Is the Current AI Safety Meltdown Also About the AI Profitability Crisis?

The Wall Street Journal last week called the rising concerns about AI's existential threat 'the great American freak-out,' with an evident expression of disdain for those 'who don't get it' putting concerns about extinction above the profits to be made by a shrinking cadre of tech oligarchs and their inside investors. 

But others are raising a different specter: that, in fact, the leaders of Anthropic, OpenAI et al are jumping on the 'slow it down' bandwagon because they now see that there is no way of operating and earning their way out of the financial apocalypse their heedless pursuit of being first has caused. None of the AI firms are close to profitability, nor do they see a real path for getting there. And all the major tech firms will be cash-flow negative next year, which is exactly as economically troubling as it sounds. So slowing things down gives them a plausible excuse for doing what common sense should have already dictated, which is that the AI arms race is built on increasingly shaky projections so jumping off that bandwagon may actually save their companies. 'May' being the operative word. JL

Shira Ovide reports in the Washington Post and Amrith Ankumar and colleagues report in the Wall Street Journal:

All over the country, this was the week that panic about the existential threat of AI leaped from internet debates and Silicon Valley to spread across mainstream America. It is a backlash that has been building for months. Questions about when, if ever, will this AI payoff arrive are growing more urgent. AI costs and doubts are spreading. The U.S. stock market has swooned this summer over fear of the AI bubble going bust. The boom is pushing up inflation, adding to challenges in tackling affordability. Financial results show AI’s mammoth costs are largely swamping the sales boost: next year, Google, Amazon, Microsoft, Meta and Oracle are projected to have negative free cash flow. At Google, for every dollar of cash generated in the past three months, $1.15 paid for AI chips and data centers. "It's not clear these guys are going to make money on it," a bet so gargantuan is cannot possibly pay off.

All over the country, this was the week that panic about the existential threat of AI appeared to leap from the confines of internet debates and Silicon Valley circles and spread across mainstream America. At Bible study groups, family dinner tables and on group chats between friends, what was once an abstract concern to many snowballed into one of society’s most ominous threats.

It is a tipping point in a backlash that has been building for months. Opposition to the widespread network of Flock Safety AI-enabled surveillance cameras in the U.S. took hold this summer, just as details about OpenAI’s autonomous hacking of the company Hugging Face became public. In the background was a drumbeat of pushback against data centers and worries that the technology could result in widespread job loss.

When Anthropic employees shared their fears for the technology’s life-threatening impact on humanity, with posts from departing researcher Jacob Coxon and a colleague racking up hundreds of millions of views, the worries that had been simmering reached a boil. 

Over the past decade, the giants of Silicon Valley became reliable engines of the American economy and the nation’s retirement accounts.

Must-have digital products like Google and Facebook hooked people and businesses, spewing geysers of cash that made tech giants the new blue chip stocks and fattened investment portfolios as markets soared. Over the past decade, the giants of Silicon Valley became reliable engines of the American economy and the nation’s retirement accounts.

Must-have digital products like Google and Facebook hooked people and businesses, spewing geysers of cash that made tech giants the new blue chip stocks and fattened investment portfolios as markets soared. 

The finances of America’s technology stalwarts now look very different. To develop and deliver what the companies say is revolutionary artificial intelligence, they’re feeding every available dollar into the cash-incinerating maw of AI machines. Tech superstars that once had oodles of cash left over at the end of each year are now flipping into the red, with enormous stakes for every American and the wider economy. 

To optimists in Silicon Valley, the White House and beyond, the big AI bet promises an even bigger payoff: huge corporate profits and a society-wide boost to wealth and well-being when AI delivers the promised transformation of life, work and the economy.

But questions about that AI vision are now growing more urgent: When, if ever, will this payoff arrive? And what will the fallout be for Americans if the titanic investment doesn’t quickly deliver?

“This AI thing better work out because if it doesn’t ... we’re going to have a problem,” said Torsten Slok, chief economist at investment firm Apollo Global Management.

AI costs and doubts are spreading. The U.S. stock market has swooned this summer over fear of the AI bubble going bust. The AI boom is pushing up inflation, adding to President Donald Trump’s challenges in tackling Americans’ affordability concerns. And there are signs that AI may be widening the economic divide between the country’s haves and have-nots by directing more wealth toward places and people that are already economically ahead.

The AI gamble sweeping up American fortunes is led by tech companies splurging on hulking data centers packed with computer chips and equipment needed to develop sophisticated AI models and deliver them to customers. 

In investor calls in the past week, Google, Microsoft, Meta and Amazon pointed to soaring AI-related sales and business deals. Advertisers are using the technology to tailor marketing pitches and corporations and start-ups are buying access to chatbots and other AI software to boost productivity. The wider U.S. economy, including construction workers and electricians, are getting a lift from the build-out of AI computer hubs.

But this spending can only continue if AI generates an even larger avalanche of new revenue to pay for it all. Financial results released over the past week show that the AI titans’ mammoth costs are largely swamping the sales boost from the technology.

At Google, for every dollar of cash its business generated in the past three months, $1.15 went out the door to pay for AI computer chips and equipment, land for AI data centers and other big-ticket purchases. The company is covering the difference partly by borrowing money and selling more of its stock.

Next year, five leading AI companies — Google, Amazon, Microsoft, Meta and Oracle — are projected to have negative free cash flow, which measures the cash left over after paying expenses and AI infrastructure costs. The figures, based on investment analyst projections compiled by S&P Global Market Intelligence, show a stunning reversal for what have been some of the world’s most cash-generating corporations.  

On late night television, Jimmy Kimmel wondered aloud why we aren’t taking the issue more seriously, offering the theory that, “It’s too much for us to wrap our heads around.” Artists including actor Matt Damon, songwriter Maggie Rogers and singer Sheryl Crow weighed in. “How can our leaders choose their trillions over their own children?” Crow asked on social media. 

Readers flocked to a Wikipedia page about existential risk from artificial intelligence, which saw a more than 10-fold increase in page views, setting a record for the article. Nate Soares, an AI scientist who co-wrote a book titled, “If Anyone Builds It, Everyone Dies: Why Superhuman AI Would Kill Us All,” said his publisher notified him that he sold more books Wednesday than he usually does in a week. 

Soares has for years been espousing the extinction-level dangers of AI. “The message never broke containment until now,” he said.

Despite this week’s alarm bells, the view that AI will lead to extinction of the human race is a fringe opinion among industry experts. Even some of those who say AI could be capable of destroying humanity think it is a low-probability event and actions can be taken to stop it. Both Anthropic and OpenAI have said they take safety seriously and their calls for government regulation are earnest.

‘This feels next level’

In March, Oscar-winning filmmaker Daniel Roher released a documentary about the risks of AI titled “The AI Doc: Or How I Became an Apocaloptimist” to mixed reception. “I had anticipated the film to have a bigger impact,” Roher said. But this week, Roher started getting more calls from friends and family asking for his assessment of the risks. 

“I’m starting to see the conversation and interest shifting,” said Roher, whose documentary will be released on streaming platform Netflix next week.

At a Wednesday church Bible study in the Brickell neighborhood of Miami, Rev. Christopher Benek got several questions about AI from his congregation.

“One of my worship leaders came up to me and said, ‘This feels next level because it’s everywhere in the press now, as opposed to being an isolated thing,’ ” said Benek, whose book “Church Leader’s Guide to Artificial Intelligence” was published in December. Vice President JD Vance recently drew attention when he described the tendency of machines to excessively agree with their users as “kind of satanic.”

Patrece M. Lucas, a mental-health counselor in Detroit, watched Coxon’s interview with CNN’s Anderson Cooper on Tuesday and texted a link to the segment to her group chats. Lucas shared the clip to bolster her argument that humans are too trusting of AI and everyone should limit their usage of the technology. “A small subset of them said, ‘Yes, I agree with you,’ while others think I’m the weird friend and they don’t necessarily get it or believe it,” she said.

CNN’s Anderson Cooper interviewed former Anthropic researcher Jacob Coxon about AI.

Lucas also shared the video on LinkedIn and wrote, “I don’t think the machines or zombies for that matter [will] listen to our prayers but let’s try it…”

‘Matrix world’

In American corporations, executives have started wondering how employees’ fears might impact internal AI adoption, said Michael Domanic, head of AI at the consulting firm Section. About half of U.S. adults said earlier this year they have used chatbots at some point, up nearly 50% from 2024, according to the Pew Research Center. 

Ketryx CEO Erez Kaminski, whose company sells software that automates compliance for medical-device manufacturers, said about half of his customers brought up anxieties about AI in calls this week. An error could mean an injection with the wrong drug or a hacked central database. At a team dinner in Cambridge, Mass., on Thursday, staff decided to review all risk-management systems.

Rakesh Shah, vice president of product at the cybersecurity company Quest Software, said the Anthropic posts and the Hugging Face hack changed the conversation among customers. Now, customers are preparing to be hacked and respond to a breach, unlike past assumptions that they wouldn’t be targeted or that hackers wouldn’t succeed, he said.

Shah said his parents, who are in their 80s, recently asked him about security fears—while his teenage children wondered over dinner in their Austin, Texas-area home if the “Matrix world” is imminent.

“When the conversation becomes a dinner-table conversation, it’s going to become, definitely, a board-level conversation,” said Shah, who stressed the importance of keeping human control over AI in these chats.

Amazon CEO Andy Jassy gave an impassioned defense of the company’s huge spending to capitalize on what he said was sustained zeal from businesses to buy AI. “We have clear line of sight to strong financial returns,” he told investors. (Amazon Executive Chairman Jeff Bezos owns The Washington Post.)

The companies remain profitable by standard financial accounting measures that spread out the costs of their AI infrastructure spending over many years. 

Silicon Valley’s AI spending spree has become a high-stakes Rorschach test. AI boosters see the mammoth costs of building out computing facilities for AI as a rational, once-in-a-lifetime opportunity to cash in on insatiable demand for history’s most transformative technology. Pessimists see a bet so gargantuan that it cannot possibly pay off.

The pessimists are growing louder. The Bank for International Settlements, a typically measured institution in Switzerland that advises government bankers around the world, recently warned there was risk of “economy-wide recessions” if the AI boom falters. That could mean pain for workers and communities across the United States.

“I’m not saying AI is going to go away, it’s just not clear to me these guys are going to make money on it,” said Christopher Wood, global head of equity strategy at Jeffries. As recently as June 2, exuberance about AI helped lift the S&P 500 stock index to an all-time high. But fear is now winning in what’s become an AI freak-out summer. People who own stock in the biggest losers of recent months, including Elon Musk’s Tesla and SpaceX, business software firm Oracle and computer chip titans Nvidia and SK Hynix, have collectively lost trillions of dollars.At the same time AI is eviscerating Americans’ stock wealth, it’s further straining their cost of living.

Many executives are lamenting that the companies developing AI are buying so many computer chips for AI calculations that it’s gobbling all the available supplies and driving up their costs. As a result, companies including Apple and Microsoft have raised prices for smartphones, laptops, video game consoles and other consumer and business products.

In some parts of the country including the mid-Atlantic, energy demand from data centers is pushing up household electric bills. Some economists and government officials have pointed to those AI-related price increases as one culprit for persistently stubborn inflation.

NCTA, a trade association representing large internet service providers and cable TV companies, is among the American business groups pleading with the Trump administration to do something about AI-related computer chip price increases.

Without action, executives say that AI will hold back new products and features or spark even higher prices for home internet equipment, cars and medical devices. “Consumers are really going to suffer both from costs and from lack of innovation,” said Cory Gardner, CEO of NCTA.

White House spokesman Kush Desai said that the Trump administration is supporting U.S. computer chip manufacturing to “ensure Americans have access to a ready supply of critical inputs for everyday electronics.”

Evidence is also emerging that undermines the idea that AI can become a great equalizer that empowers people and businesses of all backgrounds to better their financial circumstances.

Research by Barbara Denham, lead economist at research and consulting firm Oxford Economics, found that large U.S. metropolitan areas that are already economic winners are benefitting the most from the AI boom.

Denham said that’s because many of the tech companies developing AI, and the white-collar industries that have been the most avid users of AI, are concentrated in wealthy regions including the Bay Area, New York, Seattle and D.C.

The economic gains of the AI boom are “self-reinforcing,” she said.

Silicon Valley’s AI spending spree has become a high-stakes Rorschach test. AI boosters see the mammoth costs of building out computing facilities for AI as a rational, once-in-a-lifetime opportunity to cash in on insatiable demand for history’s most transformative technology. Pessimists see a bet so gargantuan that it cannot possibly pay off.

Matt Orton, chief market strategist of investment firm Raymond James Investment Management, says the panic is out of control because AI has huge potential. “A lot of investors have lost their minds,” he said.