Seven Weeks of Artificial Intelligence Investments, Revenue, and Spending, and What They Tell Us

A massive amount of money is being spent on developing, preparing for, buying, and implementing AI.  What has it caused, and how does AI now look overall?

Before the articles below came out “Is the AI bubble actually bursting?” (Patrick Kulp, Tech Brew, August 8^th).  Concerns here were that “a stock market rout and big questions about spending continue to stoke worries,” that “some high-profile reports this summer questioned AI’s money-making potential relative to its enormous cost,” that “Microsoft, Alphabet, and Meta didn’t do much to soothe investors seeking temperance in AI capital expenditures,” and that we have reason to expect “a “major course correction” in AI hype as revenues fail to keep pace with spending.”

Since then, there have been strong and weak AI financial outcomes.  On August 23rd, Courtney Vien told us, in CFO Brew, “How Walmart’s seen ROI on gen AI.”  “During its last earnings call, the giant retailer reported 4.8% revenue growth, bolstered by 21% growth in its e-commerce function,” which “Walmart executives credited… to several factors… but one stood out:  generative AI.”  The technology had helped with “populating and cleaning up” the company’s gargantuan “product catalog,” of which the new version has also “given Walmart more insight into its customers.”  AI has also been “driving its impulse sales” through improved “cross-category search.”

Another such success story was the subject of “Nvidia’s earnings beat Wall Street’s estimates as AI momentum continues” (Eric Revell, Fox Business, August 28^th).  In its “second-quarter earnings report,” earnings per share reached $0.68 instead of the projected $0.64, and revenue came in at $30.04 billion instead of $28.70 billion.  Although it started production of a new AI-dedicated chip, the Blackwell, demand for the current Hopper version has “remained strong.”

A major consumer of Nvidia’s chips rates to buy many more, as “OpenAI Is Growing Fast and Burning Through Piles of Money” (Mike Isaac and Erin Griffith, The New York Times, September 27^th).  Although that firm “has been telling investors that it is making billions from its chatbot,” “it has not been quite so clear about how much it is losing.”  While “OpenAI’s monthly revenue hit $300 million in August, it “expects to lose roughly $5 billion this year after paying for costs related to running its services and other expenses like employee salaries and office rent.”  It spends most, though, on “the computing power it gets through a partnership with Microsoft, which is also OpenAI’s primary investor.”  Even if company projections showing a much brighter future will come to pass, OpenAI’s financial present is dark.

On industry results, Matt Turner reported those from the previous week from five of the largest companies in the November 3^rd “Insider Today” in Business Insider.  Overall, he said they were “beating estimates and committing billions to AI.”  Alphabet’s Google-branded “cloud business benefited from AI adoption, posting a 35% year-over-year increase in revenues.”  Amazon did the same, with AI-assisted cloud revenues growing 19%.  Apple’s loss of Chinese revenue “left investors underwhelmed,” and it is uncertain if “new Apple Intelligence features help juice sales.”  “Meta beat estimates, though user growth came in below expectations,” and CEO Mark Zuckerberg “promised to keep spending on AI.”  Microsoft also did better than they expected, “but concerns around capacity constraints in AI” hurt investor reactions.  Overall, AI seemed to be producing real money for these firms, but related revenue growth has hardly been explosive.

A useful summary, “How companies are spending on AI right now,” by Patrick Kulp, came out on November 12^th in Tech Brew.  In an in-effect response to the first article above, also written by Kulp, the piece started with “Despite some worry about a possible AI bubble earlier in the year, businesses are continuing to spend on generative technology – and investors are still eyeing it as a growth area.”  Another conclusion here was that of “AI becoming an office staple” with 38% third-quarter-on-second-quarter growth of “business spending on AI vendors.”  Although “half of the top 10 fastest growing enterprise software vendors on the platform were AI startups,” “OpenAI’s ChatGPT still reigns supreme,” but companies buying that have been increasingly likely to get other firms’ products as well.  Additionally, we have “AI still fueling VC growth,” as “three-quarters of limited partners surveyed… said they plan to increase AI investments in the next 12 months, with cybersecurity, predictive analytics, and data centers garnering the most interest.”  Note that “autonomous vehicles and computer vision ranked last for sub-fields of AI catching investor attention.”  Yet, per an Accenture report, there has been a “productivity flatline,” despite more AI use, over the past year.

What does all this reveal about artificial intelligence?  It is not vaporware.  Demand for it is real, in fact huge.  For some applications it is strongly objectively beneficial.  But it still has problems, with, along with many more mentioned in previous posts, profitability and productivity.  We don’t know how comprehensive its advantages will turn out to be.  But it is real, and it is progressing.  From there, we will just need to stay tuned.

Artificial Intelligence Regulation – Disjointed, and Too Soon

Over the past three months, there have been several reports on how, or even whether, AI should be legally constrained.  What did they say?

On the issue of its largest supplier, there was “As Regulators Close In, Nvidia Scrambles for a Response” (Tripp Mickle and David McCabe, The New York Times, August 6^th).  It’s not surprising that this company, which not only is doing a gigantic amount of business but “by the end of last year… had more than a 90 percent share of (AI-building) chips sold around the world,” had drawn “government scrutiny.”  It has come from China, the United Kingdom, and the European Union as well as the United States Justice Department, causing Nvidia to start “developing a strategy to respond to government interest.”  Although, per a tech research firm CEO, “there’s no evidence they’re doing anything monopolistic or anticompetitive,” “the conditions are right because of their market leadership,” and “in the wake of complaints about Nvidia’s chokehold on the market, Washington’s concerns have shifted from China to competition, with everyone from start-up founders to Elon Musk grumbling about the company’s influence.”  It will not be easy for either the company or the governments.

Meanwhile, “A California Bill to Regulate A.I. Causes Alarm in Silicon Valley” (Cade Metz and Cecilia Kang, The New York Times, August 14^th).  The legislation “that could impose restrictions on artificial intelligence,” was then “still winding its way through the state capital,” and “would require companies to test the safety of powerful A.I. technologies before releasing them to the public.”  It could also, per its opposition, “choke the progress of technologies that promise to increase worker productivity, improve health care and fight climate change” and are in their infancies, pointing toward real uncertainty in how they will affect people.  Per leginfo.com, it was vetoed by state governor Gavin Newsom, who said “by focusing only on the most expensive and large-scale models, SB 1047 establishes a regulatory framework that could give the public a false sense of security about controlling this fast-moving technology.  Smaller, specialized models may emerge as equally or even more dangerous than the models targeted by SB 1047 - at the potential expense of curtailing the very innovation that fuels advancement in favor of the public good.”  Expect a different but related bill in California soon.

A thoughtful overview, “Risks and regulations,” came out in the August 24^th Economist.  It stated that “artificial intelligence needs regulation.  But what kind, and how much?,” and came up with various ideas.  It started with the point that AI’s “best-known risk is embodied by the killer robots in the “Terminator” films – the idea that AI will turn against its human creators,” the kind of risk that some people think is “largely speculative,” and others think is less important than “real risks posed by AI that exist today, such as bias, discrimination, AI-generated disinformation and violation of intellectual-property rights.”  With Chinese authorities most wanting to “control the flow of information” and the European Union’s now-the-law AI Act which “is mostly a product-safety document which regulates applications of the technology according to how risky they are,” “different governments take different approaches to regulating AI.”  Combined with most American legislation being from states, international and even national accord seem a long way off.

What can we gain from “Rethinking ‘Checks and Balances’ for the A.I. Age” (Steve Lohr, The New York Times, September 24^th)?  Recalling the Federalist Papers, a Stanford University project, now with 12 essays known as the Digitalist Papers, “contends that today is a broadly similar historical moment of economic and political upheaval that calls for a rethinking of society’s institutional arrangements.”  The writings’ “overarching concern” is that “a powerful new technology… explodes onto the scene and threatens to transform, for better or worse, all legacy social institutions,” therefore “citizens need to be more involved in determining how to regulate and incorporate A.I. into their lives.”  This effort seems designed to be a starting point, as, before, we have no more idea how, if it meets its high-importance expectations, AI will affect society than we did about cars in 1900.

Overall, per Garrison Lovely in the September 29^th New York Times, it may be that “Laws Need to Catch Up to Artificial Intelligence’s Unique Risks.”  Or not.  Over the past year, OpenAI has been in controversy about its safety practices, and, per Lovely, federal “protections are essential for an industry that works so closely with such exceptionally risky technology.”  As before, we do not have enough agreement between governments to do that now, but the day will come.  Sooner?  Later?  We do not know, but someday, we hope, we can get together on this potentially critical issue.

Today’s Jobs Report Didn’t Go Much of Anywhere – AJSN Latent Demand Down To 15.9 Million on Lower Number of Expatriates

This morning’s Bureau of Labor Statistics Employment Situation Summary was supposed to show a greatly reduced number of net new nonfarm payroll positions, but at 12,000 it didn’t even approach the 110,000 and 115,000 published estimates.  How did the other figures turn out?

Seasonally adjusted and unadjusted unemployment stayed the same, at 4.1% and 3.9% respectively, with the adjusted count of jobless up 200,000 to 7 million.  Of those there were 1.6 million long-term, or without work for 27 weeks or longer, down 100,000.  Those working part-time for economic reasons, or holding short-hours positions while seeking full-time ones, remained at 4.6 million.  The two measures of how common it is for Americans to be working or officially unemployed, the labor force participation rate and the employment-population ratio, both worsened, coming in at 62.6% and 60.0% for drops of 0.1% and 0.2%.  The unadjusted number of employed was off 108,000 to 161,938,000.  Better, though, were private nonfarm payroll wages, which gained 10 cents, more than inflation, to $35.46 per hour. 

The American Job Shortage Number or AJSN, the metric showing how many additional positions could be quickly filled if all knew they would be easy to get, fell 736,000, almost all from a much-reduced estimate of the number of Americans living outside the United States, as follows:

The share of the AJSN from official unemployment rose 2.3% to 37.6%.  Compared with a year before, the loss of 900,000 from the expatriates’ contribution was mostly offset by 480,000 more from unemployment and 154,000 from those not looking for work for the previous year, with other changes small, for a 247,000 fall. 

What happened this time?  To judge that, we next look at the measures telling us how many people left or entered the workforce.  Those were a 469,000 rise in the count of those claiming no interest in a job, and 219,000 more overall not in the labor force.  There was also a consistent shrinkage in the categories of marginal attachment, the 3^rd through 6^th and 8^th rows above.  Those departing workers were why our unemployment rates didn’t worsen, given fewer new positions than our population increase could absorb.  October’s deficiency, possibly created mostly from storms and sudden layoffs, may well greatly reverse itself next time, but it is in the books.  Accordingly, I saw the turtle take a small step backwards.

Autonomous Vehicles in 3Q24: A Pause, A Scandal, and a Fine

They’re still in the news, so what has been going on with driverless cars?

On July 23rd, we had two stories on the status of one manufacturer’s efforts.  In “GM indefinitely pauses Cruise Origin autonomous vehicle while it refocuses unit” (Daniella Genovese, Fox Business), the word was that General Motors would be “focusing their next autonomous vehicle on the next-generation Chevrolet Bolt, instead of the Origin, which had been facing regulatory uncertainty because of its unique design.”  Later that day, though, we saw that “G.M. Will Restart Cruise Taxi Operations” (Neal E. Boudette, The New York Times), a report that “General Motors said on Tuesday that its Cruise driverless-taxi division has restarted test operations in three Sun Belt cities, using self-driving cars with human safety drivers who will monitor the vehicles and intervene if needed.”  The second half of that sentence is important to note, as is the word “test,” necessary since “the vehicles will not carry paying passengers for now.”  No clear progress here.

How about one of GM’s competitors?  They produced a nuisance, as “Endless Honking of Waymo’s Driverless Taxis Wakes a Neighborhood” (Sara Ruberg, The New York Times, August 14^th).  This was about a Waymo-rented San Francisco parking lot used for the vehicles to “idle in then they weren’t making trips or charging.  But because the vehicles are programmed to honk when nearing other vehicles and then change directions, the more crowded the lot became, the more honks erupted.”  Whoops.  The company has said it has since “updated the software.”  Three weeks later, another piece asked, since “Waymo’s Robot Taxis Are Almost Mainstream.  Can They Now Turn a Profit?” (Eli Tan, The New York Times, September 4^th).  Lost in the autonomous follies has been news that “Waymo is now completing over 100,000 rides in San Francisco, Phoenix, and Los Angeles – double the number in May.”  That’s highly favorable news, even if “robot taxi services are not profitable right now.”  As for other locations, “autonomous vehicle experts” see potential in New York, Chicago, Atlanta, Las Vegas, Hoboken, Westchester County, and “even Long Island.”

I’m calling this a scandal since the public was deceived, but perhaps it wasn’t, given the results above: “When Self-Driving Cars Don’t Actually Drive Themselves” (Cade Metz, The New York Times, published September 11^th and updated September 21^st.  The author, a long-time writer on autonomous transportation, reported that he had taken “his first ride in a self-driving car nearly a decade ago,” and then “felt a deep sense of awe that machines had mastered a skill that once belonged solely to humans.”  He realized afterwards that he was wrong, that such cars “could not yet match the power of the human brain,” and as of the article date “they still can’t.”  He checked out a Zoox “command center” which provided “help from human technicians” when “the company’s self-driving vehicles… struggle to drive themselves.”  Among other things, these as-needed operators rerouted impeded cars, and “all robot taxi companies operate command centers like” that one.  We knew about the shortcomings Metz also mentioned, such as the similarly misleading Tesla “full self-driving” technology that wasn’t, but more such misrepresentations will only serve to discourage people from thinking the current state is as good as it is.  Perhaps all companies need to do is to label it accurately.  For now, though, the author has discovered that the capabilities of autonomous vehicles “and so many other forms of artificial intelligence… are not as powerful as they first seem.  When we, the people, see a bit of human behavior in a machine, we tend to think, subconsciously, that it can do everything we can do.  But we should give ourselves more credit,” a point also made in similar-topic article “Self-driving cars have a dirty little secret,” by Frank Landymore on September 14^th in Futurism.com. 

A sad follow-up to General Motors’ problems above was that “Cruise, G.M.’s Self-Driving Unit, Will Pay $1.5 Million Federal Fine” (Jack Ewing, The New York Times, September 30^th).  That was for “failing to properly report an accident in which one of its self-driving taxis severely injured a pedestrian last year.”  That’s not a lot of money in this industry, and I hope it will not slow the company.  We’re still looking at almost 40,000 driver-caused deaths per year, and we need to stay focused on ending that.

Kamala Harris for President

After most of this one-of-a-kind campaign, reminiscent of 1968 but hardly the same, we’re 18 days away from making our presidential decisions.  The right choice is no foggier than it was last time.

The Republican nominee in 2020 and election winner in 2016 runs again as the first major-party choice to stand for a third time since Franklin D. Roosevelt in 1940.  That’s not the problem, and his age, 78, which would make him older on Inauguration Day than any other president, isn’t the main one either.  Donald Trump has more flaws and disqualifying characteristics than any Democratic or Republican nominee I have seen since I started following campaigns with Nixon-Humphrey.  He is a convicted felon who has consistently shown he does not want to follow our laws and Constitution.  He has a bizarre, apparently insatiable sweet tooth for lying, way beyond any of his competitors even in this often-sordid profession.  He has shown affinity with the world’s dictators, while saying many things indicating he would strive to be one himself.  He has threatened legal and even military retribution against those taking lawful measures to stop him.  His attitudes toward women, over a wide spectrum of areas, are disastrous.  His delusions, such as him being the true 2020 winner, which he has often insisted be supported by those working with him, have persisted.  And on jobs and the economy, his proposed extensive and expensive tariffs would drastically worsen both.

Nothing reported in news sources has been able to reverse the Trump tide.  His advocates have remained impervious to these issues, even when they are shown to be the truth.  And others have expressed a willingness to pollsters to join his side.  The reasons for his popularity will be discussed for decades or centuries to come, but common sense or prudent judgment will not be among them.  Some of his heavy contributors are extremely wealthy, expecting to save tens or hundreds or millions of dollars on his likelihood of taxing them less, but that does not make them worthy of emulation by the rest of us.  Perhaps the largest lesson of the 20^th century was that those who people find charismatic may lead us in devastatingly wrong directions, and caution about Trump seems a clear response.

His opponent, Kamala Harris, is a former district attorney who is currently the vice president.  She has shortcomings, but has shown in public appearances to be sober, reasonable, lawful, and almost always truthful.  We don’t know exactly how well she would work out, but it is obvious that her downside is vastly smaller.  As contrasted with her opponent, who has been described as a weak man’s idea of a strong man, Harris is forceful without being abrasive, and will work with politicians on both sides.  That is what we need in 2025 and beyond.

The best justification for a Trump vote I have heard was from one who said he was a reprehensible person, but she was not choosing a friend.  I don’t buy that, since the world is too dangerous, and our allies too valuable, for us to pick someone who needs to be contained.  And we still have a large nuclear arsenal with which the president would have great scope.  Junkyard dogs can be mean, but presidents need not be.

I have not mentioned Harris’s or Trump’s running mates, but both seem fair choices.  Either Tim Walz or J.D. Vance would rate to be adequate if circumstances put them into the top job, and, in the case of Vance, would get the presidency in steadier hands.  There is also little here about either candidate’s meager list of proposed policies, since that is not what this election is about. 

As of yesterday morning, the PredictIt site showed its contributors giving a combined five-point winning-percentage advantage to Trump.  We can do better, and massive amounts of safety and prosperity may depend on whether we do.  We need look only at what news and information sources, even including those generally favorable to his cause, say the realities are.  If this registered Republican who might have chosen a conservative nominee from that party can avoid him, so can you.  And please vote. 

Royal Flush Press endorses Kamala Harris for president.

A Strong Jobs Report Gathered Before the Interest Rate Cut, with AJSN Showing Latent Demand Almost a Million Lower

Commentary I read before this morning’s Bureau of Labor Statistics Employment Situation Summary’s release said that it would be a critical installment, mainly because of the effect it would have on the Federal Reserve’s two remaining 2024 interest rate decisions.

It turned out to show real improvement.  The number of net new nonfarm payroll positions exceeded its 150,000 consensus estimate with 254,000.  Seasonally adjusted unemployment dropped another 0.1% to 4.1%, the same place it was three months before.  There were 6.8 million unemployed people, down 300,000, and the unadjusted rate fell from 4.4% to 3.9%, some but not all due to seasonality.  The count of people working part-time for economic reasons, or keeping such jobs while thus far unsuccessfully seeking longer-hours ones, erased the last report’s 200,000 gain, going back to 4.6 million.  Those officially unemployed and looking for work for 27 weeks or longer, though, gained 100,000 to 1.6 million.  The unadjusted number of employed grew 700,000 to 162,046,000.  The two best measures of how many people are working or one step away, the employment-population ratio and the labor force participation rate, gained 0.2% and stayed the same to reach 60.2% and 62.7%.  Average private nonfarm payroll earnings increased 15 cents, almost double the effect of inflation, to $35.36.  More people continued to leave the labor force, with those claiming no interest gaining almost 600,000 to add to last time’s 1.3 million, reaching 94,920,000.

The American Job Shortage Number or AJSN, the Royal Flush Press measure showing how many additional positions could be quickly filled if all knew they would be easy to get, lost 980,000, as follows:

The effect of fewer people officially jobless was responsible for 800,000 of the drop, and those interested but not looking for a year or more cut off another 340,000.  Gains in the second through sixth categories above offset that by 150,000.  The share of the AJSN from those unemployed fell 2.6% to 35.3%.  Compared with a year before, the AJSN has increased 433,000, almost exactly that amount from those officially unemployed. 

What happened here?  Still many more new positions than we can expect, and that along with continued workforce departures assured our unemployment-rate’s lowering.  The job market is healthy, but hardly overheated.  That means the Federal Reserve ball will go back to the inflation court, and then back to the next jobs report on November 1st, five days before the next Fed meeting starts.  We are very much in the hunt for another quarter-point decrease, but more than that, considering the progress above, is less likely.  The turtle did, this time, take a moderate step forward.

Remote Work: The Pendulum Has Swung Back to the Office

As I have written repeatedly before, employer attitudes on working from home have oscillated back and forth over the past three-plus decades.  In the 2010s, hybrid labor, or putting in time in some combination between in the office and elsewhere, was getting reestablished, with glowing reviews of home productivity gains as well as work-life balance encouraging organizations to allow a large portion of time to be spent out of sight, and, as always, greatly out of mind.  By early 2020 the pendulum was moving toward not allowing that, but the pandemic necessitated it, with not only physical proximity issues but a greatly tightening labor market facilitating too many people to leave if they did not get the schedules they wanted.

Now, with Covid-19 almost no factor and unemployment, especially for information technology positions, growing, opposition to non-office work is again becoming entrenched.  What is the evidence of that?

One piece is the emerging of a new expression, as featured in “No more “coffee badging”” (Business Insider, July 21^st).  The term applies to “employees who badge in, get coffee, and leave shortly after to satisfy their (return to office) requirements.”  As of just before this date, Amazon was “getting serious” about ending this custom, and, as we shall see, there was more to come.

Especially in transition times, private organizations have varied greatly in what they allow.  One large public one, capable of setting national, multi-installation rules, is the subject of “To be remote or not to be?  That is the burning federal workplace question” (Gleb Tsipursky, Fox News, August 16^th).  While “many federal agencies have implemented hybrid work models, allowing leaders to refine strategies to adapt to evolving employee needs and mission-driven objectives,” “there is tension between this flexible approach and congressional legislative efforts such as the Back to Work Act of 2024… a bipartisan bill that seeks to limit telework for federal employees to no more than 40% of their workdays per pay period.”  That is broad-based and specific, and nothing that would have been taken seriously in 2014.

As well as the stick, businesses are also using the carrot.  “The Hotelification of Offices, With Signature Scents and Saltwater Spas” (Stacey Freed, The New York Times, August 18^th).  Such things have been controversial since they began appearing around the turn of the century, especially when remote work has been unfashionable.  This case is “the Springline complex in Menlo Park, Calif.,” where employees and others “are surrounded by a sense of comfort and luxury often found at high-end hotels:  off-white walls with a Roman clay finish, a gray-and-white marble coffee table and a white leather bench beneath an 8-by-4 resin canvas etched with the words “Hello, tomorrow,” and “hints of salty sea air, white water lily, dry musk and honeydew melon linger in the air.”  You get the idea.  While “companies have over the years improved their spaces in the hopes of getting more out of employees,” this kind of thing is now transparently designed to make people happier about reporting in person, and will not be immune to backlashes as they figure that out.

Another change many companies are making turned up in “Downtown’s lost prestige” (Bloomberg, August 27^th).  “The US office market is splitting in two:  Investors are writing off the value of older buildings downtown as newer developments outside traditional business hubs become prestige destinations,” resulting in “more than half-a-trillion dollars of value” being “erased from US offices from 2019 through 2023.”  Suburban desk farms are nothing new – I started my AT&T cubicle career at one 35 years ago – but employers are now motivated by “trying to get employees back to their desks” by moving to “low-crime neighborhoods with plenty of shopping and parking.”

The big story here was, though, “Bosses Rejoice!  Amazon Delivers the End of Hybrid Work” (Vanessa Fuhrmans, Katherine Bindley and Chip Cutter, The Wall Street Journal, September 21).  This article, on the front page of the Exchange section and embellished with a picture of an Amazon shipping box containing someone at a plain-looking office desk, was subtitled “If you thought your two days a week of work-from-home were safe, think again.  The CEO of one of America’s largest employers just called everyone back to the office full-time,” effective January 2^nd. 

It was clearly an overreaction – Amazon does not set national workplace policy – but documented a remarkably firm and all-encompassing decision.  Per the first story above, “until (the CEO’s) memo, 4½ years after the Covid-19 pandemic sent everyone home, bosses and employees had largely reached a truce on part-time remote work,” as, while “many company leaders looked out at their substantially empty offices in quiet exasperation,” they feared top-performer departure.  Amazon’s pronouncement, “the talk of the town” in Seattle, was publicized as something “that will help both the company and its employees,” as in offices “we’ve observed that it’s easier for our teammates to learn, model, practice, and strengthen our culture,” as, in person, “collaborating, brainstorming, and inventing are simpler and more effective;  teaching and learning from one another are more seamless; and teams tend to be better connected to one another.” 

Beyond Amazon, a survey showed that while about 30% of CEOs said they “expect workers to be back in the office full-time within three years” in April.  Earlier this month that had become almost 80%.  That stunning shift gives Amazon’s decision at least the appearance of spearheading a widespread change.  There will be exceptions, but many more companies will follow, and, for now, we will hear little about the good side of remote work.

That will come back in the 2030s.  Count on it.