Although the e-commerce didn’t disappear, the popping of the “bubble” caused havoc on the industry as well as most of the companies that supplied internet hardware for e-commerce companies. Suddenly there were no new orders, cancelled existing orders, and a glut of used hardware on the market. I don’t remember any hardware or software companies going under, but they were badly hurt for a while.

In addition, we are learning many of the downsides to what we call AI. It lies and deceives, blackmails, and we have discovered that they understand when they are being tested. They are smart enough to do these things, yet they aren’t smart enough to not help a student cheat on his term paper, not help a fraudster from fleecing victims, or not encourage someone to follow through on thoughts of suicide.

What we call AI is not yet ready for prime time or for helping humanity. .

Which is (see Elon Musk video referenced below) some dozens of times our entire production of logic, memory, and neural network chips, combined. Thus, a massive leap for the global computing-creating industry, essentially doing to the data-processing semiconductor industry what SpaceX has done for orbital launch.

By a sort of conceptual jiu-jitsu, the truly massive energy consumption of today’s essentially brute-force “artificial intelligence” technologies has been turned into a measure of their size — denominating by input, not output, as in the recently spotlighted xAI facility that uses up a gigawatt, “1 GW of compute.” (For example, machine translation now works pretty well; this was enabled not by fundamental breakthroughs but by large-scale statistical techniques. No deeper understanding involved; it’s all done with statistics on huge sets of parallel texts in the languages translated.)

The “Terafab” idea assumes, down there in the financial fundamentals, that there is or soon will be a demand for neural-network processing (so-called “artificial intelligence” or before that “cybernetics”) on that sort of mighty scale. At least to a limited extent even for a self-owned company, and to far greater and more legally binding extent for any future publicly-traded version of SpaceX / xAI (the former owns the latter), the existence of actual paying customers “at scale” is (eventually) mandatory. And this extrapolation — to many times current business levels — might be the most speculative aspect of this whole impressively “go big or go home” idea.

See ~30 min. Elon Musk video, currently “pinned” at x dot com slash spacex. (No, I don’t entirely trust the blogging software not to throw links into moderation… the fruits of experience!)

“This “bubble” idea is mostly derived from the so-called “Dot Com Bubble” that burst around the turn of the century. This bubble was strictly a stock market phenomenon.”

The claim that the “bubble” idea mainly comes from the dot-com era ignores a long history of well-documented speculative bubbles that predate modern stock markets by centuries. For example, the Tulip Mania in the 1630s saw tulip bulb prices in the Dutch Republic reach absurd levels before collapsing, while the South Sea Bubble and the Mississippi Bubble involved massive speculation tied to government-backed companies, ending in financial ruin for many investors. These episodes show that bubbles are a recurring economic pattern driven by human behavior (overconfidence, herd mentality, and speculation) not a concept invented in response to the dot-com crash.

The claim that it was “strictly a stock market phenomenon” overlooks how bubbles typically spill into the wider economy through overinvestment, misallocation of resources, and shifts in business activity. When they burst, the effects are not confined to financial markets but also impact jobs, spending, and broader economic confidence.

I am reminded of the movie “Battle Angel”… A interesting fantasy future concept of the aftermath of a war between earth and mars over advanced Technology and it’s control.

There isn’t going to be any “AI bubble” to burst for the same reason that there was no “horseless carriage bubble” or “heavier-than-air-aircraft bubble” or “television bubble” or “personal computer bubble” or “cell phone bubble.” New, fundamental pillars of an industrial civilization do not produce “bubbles,” though they do tend to produce a lot of stock market froth and many also-ran would-be players during the Eras of Wonderful Nonsense that inevitably characterize any such industry’s early days.

This “bubble” idea is mostly derived from the so-called “Dot Com Bubble” that burst around the turn of the century. This bubble was strictly a stock market phenomenon. The underlying new business category, e-commerce, didn’t disappear, it simply consolidated and continued to grow aggressively. The largest player in that space is Amazon, which has long since shouldered aside other former top-rankers in the Fortune 500 to take up a No. 2 ranking.

There will be more shaking out of AI firms yet to come, but the fact that most current major players are outgrowths of established enterprises renders any utter collapse, even in terms of just stock market valuations, massively unlikely.

My own idea of what a “survival minimum” would look like might be very different from Musk’s; I do not view “AI” or “widely or ubiquitously autonomous” (self-driving etc.) machines as truly essential. And actual Mars colonists might have a very different view indeed of “just sit and wait for help” than, say, Tesla owners by some big road in America.

But some amount of computing capacity is pretty much essential, even going back to the Apollo days. And having a “package” chip fab, that you could just land and unpack and run, would be a huge and comforting advance.

When SpaceX is the world’s AI powerhouse, it will be instructive to look back and see who the media thought was so important today!

In commercial fabs the process is optimized for yield and both of these aspects work to reduce it. So having fab control is a powerful lever to optimize for these two requirements..

Finally, radiation tolerance will become ever more important in the commercial businesses Elon’s companies serve in terrestrial markets too. Bit flip glitches are a rare but unavoidable reality, and highly undesirable in self driving cars and autonomous robots, annd roducts more suceptable to them will create a feeding trough for trial lawyers as these products spread. So making serious investments to mitigate this problem will provide not just superior less risky products, but also somewhat of a shield against claims of“callous and malicious negligence” so often used to amplify jury awards.

BTW, going hand in glove with Terrafab in this regard SpaceX recently acquired the facility assets of a Cancer Radiation Therapy company in Florida too. This facility is a large synchrotron which Grok confirmed for me generates proton beams that very closely match the energy intensity of space outside of Earth’s protective magnetic field. A very useful asset for designing and optimizing the manufacture of semiconductors to be used there..

I just hope the AI bubble bursting doesn’t take these companies down at the same time.