What I didn’t totally appreciate until now is how that shifts us off the course where a few frontier labs end up becoming ACME mega corp which run the whole world and capture everyone’s money.
Power and value shifts to those who figure how to leverage LLMs to create value. Similar to how the use of a particular programming language is rarely the key to success and ISPs aren’t in charge of everything. Rather, the ability to turn code and a connection to people via the internet is the key to success.
So that makes me wonder - is the dot-com style correction in the industry required before we truly get a wave of exciting new companies emerge which upend society through the use of LLMs. Or can that shift happen without one?
I struggle to decide how this compares/contrasts with the dot com era. Where we had both the dot.com bubble burst and the internet totally change society.
alephnerd•1h ago
This has already been known for 4 years now amongst my peers.
Growth Equity raises like OpenAI's $110B round is not a Venture Capital raise nor an LBO or Mezzanine.
> is the dot-com style correction in the industry required before we truly get a wave of exciting new companies emerge which upend society through the use of LLMs
Nope. The Application layer along with Reinforcement Learning and DeepTech funding for hetrogenous computing and quantum/post-quantum has been hot for the past 2-3 years.
Most are in stealth. Most are B2B and Enterprise. Most of those founders don't use HN, as HN has an increasingly negative reputation amongst people in the space, and because HN's userbase has increasingly become more European individual contributors and less Bay Area, so the signal to noise ratio has dropped dramatically
> I struggle to decide how this compares/contrasts with the dot com era
Becuase that is not the best comparison when looking at the economics of the industry. A better model is the rise of hyperscalers and SaaS. Foundation models and Agents are an additional abstraction layer packaging distributed compute, just like how hyperscalers and SaaS packaged compute into easily distributable applications.
AbstractH24•1h ago
> Nope. The Application layer along with Reinforcement Learning and DeepTech funding for hetrogenous computing and quantum/post-quantum has been hot for the past 2-3 years.
How does this deal with need for a correction in overvalued companies? And the impact on those who invested in them?
You still have a situation where there’s insane excess capacity built out. Akin to fiber during dot com era.
And the fallout from when companies like OpenAI need their valuation adjusted.
Chewy proved Pets.com thesis right. But that didn’t stop Pets.com from failing as part of a bubble bursting.
>> I struggle to decide how this compares/contrasts with the dot com era
>Becuase that is not the best comparison when looking at the economics of the industry. A better model is the rise of hyperscalers and SaaS.
Can you elaborate? The thing i still don’t see is how this creates the protective moat.
As I type this out I think we’ll go through an era of “buying SaaS is stupid, you can just build it yourself” before some SaaS companies prove they can build and maintain better than you (we’re probably in the midst of that already)
alephnerd•1h ago
Which companies do you think are overvalued commensurate to revenue? The biggest issue we have for overvaluation is SaaS apps that raised in the 2017-22 period.
Terms were extremely lax and made it difficult to pop their bubbles.
> The thing i still don’t see is how this creates the protective moat
Protective moats are not the name of the game and never have been - they only reduce TAM and make it difficult to exit because comparable multipliers are limited, making valuation extremely difficult.
The primary moat has always been distribution, and this is where the foundation model companies have been extremely successful at. AEs who's Rolodexes included the F1000s all left for the foundation model companies and brought their clients with them.
Additionally, companies are approaching foundation models the same way you would cloud - a multi-model and a multi-cloud approach to reduce vendor stickiness.
AbstractH24•1h ago
Take Clay.com, what justifies the $5 billion valuation?
And all the frontier labs. Because their core offering will be commodified.
Finally, Nvidia and the companies whose main offering is computing power. Efficiency and commodification will lead to something akin to the fiber overbuild of the dot com era (like I referenced before)
As I type this out, I think there is an inevitable correction. Hard to say if it’s akin to dot com era or not. And those who succeed 15 or 20 years ago will be ready to take advantage of it. Be through capital, through skills and knowledge, or through stealth companies. Question becomes when to pull the trigger on taking any of those of their respective sideline.
alephnerd•1h ago
Their revenue and additonal metrics which I cannot disclose does justify their valuation. Their ICP who are using them (RevOps and Marketing) also love it, and have begun reducing SFDC spend as a result.
> Nvidia and the companies whose main offering is computing power. Efficiency and commodification will lead to something akin to the fiber overbuild of the dot com era
Most foundation model companies are already rate limiting enterprise customers due to lack of compute capacity. There is an actual bottleneck in capacity that the buildout is solving.
> Because their core offering will be commodified
Get. This. In. Your. Head.
Commodification is treated as a win. It means 3-5 vendors can take majority of the marketshare while expanding TAM and giving later stage investors multipliers they can use to exit.
It also means distribution becomes the key factor, and that is a toggle that is easy to manage.
> Question becomes if there is or isn’t a correction first. With its associated period of stalled growth (akin to the 2000s post bubble bursting)
A correction implies that there is an underutilization of capacity. We are not at that point, and won't be for the next 3-5 years.
Additionally, most foundation model companies are trying to expand up the chain into applications as well, much like how hyperscalers transitioned from being IaaS and adding additional abstraction layers to reduce deployment friction.
AbstractH24•1h ago
What you aren’t answering is why to believe the current trajectories will sustain long term.
Enterprise companies are being rate limited and incentivized to look for other options and/or finding efficiencies id actually example of why commodification and overbuilding is likely.
alephnerd•1h ago
What other options? SuperMicro has an 18 month backlog. Same with Dell, HPE, and all the other compute manufacturers and everything in-between.
It's impossible to buildout because best case you would operationalize in 24 months, at which point you would be around 4 years behind SOTA because it takes years to train, and that money would be better spent trying to negotiate a more competitive inference terms.
---
The crux of the issue with the Dot-Com boom and bust was that most enterprise were not purchasing the products of most startups. The Dot-com boom/bust was largely a B2C play.
The current generation of AI products are entirely targeted at business applications, where I can justify reallocating spend on SaaS and maybe some headcount to a specific AI product which has a much more predictable cost model.
There is a B2C boom brewing now thanks to OpenClaw, but all that action is in China and India, not the US or Europe.
---
Edit: can't reply
> The emergence of something akin to DeepSeek 14 months ago that proves you don’t need all this power to get the desired results
Already has. India's Sarvam has GPT-4 or Deepseek comparable performance. There's a second model of similar scope in the works in India.
I know of 2 other projects in the UAE and KSA with a similar scope, 1 project in South Korea, and 1-2 in Japan.
The thing is, sovereign AI is the name of the game - no country wants to be dependent on Anthropic or OpenAI for government critical applications.
But this isn't an issue from a valuation perspective because it's these sovereign model projects that are also subsidizing domestic hyperscaler buildouts across APAC, as historically most compute was centered in SG+MY.
> That’s an interesting observation
It's because there are less luddites and more openness to experiment. If you spent your entire life using digital payments, running a digital storefront, and doing paperwork via an app you are much more open to playing around with digital and agentic workflows.
I've noticed most western HNers are significantly older (in their 40s-50s) and are much more resistant to new tech as a result, especially as most didn't grow up with digital products for much of their life.
> why are you here then?
Force of habit like taking a smoking. There are also the occasion tidbits of good info, but this is growing less common.
> I’d question if they are adverse or simply measured and able to see through hype because it’s not their first rodeo
There's a difference between hype ("AI will take all our jerbs") and reality ("Agentic workflows are becoming incorporated in most operational workflows but with a human in the loop, and that requires expanded capacity. In a lot of cases, agentic workflows will suck, but so did human developed workflows for cost centers").
People whose thinking is closer to the latter will be more successful professionally speaking. It's the same way HN used to reflexively crap on cloud and K8s, but it has now become the industry norm.
AbstractH24•1h ago
The emergence of something akin to DeepSeek 14 months ago that proves you don’t need all this power to get the desired results
Or multiplexing during the fiber boom.
> There is a B2C boom brewing now, but all that action is in China and India, not the US or Europe
That’s an interesting observation
AbstractH24•48m ago
Yeah, something odd is occurring where I need to click into the comment to reply
> sovereign AI is the name of the game - no country wants to be dependent on Anthropic or OpenAI for government critical applications.
This is an interesting concept. The idea that in the end you’ll see the emergence of something akin to the WWW for AI. That we’re in the AOL/Prodigy phase of it.
> I've noticed most HNers are significantly older (in their 40s-50s) and are much more resistant to new tech as a result
Im just below that age bracket, take it you are significantly.
I’d question if they are adverse or simply measured and able to see through hype because it’s not their first rodeo
But it begs a question I had from your first comment where you trashed HN - why are you here then?
AbstractH24•56m ago
This is the most interesting point I think you made. But really isn’t in contrast to what I said.
Doesn’t resolve the question of if there will be a correction. Just that if current investors exit fast enfough those investors won’t be left holding the bag when one occurs and will be able to reinvest.
To some extent that’s inconsequential. If anything is certain it’s that there is always someone else available to invest money in the broader market at some point in the future.
Question becomes if there is or isn’t a correction first. With its associated period of stalled growth (akin to the 2000s post bubble bursting).