There is no panic, it's misreporting and bad journalism. 2025 AI budgets were based on 2025 AI capabilities, and let's face it, LLMs only got acceptable in around November 2025. So it's natural usage went up and budgets didn't account for that.
There's absolutely someone in every big company except the biggest tech companies in the world looking at spend these days because of exactly what you said. The models are good now which means people use them a lot more which means money is flying out the door more than ever before (and the impact on the businesses hasn't shown up yet as you might notice in the earnings of any business that isn't a frontier AI company)
The root problem: At every company, there is always more work that could be done, but there is not always more work that would increase profits.
Existing corporate command and control has optimized for people control, because people cost money and performed work. Control their assignments, and you control costs and what's worked on.
Widespread unmetered AI turns this on its head, because suddenly each employee is directing their own work and the AI spend that comes with it.
F.ex. Bob in accounting may think it's a brilliant idea to rebuild Lotus 1-2-3.
That may help Bob, but 10x'ing Bob's spreadsheet output doesn't change the company's profitability, because it wasn't a limiting factor. It was to Bob, but not to the company's revenue generators.
Increasing AI spend without profitability improvements is a symptom that C2 is failing (or was insufficient to begin with).
Seen through a charitable "CEOs know what the fuck they're doing" lens, the preemptive layoffs are about forcing AI efficiency gains in areas CEOs expect them: instead of allowing those departments' remaining employees to build their own apps, they're forced to deploy AI to cover for their missing 3 team members.
Unfortunately, the layoffs were executed before there were solid results about which departments could benefit from AI use (and without a plan for continuity of institutional knowledge), so... we'll see.
I mean, the layoffs we are going through right now are patently due to the high cost of AI buildouts and transitions. Meta is taking on significant debt for the first time in a long time to continue their build out plans as AI components have spiked in price.
I get what you're saying about how every employee becomes a liability when they are let loose with an AI, and totally agree. But I think the layoffs have a much more financial root because they are so widespread across so many companies and even industries (not just tech)
My point about layoffs is that with widespread AI adoption and without department-targeted layoffs, a company risks their AI spend disappearing into the void.
Layoffs + access to AI forces most of that AI use to make up for the layoffs.
Which is a pretty shitty way to burn your employees out... but it has a method.
(Also, I'd say AI infra companies vs everyone else are apples to oranges. This point would be more applicable to a non-AI infra company that's paying for AI use rather than AI infra capital)
An alternative strategy would be to stack insane amounts of cash while every other competitor is blowing theirs, putting you in an incredible position to deploy capital whenever this bubble pops. This seems so much more obvious, to me at least. I think AI is the future but it’s far more likely than not that the current phase of the market is a bubble and unsustainable. What even has Meta produced with all this AI spend? I’m not even sure what race they’re in. It just seems like a big AGI or nothing gamble. Personally I would be watching all my competitors make that bet and laughing all the way to the bank as my financial position constantly improved relatively. A lot of your competitors are basically practising self harm right in front of you and you’re joining in? Maybe I’m the idiot who is missing something, but I just don’t get it.
That's a big risk for any market with first mover advantage / network effects.
How'd Microsoft's mobile efforts go?
Sometimes the lead quickly becomes insurmountable, so if you're sitting on a cash flow machine it's not a terrible idea to at least keep pace with new markets.
Right but that kinda like just happened. The market hasn't fully reacted to it yet, so it's hard to say that now is the moment when it's safe to draw a linear extrapolation.
As Anthropic with all its revenue still needs a large outside capital, it suggests that those AI costs those CFOs pay probably don't cover the actual Anthropic's costs.
As that sort of person myself, albeit not in a software company right now, my thought process would be this.
1) I have a new extra cost
2) How does that make me more profit, and improved cashflow
I know I'll be bombarded with metrics about productivity, feature completion, bug fixes etc. But someone is going to have to tell me how that equates to more sales. And who is going to do that? I'll be worried that the feature wishlist will just creep up now we can handle more throughput, and yet everyone will be telling me that I don't need to worry about the lack of new customers this quarter, one more new feature and we will catch up in Q4. You can see how that could make one grumpy. Then when the sales don't come, I'll tell the CTO that they need to balance the books, if they want to use expensive tools to make each developer more productive then they will need fewer developers...
...but I don't want that, I want more great features that people will pay for, and faster. But they have to pay for themselves.
