AI's Economics Don't Make Sense

[bobalot]

I was going to copy and past the article into here but it is actually quite long.

Please find relevant link here: AI's Economics Don't Make Sense by Ed Zitron.

The unit costs of these LLM prompts are being massively subsidised.

Outside perhaps programming, it's unclear who would actually pay full price for LLMs that routinely hallucinate.

This is despite the tech companies trying to force this on everyone (see Copilot).

OpenAI needs $852 billion in revenue in the next 4 years to meet all their commitments.

I don't see this ending well financially.

[bilateralrope]

I've linked to other pieces by that author on the same theme before. An AI crash is coming, it's just a question of when. Likely started by OpenAI going bankrupt. Once we see which companies survive, then we get to see who is willing to pay to use a profitable AI.

The crash is going to be bad.

The biggest new thing there is how tightly Oracle has tied itself to OpenAI. How tightly Larry Ellison has tied his wealth to the crypto orb guy that is Sam Altman.

I'll also post an article about specific irrational investment in AI: Allbirds shares soar 580% after pivot from shoes to AI

16 April 2026

Osmond Chia
Business reporter

Shares in shoe brand Allbirds, once seen on the feet of famous people like actor Ben Affleck and former US President Barack Obama, soared on Wednesday after it announced plans to pivot from footwear to artificial intelligence (AI).

The San Francisco-based firm said it has struck a $50m (£37m) deal to become an "AI compute infrastructure" business and change its name to NewBird AI.

The announcement sent the firm's shares surging by more than 580%, though its stock market value is still more than 90% lower than when the company was first listed in 2021.

Allbirds' trainers became popular among technology workers in Silicon Valley but the company faced serious challenges in recent years.

NewBird AI will buy advanced graphic processing units (GPUs) - computer chips that power AI, Allbirds said in a statement.

The company said it had seen a "gap in the market" that has left many businesses without enough computing power because the industry cannot keep up with demand.

Its long-term plan is to offer on-demand graphics chips and cloud services that are specially built for AI, it added.

The Allbirds brand will be owned by fashion conglomerate American Exchange Group, which includes names like Ecko Unltd and Aerosoles, following a $39m deal announced in March.

Allbirds chief executive Joe Vernachio said the move will allow the Wool Runner maker to "thrive in the years ahead".

Branding consultant Wei Kan from Conduit Asia likened the move to a "liquidation" rather than a pivot, using the stock market shell of its shoe brand to move into an unrelated business.

Retail analyst Hitha Herzog said the excitement over Allbirds "just by putting AI in an announcement" makes it "clearly a meme stock".

The meme stock phenomenon gained prominence during the Covid-19 pandemic when some company's shares surged in value due to strong interest from retail investors was boosted on social media.

There is "certainly AI mania that is going on", given the lack of proof of product or earnings from the company related to its new business, Herzog said.

Allbirds was founded in 2015 by a former football player Tim Brown and a clean-technology businessman Joey Zwillinger.

The footwear firm opened dozens of shops in the US and around the world including the UK, New Zealand, China and Singapore, targeting casual joggers, office workers and yoga lovers.

But the company has struggled to turn a profit since it listed on the Nasdaq stock exchange in New York five years ago.

Its stock market value had plummeted from a high of more than $500 a share to around $2.50 just before the AI pivot was announced.

The announcement gives the NewBird AI a shell to trade on, but "a stock going from $3 to $17 on a press release doesn't restore $4bn in destroyed value," Kan said.

A show company pivots to AI, claiming that they will help with the problem "many businesses without enough computing power" by buying and renting out the hardware that is in short supply. Investors flock to it.

[bobalot]

OpenAI had conflict between it's CFO and CEO regarding when it should go public.

I suspect the CFO didn't want to sign off fraudulent books.

[Alferd Packer]

If I'm not mistaken, Sam Altman has said, in public, to actual people, that his endgame is hoping that OpenAI will bootstrap itself into sentience (or become some kind of AGI) and then just asking it to come up with a way to make all the money they poured in back.

[bobalot]

If I'm not mistaken, Sam Altman has said, in public, to actual people, that his endgame is hoping that OpenAI will bootstrap itself into sentience (or become some kind of AGI) and then just asking it to come up with a way to make all the money they poured in back.

Large Language Models are simply predictive models.

They don't "know" anything.

This man is either a liar or a fuckwit.

Or possibly both.

[bobalot]

If I'm not mistaken, Sam Altman has said, in public, to actual people, that his endgame is hoping that OpenAI will bootstrap itself into sentience (or become some kind of AGI) and then just asking it to come up with a way to make all the money they poured in back.

Large Language Models are simply predictive models.

They don't "know" anything.

This man is either a liar or a fuckwit.

Or possibly both.

[bilateralrope]

If I'm not mistaken, Sam Altman has said, in public, to actual people, that his endgame is hoping that OpenAI will bootstrap itself into sentience (or become some kind of AGI) and then just asking it to come up with a way to make all the money they poured in back.

Large Language Models are simply predictive models.

They don't "know" anything.

This man is either a liar or a fuckwit.

Or possibly both.

Do you remember the Worldcoin Orb ?

An orb that scans your iris then gives you some crypto. Sam Altman made a lot of promises about the good that would come from it.

Now that he's moved from crypto to AI, he still wants to use the orb.

[bobalot]

If I'm not mistaken, Sam Altman has said, in public, to actual people, that his endgame is hoping that OpenAI will bootstrap itself into sentience (or become some kind of AGI) and then just asking it to come up with a way to make all the money they poured in back.

Large Language Models are simply predictive models.

They don't "know" anything.

This man is either a liar or a fuckwit.

Or possibly both.

Do you remember the Worldcoin Orb ?

An orb that scans your iris then gives you some crypto. Sam Altman made a lot of promises about the good that would come from it.

Now that he's moved from crypto to AI, he still wants to use the orb.

This guy is such an obvious grifter.

I struggle to understand why investors are giving these clowns billions.

These Financial Masters of the Universe showed the world what a bunch of clowns they were in 2008 and for some reason, governments, the press, and society have forgotten all that and gone back to worshipping them.

[KraytKing]

The biggest new thing there is how tightly Oracle has tied itself to OpenAI. How tightly Larry Ellison has tied his wealth to the crypto orb guy that is Sam Altman.

In the same vein, SpaceX is now an AI company. Which is just so mind-bogglingly stupid, if you aren't Elon Musk trying to steal as much money as humanly possible. But between massive CapEx driven losses in rocket development and Starlink driven profit, SpaceX actually showed GAAP profitability in 2025, not just bullshit EBITDA profitability. But they're still developing tech like crazy: nobody else can do what Falcon 9 has been doing for ten years now. If Starship starts flying payloads in the next five years with even a fraction of the promised specs, that is going to be ANOTHER revolution in launch costs.

And so you have a company showing top-50 profit AND a world-beating tech lead, and what do you do? Chain it to the AI loss machine. One of the worse ones, everyone knows Grok isn't going to be the AI that wins, if "winning" isn't just another hallucination.

[bilateralrope]

Here's an interesting court ruling from Germany:

Nobody needs AI to search the Internet, court says in ruling against Google

Nobody needs AI to search the Internet, court says in ruling against Google

Google AI Overview court loss in Germany could spell doom for AI search industry.

Ashley Belanger – Jun 11, 2026 5:19 AM

Potentially impacting all AI search engines and chatbots known to poorly paraphrase source links, a German court has ruled that Google is liable for false statements in AI Overviews.

The preliminary ruling came in a case flagged by The Decoder, where two publishers found that Google’s AI Overviews incorrectly linked them to scams and other sketchy business practices. After smearing publishers by making affirmative statements like “Yes, [it] is known for dubious business practices and is often perceived as a scam,” Google failed to correct the misleading output, even after the publishers sent a cease-and-desist letter earlier this year.

Google tried the usual arguments to shield itself from liability for false statements in AI Overviews, such as arguing that most users understand that AI outputs aren’t always accurate and must be verified.

But the court found that, unlike traditional search engines that merely present lists of links to third-party statements, Google’s tool made “independent, new, and substantive statements” based on its own misinterpretation of links on the Internet.

That’s a problem, the court said, because while publishers may have been able to sue to stop third parties from publishing defamatory statements appearing in Google search results, only Google can correct the underlying algorithm and outputs displayed in AI Overviews. And because, at least initially, the company did not, it therefore “must be held accountable,” the court ruled. Beyond that, Google’s argument was deemed particularly weak, since the AI overview in this case “contains statements that do not appear in the search results at all.”

The court’s order—requiring a temporary injunction barring Google from spreading the false claims in any further AI Overviews—may have global implications, as the court seems to be the first to hold an AI firm liable for AI speech.

In the past, AI firms have hoped that disclaimers warning about misinformation would protect them from lawsuits over untrustworthy outputs. Last year, one chatbot maker even argued that AI speech is its own category of “pure speech” and the First Amendment should protect it.

According to a Google translation of the German court ruling, however, the false outputs were “primarily an expression of the defendant’s commercial activity,” and the AI tool’s “opinions” and false statements were capable of impacting public opinion.

The court concluded that, in weighing the balance, publishers’ interest in removing the false information outweighed Google’s commercial speech rights.

AI is not necessary to search the web

Historically, any potentially harmful content surfaced by search engines has been protected from direct liability because that surfacing was considered largely unavoidable when helping users sort through an enormous tangle of information online. But the German court emphasized that AI search engines do not enjoy those same protections because AI summaries merely provide “an additional function—one without which the use of the search engine would still be (and is) possible, and without which users are perfectly capable of finding results amidst the ‘flood of data.’”

In other words, nobody needs AI to search the Internet, so AI firms can’t just let their tools attribute false claims to fake sources without assuming any liability.

The court also seemed to take a dig at Google for expecting users not to “blindly trust” AI overviews, noting that the AI tool’s utility “would be significantly diminished if the ‘AI overview’ were generally regarded as unreliable and if every single displayed link required independent verification.”

It seems clear that’s not how people approach AI search tools. The Decoder noted a Pew survey last July showing most people don’t click on AI Overview source links, as well as a May analysis published by The New York Times that showed that AI Overviews with the current Gemini 3 model are inaccurate about 9 percent of the time and include inaccurate source links about 56 percent of the time.

Together, these findings suggest that Google’s AI tool may be cranking out millions of wrong answers daily, with few users verifying the information. Should other courts agree that tech firms are liable for any defamatory outputs emerging from this experimental period of AI search chaos, the biggest AI leaders could find themselves soon buried in lawsuits.

It remains unclear if Google expects to appeal or perhaps start addressing requests to fix false statements in AI Overviews more quickly following the ruling.

Google will likely fight the preliminary ruling. Asked for comment, a Google spokesperson told Ars that “we invest deeply in the quality of AI Overviews to ensure that the overwhelming majority of responses provide accurate information, and they are designed to reflect the information that exists on the web. We’re carefully reviewing this decision, which is not yet final.”

The court says that "only Google can correct the underlying algorithm and outputs displayed in AI Overviews" and therefore they are liable for any falsehoods the AI Overviews produce. But LLMs have had a consistent problem with hallucinations, so there might not be any way to fix them. Except by killing AI search and going back to more reliable search algorithms.

I hope this ruling survives appeal.

[Solauren]

Removing the AI summaries from searches is probably the best idea and way to handle this.