Nobody Asked for AI

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Nobody Asked for AI<br>ByGrace Blakeley<br>We tend to think that markets reflect consumer choice. But the artificial-intelligence boom has been powered by the investment decisions of concentrated capital rather than by consumer demand.

We assume that the AI boom is the result of market demand. In reality, it is the result of investment decisions made by concentrated capital, which is reshaping the economy on its own terms. (Al Drago / Bloomberg via Getty Images)<br>Get four print issues and full access to our archive for just $20

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The Big Tech companies have spent $1 trillion on capital investment since the start of the artificial-intelligence boom. Pretty much all that investment has been used to build data centers, purchase the chips that power those data centers, and construct the energy systems that fuel and cool them.<br>That $1 trillion could have been used for anything. It could have been invested in renewables. It could have been used to develop lifesaving new drugs. It could have been used to build housing, public infrastructure, or anything else human beings need to survive and thrive.<br>Instead, it has been channeled into constructing energy-draining, water-absorbing data centers that power large language models (LLMs) built on the theft of millions of people’s creative work, which consistently produce incorrect responses and drive many users mad in the process. It’s hard to think of a worse use of society’s shared resources.<br>Now, you may argue that we live in free-market societies, so investment takes place according to the laws of the market. All that money and investment is flowing into AI because it is simply the most profitable use of resources. And when society maximizes profits, it maximizes efficiency — ensuring that, on aggregate, everyone is better off over the long run.<br>There are a lot of problems with this story. First, we do not live in free-market societies. We live in capitalist societies — that is, societies dominated by capital. Capital is not distributed into lots of little businesses each producing widgets in perfect competition with one another. Capital agglomerates until it is concentrated within a few massive, monopolistic corporations, controlled by a few powerful men.

These massive corporations can afford to ignore what’s profitable in the short run pursuit of what will bring their owners immense wealth and power in the long run. Just take Amazon. It was unprofitable for years while Jeff Bezos channeled more and more money into expansion. Investors continued to funnel billions into Amazon’s coffers because they were betting that Bezos could carve out a powerful monopoly. And they were right. Corporate concentration and monopoly power trump competition and efficiency every time.

Despite all the hype about AI, LLMs are not currently profitable. OpenAI and Anthropic — the two companies whose fate is tied entirely to the performance of their LLMs — have yet to make a profit. And yet both companies are trying to list on the stock market chasing valuations of $1 trillion.<br>Why? Because these two companies have successfully enclosed — that is, taken and put walls around — vast areas of human knowledge. Now they are selling it back to us in the form of strange, sycophantic chatbots that put all this knowledge back together in unpredictable — and sometimes completely useless — ways. Still, investors are betting that this innovation will revolutionize capitalist production, and that one or both of these companies will continue to hold immense power over the market.<br>All the other companies in the ecosystem — the ones building the infrastructure, the ones producing the chips, the ones powering the data centers — are dependent upon the performance of the LLMs at the center of the boom. Which is why companies like Nvidia and Oracle are locked into a circular network of financing with OpenAI — they’re funding OpenAI while it loses money, because their profits are contingent upon the company’s success.

This is where the next correction to our original story comes in. Right now, we are absolutely in a bubble when it comes to AI. That doesn’t mean the technology won’t permanently change the way our economy works — but it does mean that the tech won’t be as profitable as most investors are expecting, especially over the short term. In other words, not only are our markets not free — they’re not efficient either.<br>Investors are betting that this tech cycle will be like the last one — the one where companies like Google, Meta, and Amazon enclosed the entire internet. Lots of those companies took a long time to make any profit, because they were investing to eke out a...