Author: Orange AI
Today is October 31, 2026, Saturday. US time Friday just closed.
The Nasdaq fell 2.86%, which isn't a particularly terrifying number, but the internet is full of wailing.
Intel fell 28.58% on Friday, its biggest single-day drop in forty years. Its Q3 EPS was 0.52, far exceeding the market expectation of 0.40.
Just yesterday, Google fell 12.64%, closing at $283.82, its worst day since its 2004 IPO. Nearly five hundred billion dollars of market value evaporated in a single day. But its revenue only missed market expectations by 0.2% to 0.4%. Its cloud revenue doubled, and search query growth was the highest in five years.
SanDisk's revenue rose 23% quarter-over-quarter, adjusted EPS was $49.51, up more than 40 times year-over-year, and it has $91.1 billion in signed orders on hand. Earnings beat expectations, yet the stock still fell 13.47%.
When these things happened, the market's first reaction was: the AI bubble is about to burst.
AI definitely has a bubble, and the bubble will definitely burst. Whether it burst today, I don't know, and it doesn't matter.
This article does not constitute any investment advice, and investment is not the topic I want to talk about today.
I want to talk about whether AI is actually creating incremental value right now.
AI's value is hard to understand
This year, what has affected us the most is probably the price increases in memory and flash storage.
The direct result of hardware price increases is a decline in PC and phone sales.
Memory already accounts for 40% of the cost of Apple phones. The standard iPhone simply isn't being released.
The new iPad mini sells for 5499, but only comes with 128G of flash storage, not even enough to install two large games.
Many Android manufacturers are also no longer launching low-end thousand-yuan phones.
Intel predicts the PC market will shrink 12% in 2026 and another 10% in 2027, with the downturn continuing.
We were told AI would make us happier, but it turns out we can't afford phones and computers anymore.
And the root cause of the hardware price increases is the great leap forward in AI cloud.
AI needs cloud hardware for inference, and the hardware people use has gone up in price along with it.
Sam said that running local AI on personal computers is a waste of memory. The subtext is that it should be given to AI to create greater value.
He said this entirely from the perspective of an AI large-model company, and the value he sees is only the value he believes in.
AI is of course very powerful and very valuable; no one would doubt AI's economic value.
It is precisely because AI is so powerful that it can replace many, many white-collar jobs. This replacement value is beyond doubt.
Beyond replacement value, what incremental value has AI created?
This is what I find most incredible.
When I try to think about what incremental value AI has actually brought.
I find that there isn't any.
At least at this point in time, October 31, 2026, I haven't seen it.
If I must name an exception, the only exception is Hongguo Short Dramas, but that matter is also very strange. I'll talk about it at the end of the article.
Is AI a kind of self-pleasing economy?
I know this conclusion will be rebutted by many people. Let's look at AI's strongest field, Coding. AI Coding is so strong, how can you say it hasn't created incremental value?
Yes, AI Coding capability is beyond doubt. Every software company has improved Coding productivity because of AI, and every company's code volume is exploding, one year matching the past ten years.
But productivity cannot be equated with value.
AI Coding increases productivity 10x, but it hasn't increased product revenue 10x, and even 2x improvements are very, very rare.
This principle is easy to understand if you substitute something else.
Yunnan's blueberry production this year grew 39% over last year, but prices fell 50% compared with last year.
The official conclusion is: "A large amount of fresh fruit flooded into the market in a concentrated way, and the change in supply and demand structure led to a cliff-like drop in prices."
Supply increased, but revenue doesn't necessarily increase, because things were sold cheaper.
Economics is just that ruthless: only scarcity has value, and humans pay for scarcity.
Price is determined by supply and demand. If demand stays the same, the more supply there is, the cheaper it gets.
Last year, you ran a business and could earn $1 million a year.
This year you have more powerful AI, and you think, great, productivity has improved, this year I can earn $10 million.
But don't forget, AI lets your competitors build your business in a day, so the number of your competitors has increased 10x. The result is fiercer competition, and consumers get cheaper goods and services.
And you have a harder time.
What AI does is make intelligence not scarce.
Not scarce means no value.
The price of tokens that drive intelligence is falling.
The price of products built on intelligence is falling.
The price of jobs generated by intelligence-based activities is falling.
To make up for this decline, we must increase output.
Consume 10x the tokens, produce 10x the products, work 10x as hard.
And even then, we can only barely maintain the balance of value.
This year I've seen friends around me frantically using AI to write code, carefully calculating how to use every reset.
Products come out one after another.
But have they made money? Not a single one.
AI really does make things that weren't worth spending money on before something you can just casually produce.
But AI seems not to have created incremental value.
I asked my friends whether they think vibe coding saves time or kills time, and everyone said it kills time.
No wonder some people say the essence of AI is neither 2B nor 2C, but 2me—just to make yourself happy.
So it turns out to be the self-pleasing economy.
In the AI economy, there are no middlemen
The most paradoxical thing about the AI economy is that there are no middlemen earning a cut.
Wait, isn't that a good thing?
The basic principle of economics is about transactions. Transactions make everyone's life better.
A person obtains money through transactions and spends it, so others obtain money, and they spend it too, and the cycle repeats endlessly.
But AI is anti-transaction. A person directly obtains results through AI that will be as cheap as electricity in the future, and in this process almost no other human beings obtain money. So others can no longer use money to consume.
AI has replaced the jobs of consumers, so who is going to consume?
Even the logic of content consumption has changed.
Reddit just experienced its worst day since going public today, with its stock price falling 29%.
On a conference call, Reddit CEO Steve Huffman summarized the reason simply:
Google's AI Mode now gives answers directly, and no one clicks links anymore.
"AI doesn't bring traffic, neither to us nor to anyone else."
For the past 25 years, the internet protocol has been this:
Websites provide content for Google, and Google sends users back to the websites.
But now AI Mode summarizes it, and users get the result directly and leave.
In October, visits from search engines decreased by more than 1 million per week on average.
The number of daily users entering the website in the United States fell 2% within a year, the first decline since Reddit went public in 2024.
Reddit is just a microcosm. It is widely recognized as the community with the most human touch, and even it has been affected like this, let alone other websites.
When the nest is overturned, how can any eggs remain intact?
But aren't relay stations still making quite a bit of money? How can you say there are no middlemen?
From Claude Opus 4.5 to DeepSeek Flash 4.1, the price of tokens to complete the same task dropped 50–100 times this year, and it is foreseeable that it will drop at least another 10 times next year.
Now there are few relay stations offering low-priced models like Luna. A friend who runs a relay station told me that their revenue looks okay, but after deducting costs, there isn't much profit.
Tokens are too cheap, already lower than the cost of relay servers.
The money humans earn is all spent on AI
Another big thing this week is that Microsoft opened voluntary departure buyouts to 60,000 employees, more than a quarter of its total workforce.
Everyone knows this is a gentle form of layoffs.
Has Microsoft encountered any problems? Why does it want to lay off a quarter of its employees?
The fact is that this company is making more and more money, but it still resolutely spends the money on investing in AI.
What if there isn't enough money to invest in AI? Lay off employees to raise the money.
Speaking of this, we have to talk about ByteDance's big closed loop, Hongguo Short Dramas.
It must be said that Hongguo is an even more formidable product than Douyin—short dramas for everyone, suitable for all ages.
The text of Tomato Novels + video generation of Seedance + intelligent advertising of Juliang Engine + Hongguo's DAU and time spent.
From producers, to models, to recommendations, to consumers, the entire loop is closed.
How much money that must make.
But where did all the money ByteDance earned go?
ByteDance earned about $50 billion last year, and this year it plans to spend up to $70 billion building AI infrastructure.
ByteDance has invested most of its cash into AI.
Have you noticed? Hardware investment has to be spent on AI, productivity software companies have to spend money on AI, and even after a big consumer closed loop, money still has to be spent on AI.
We are now in such a crazy era of mindless investment in AI.
We go all in on productivity, without considering the relations of production at all.
After the bubble
I think where we are now is a bit like the eve of an AI bubble.
I don't think today is necessarily Black Friday, nor do I know when this AI bubble will burst.
Looking at history, in every technology cycle, a technology first has to go through a bubble, then a big crash to deflate the bubble, and only then will everyone apply it to places with real value.
This is the cycle, and behind the cycle is human nature.
Technology keeps changing, but human nature never changes.
From the release of ChatGPT in November 2022 to today, AI is about to complete a full four years.
Anthropic is going public next month, and many people say that will be the peak of the AI bubble.
What do you think?
Note: This article is only processed and organized based on public information. The author does not understand investment at all, and this article does not constitute any investment advice.
