AI — the next big thing, or the next big bubble? 2024 may well be the year we find out
Juha Saarinen comment
As 2023 draws its last gasps the technology sector, which at times seems to exist in a dimension of its own with no or completely different rules, has shown itself to be as vulnerable to what goes on in the real world as everything else.
The inflation and high interest rates hangover really kicked in after the bizarre pandemic purchasing party when those who could upgraded their gear and services as they set up to work from home.
Reconfigured global supply chains started shifting tech products again, with container rates dropping but market demand had been strangled as financing costs for distributors had gone up along with mortgage payment rises chewing up consumers’ disposable incomes.
Not that the tech sector was short on cash. Several big mergers and acquisitions, the size of the GDP of small countries took place. Microsoft completed the buy of Call of Duty developer Activision Blizzard, and infrastructure companies Broadcom and VMware amazingly got regulatory approval worldwide to grow bigger and more dominant.
Watch that space next year, as those hundreds of billions of dollars spent have to be recouped somehow. It’s a safe bet 2024 will bring bad news for customers. Already, Broadcom has killed off perpetual user licences for VMware customers who are now looking at subscriptions only.
Something had to give in that scenario, so chief executives put the squeeze on workers, with waves of redundancies in which tens of thousands of people were let go. Big names with trillion-dollar market capitalisations such as Microsoft and Amazon have jettisoned techies.
There have been local job losses, too, with Xero receiving a share market fillip for culling 15 per cent of its workforce. We’ll see if the tech job market downsizing continues next year, what with artificial intelligence coming onstream, but maybe the industry “peak bodies” could dial down the volume of skills shortage media releases for the next bit of time?
If you’re comparing the huge amount of money that’s still being spent on mergers and acquisitions despite weak economic conditions with companies cutting costs by laying off workers and scratching your head, you’re not alone. Add to that, tech-adjacent businesses such as WeWork finally filing for bankruptcy this year, after burning through billions of dollars, and bald patches will appear on many people’s pates as the scratching intensifies.
We can’t talk about bankruptcies without mentioning the spectacularly failed cryptocurrency exchange FTX. This year, founder Sam Bankman-Fried was found guilty on seven charges of fraud, to the tune of US$8 billion ($12.6b).
Prior to that, the other key executives of FTX had pleaded guilty to fraud, and “SBF” himself faces a second trial in March, while awaiting
We’ll see if the tech job market downsizing continues next year
sentencing for his first case which could bring decades in prison for him.
FTX’s fraudulent failure dragged the American Silvergate and Signature banks with it, and those collapses were large.
Signature Bank was the thirdlargest such failure in US history.
Despite that, reports in August suggested FTX would restart cryptocurrency offerings, after bankruptcy restructuring the exchange’s token is still being traded. Mindblowing, really.
Intimately linked to BankmanFried is Changpeng Zhao or CZ, founder of the biggest cryptocurrency exchange in the world, Binance, which operates in New Zealand as well.
CZ pleaded guilty to US criminal charges, and was fined US$50 million in November. He had to resign as the Binance chief executive with the exchange itself copping a whopping US$4.3 billion in fines.
All is going as expected in cryptoland in other words. Amazingly enough, crypto looks set to carry on next year, and that includes the silly non-fungible token (NFT) speculation in Bored Apes and what have you, with regular scams and rug-pulls.
Next year might also tell us if artificial intelligence is a huge exuberant bubble, or The Next Big Thing that will cause major restructuring of the IT industry.
Neither of those options will be painless but if the former happens, it’ll be time to grab your ankles for sure as the tech industry is totally overinvested in AI currently.
Don’t get me wrong — AI can do genuinely useful stuff. However, AI going beyond being a tool and displacing the workers it has learned task and process completion from could be a poisoned chalice for us all.
Think of it as dramatically devaluing entire chains of production all the way to output, without necessarily getting better quality, just something good enough. What happens then? Next year, we’ll continue to faff around with AI and find out.