-26

   “If I had to guess, it’s about as deeply unprofitable as a SaaS company has ever been, and there is no real turning that around.”

   What we tested: If he had to guess, Glean is about as deeply unprofitable as a SaaS company has ever been, and there is no real turning that around.

5. Assessment: UnresolvedSaid 2024-09-26

   “And the reason I've so agonizingly explained it is that I believe the current generative AI boom is almost entirely fueled by the hunger of the Software As A Service parasite for growth...and the slow collapse of growth in tech's favorite business model.”

   What we tested: The generative AI boom is almost entirely driven by the SaaS industry's need for growth and the slow collapse of SaaS growth.

6. Assessment: UnresolvedSaid 2024-09-26

   “The answer is simple: the tech industry's desperate attachment to artificial intelligence is largely fueled by the SaaS industry, because AI is the first meaningful new "thing" they've had to flog to customers in quite some time”

   What we tested: The tech industry's attachment to AI is largely driven by SaaS companies needing a new product to sell to customers.

7. Assessment: UnresolvedSaid 2024-09-26

   “It doesn't really matter that these agents are basically the same "chatbot-that-connects-to-large-database-of-information" thing we’ve seen a million times, but this time connected to a Large Language Model.”

   What we tested: Salesforce's Agentforce agents are essentially the same database-connected chatbots seen before, now connected to an LLM.

8. Assessment: UnresolvedSaid 2024-09-26

   “Every company promising "AI agents" is really just trying to rebrand the concept of chatbots and provide a front-end to let you connect them to data sources and give them guardrails so they don't scream curse words at your customers or write poetry about how bad the company is.”

   What we tested: Every company promising 'AI agents' is really just trying to rebrand chatbots and provide a front-end that connects them to data sources and gives them guardrails.

9. Assessment: UnresolvedSaid 2024-09-26

   “These "agents" are branded to sound like intelligent lifeforms that can make intelligent decisions, but are really just trumped-up automations that require enterprise customers to invest time programming them.”

   What we tested: Enterprise AI 'agents' are not intelligent decision-makers but automations that customers must spend time programming.

10. Assessment: ContradictedSaid 2024-09-26

    “Almost every one of these companies is claiming that these systems "reduce drudgery" or "enhances productivity," yet there's no real explanation as to how it might do so or what the drudgery is that's being relieved, nor any unassailable metrics on how productivity improves.”

    What we tested: Almost every one of these SaaS companies with AI products claims the systems reduce drudgery or enhance productivity, yet there is no real explanation of how or what drudgery is relieved, nor any unassailable metrics on how productivity improves.

    What happened: This identifies both the work involved—writing replies—and the proposed mechanism—generating suggested responses and revisions. It directly contradicts the absence of a concrete explanation, without proving the size of any productivity gain. (ServiceNow, 2024-09-10)

11. Assessment: UnresolvedSaid 2024-09-26

    “And, more worryingly, they're building all of these tools on top of generative AI, which is extremely expensive and, as I've argued, unsustainable at the rates being charged.”

    What we tested: Generative AI is extremely expensive and unsustainable at the prices currently charged.

12. Assessment: UnresolvedSaid 2024-09-26

    “Scenario 1 is obviously dangerous, offering a tool that costs a great deal of money to provide only a little value to customers for free, meaning that at best you'll have customers that lose you money every single time they interact with the product.”

    What we tested: SaaS companies offering costly AI features for free will at best lose money every time customers use them.

13. Assessment: UnresolvedSaid 2024-09-26

    “As The Information reported a couple of weeks ago, Microsoft has categorically failed to turn Copilot for Microsoft 365 (a product line that makes at least $15 billion of revenue a year) into a meaningful revenue driver, with “between 0.1% and 1% of the 440 million existing users of Microsoft 365...paying for the new AI features" according to an equity analyst's estimation.”

    What we tested: Microsoft has failed to make Copilot for Microsoft 365 a meaningful revenue driver, with only an estimated 0.1–1% of users paying.

14. Assessment: Can’t be checkedSaid 2024-09-26

    “While it's possible that Microsoft could have found ways to make Github Copilot more efficient, this seriously suggests that Microsoft 365 Copilot loses money in much the same way, though generating code is a little more compute-intensive.”

    What we tested: Microsoft 365 Copilot likely loses money per user, as GitHub Copilot was reported to.

15. Assessment: UnresolvedSaid 2024-09-26

    “While this sounds like a lot, it’s actually a staggering reversal from the previous 30% quarter-over-quarter growth and suggests that momentum has rapidly slowed.”

    What we tested: GitHub Copilot's rise from 1.3 million to 1.8 million paying users is a staggering reversal from its previous 30% quarter-over-quarter growth and suggests its momentum has rapidly slowed.

16. Assessment: Can’t be checkedSaid 2024-09-26

    “One has to wonder if Microsoft365's "Copilots" are equally unprofitable. I'd wager they are.”

    What we tested: Microsoft 365 Copilots are probably as unprofitable as GitHub Copilot.

17. Assessment: Can’t be checkedSaid 2024-09-26

    “As a result, generative AI kind of felt like the perfect SaaS snake oil, a magical new way to indefinitely charge customers for the thing that they already should have.”

    What we tested: Generative AI kind of felt like the perfect SaaS snake oil, a magical new way to indefinitely charge customers for things they already should have.

18. Assessment: UnresolvedSaid 2024-09-26

    “These products almost always include some sort of half-hearted generative addition too — creating presentations or drafting emails or creating boilerplate content, all things that you can do for free with ChatGPT, Claude or whatever other Large Language Model you can find.”

    What we tested: SaaS AI products almost always include some half-hearted generative addition, such as creating presentations, drafting emails or boilerplate content, all of which can be done for free with ChatGPT, Claude or another LLM.

19. Assessment: Can’t be checkedSaid 2024-09-26

    “In fact, I think they're doing their best to hide the fact that it isn't selling at all, and costs more money than it makes when it does.”

    What we tested: He thinks SaaS companies are doing their best to hide that their generative AI isn't selling at all and costs more money than it makes when it does sell.

20. Assessment: SupportedSaid 2024-09-26

    “In essence, Amazon is benefitting from AI in much the same way NVIDIA is.”

    What we tested: In essence, Amazon is benefitting from AI in much the same way NVIDIA is, by supplying the compute people need while working out what AI is useful for.

    What happened: The account documents Slack using AWS instances, including GPU instances, to host models for its AI features. This directly establishes AWS's role as a computing supplier for another company's AI product. (Amazon Web Services, co-authored with Slack, 2024-04-18)

21. Assessment: Can’t be checkedSaid 2024-09-26

    “As I hinted earlier, I see the enterprise and the SaaS market as the commercial real estate arm of the Subprime AI Crisis — an industry desperate for growth attaching itself to an unprofitable, unsustainable technology that they invested in in the hopes that it would fuel a decade or more of revenue growth.”

    What we tested: The enterprise SaaS market is the 'commercial real estate' of a Subprime AI Crisis, tied to an unprofitable, unsustainable technology.

22. Assessment: Can’t be checkedSaid 2024-09-26

    “Much like the feared commercial real estate bubble, SaaS may see its own series of dramatic price cuts to its AI tools as a means of competing and showing growth to the markets...despite the costs staying the same, or possibly increasing.”

    What we tested: SaaS companies may engage in a race to the bottom with dramatic AI tool price cuts while costs stay flat or rise.

23. Assessment: Can’t be checkedSaid 2024-09-26

    “Especially in the case of Microsoft, which will likely only ever make money from AI by selling compute.”

    What we tested: Microsoft will likely only ever make money from AI by selling compute.

24. Assessment: Can’t be checkedSaid 2024-09-26

    “For me to be wrong, there will have to be sudden, remarkable changes in either enterprise software spend, or the capabilities and costs of generative AI itself.”

    What we tested: His thesis about SaaS and generative AI holds unless enterprise software spend or generative AI's capabilities and costs change suddenly and remarkably.

25. Assessment: Can’t be checkedSaid 2024-09-26

    “And if Salesforce — considered the prize growth-pig of the SaaS hogs — isn't growing, then the rest of the market should be terrified.”

    What we tested: If Salesforce is not growing, the rest of the SaaS market should be terrified.

26. Assessment: UnresolvedSaid 2024-09-26

    “While these companies had costs before, generative AI is multitudes higher than regular cloud compute costs, meaning that any new revenue growth from this software will be burdened by leveraging an increasingly-expensive solution to a problem that most of them have trouble describing.”

    What we tested: Generative AI costs many times more than regular cloud compute, so any AI revenue growth for SaaS will be weighed down by rising costs.

27. Assessment: Can’t be checkedSaid 2024-09-26

    “And if the revenue never arrives, they'll be faced with the same problem as the rest of the tech industry — that they've run out of ideas to generate growth.”

    What we tested: If AI revenue never materializes, SaaS companies will face having run out of ideas for growth.

Held from this post (14)

These records did not pass every check, so nothing about them is published. Held is not a finding.

• The record does not meet the current rules. Our reading, not assessed: Because most of these companies effectively have to double prices to offer AI, it is hard to imagine these features aren't already problematically expensive to maintain.
• The record does not meet the current rules. Our reading, not assessed: Hallucinations are not a bug so much as a feature of the transformer model that underpins generative AI.
• The two reviews read the claim differently
• The two reviews read the claim differently
• The two reviews read the claim differently
• The criteria are ambiguous. Our reading, not assessed: Google, Amazon and Microsoft are bankrolling the generative AI boom, including heavily subsidizing the compute rates OpenAI (and likely Anthropic) pay.
• The criteria are ambiguous. Our reading, not assessed: At some point, generative AI's poor margins will begin to eat into these SaaS companies' already-tenuous profitability, and he imagines this will lead some to vastly raise prices or drop the tools, assuming competition doesn't make keeping them necessary.
• The criteria are ambiguous. Our reading, not assessed: It feels like hundreds of companies have made AI summaries, generative features and search so commonplace that they are effectively commoditized, so everyone is expected to offer mediocre tools that cost too much to run, making them harder to sell at a premium.
• The two reviews read the claim differently
• The two reviews read the claim differently
• The record does not meet the current rules. Our reading, not assessed: Nobody, including Microsoft, Anthropic, OpenAI or Google, is any closer to solving hallucinations.
• The two reviews reached different assessments. Our reading, not assessed: The SaaS business model, the main way that over a hundred multi-billion dollar companies and parts of several multi-trillion dollar companies make money, is potentially collapsing or at the very least contracting, likely because there just might not be that much left to sell.
• The two reviews read the claim differently
• The record does not meet the current rules. Our reading, not assessed: Other than Microsoft, which has barely been able to sell it, he can find no public SaaS company that appears to have attributed any meaningful revenue growth to generative AI.