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IBM CEO says there is 'no way' spending on AI data centers will pay off

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Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#161

Post by dkural »

jkubicek wrote: post #80
dkural wrote: post #61

Earlier quoted context omitted.

[ This comment I'm making is USA centric. ]. I agree with the idea of making our society better and more equitable - reducing homelessness, hunger, poverty, especially for our children. However, I think redirecting this to AI datacenter spending is a red-herring, here's why I think this: As a society we give a significant portion of our surplus to government. We then vote on what the government should spend this on.…

> AI datacenter spending is massive, but if you add it all up, it doesn't cover half of a years worth of government spending. I didn't check your math here, but if that's true, AI datacenter spending is a few orders of magnitude larger than I assumed. "massive" doesn't even begin to describe it

Global datacenter spending across all categories (ML + everything else) is roughly 0.9 - 1.2 trillion dollars for the last three years combined, I was initially going to go for "quarter of the federal budget", but picked something I thought was more conservative to account for announced spending and 2025 etc. I pick 2022 onward for the LLM wave. In reality, solely ML driven, actual realized-to-date spending is probably about 5% of the federal budget. The big announcements will spread out over the next several years in build-out. Nonetheless, it's large enough to drive GDP growth a meaningful amount. Not large enough that redirecting it elsewhere will solve our societal problems.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#162

Post by arisAlexis »

edhelas wrote: post #71
arisAlexis wrote: post #69

Earlier quoted context omitted.

Yes this capital allocation is a once in a lifetime opportunity to crate AGI that will solve diseases and poverty.

This is literally the view of demis hassabis, Sergey brin, Mario amodei and others. Are you seriously implying they are trolling us?

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#163

Post by dkural »

kipchak wrote: post #153
dkural wrote: post #61

Earlier quoted context omitted.

[ This comment I'm making is USA centric. ]. I agree with the idea of making our society better and more equitable - reducing homelessness, hunger, poverty, especially for our children. However, I think redirecting this to AI datacenter spending is a red-herring, here's why I think this: As a society we give a significant portion of our surplus to government. We then vote on what the government should spend this on.…

>We need to change our politics to redirect taxation and spending to achieve a better society. Unfortunately, I'm not sure there's much on the pie chart to redirect percentage wise. About 60% goes to non-discretionary programs like Social Security and Medicaid, and 13% is interest expense. While "non-discretionary" programs can potentially be cut, doing so is politically toxic and arguably counter to the goal of a be…

I agree with all of what you're saying.

I think the biggest lever is completely overhauling healthcare. The USA is very inefficient, and for subpar outcomes. In practice, the federal government already pays for the neediest of patients - the elderly, the at-risk children, the poor, and veterans. Whereas insurance rakes in profits from the healthiest working age people. Given aging, and the impossibility of growing faster than the GDP forever, we'll have to deal with this sooner or later. Drug spending, often the boogeyman, is less than 7% of the overall healthcare budget.

There is massive waste in our military spending due to the pork-barrel nature of many contracts. That'd be second big bucket I'd reform.

I think you're also right that inflation will ultimately take care of the budget deficit. The trick is to avoid hyperinflation and punitive interest rates that usually come along for the ride.

I would also encourage migration of highly skilled workers to help pay for an aging population of boomers. Let's increase our taxpayer base!

I am for higher rates of taxation on capital gains over $1.5M or so, that'll also help avoid a stock market bubble to some extent. One can close various loopholes while at it.

I am mostly arguing for policy changes to redistribute more equitably. I would make the "charity" status of college commensurate with the amount of financial aid given to students and the absolute cost of tuition for example., for example. I am against student loan forgiveness for various reasons - it's out of topic for this thread but happy to expand if interested.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#164

Post by Izikiel43 »

ericmcer wrote: post #78
ayaros wrote: post #37

Earlier quoted context omitted.

I'm a younger millennial. I'm always seeing homeless people in my city and it's an issue that I think about on a daily basis. Couldn't we have spent the money on homeless shelters and food and other things? So many people are in poverty, they can't afford basic necessities. The world is shitty. Yes, I know it's all capital from VC firms and investment firms and other private sources , but it's still capital . It shou…

The last 10 years has seen CA spend more on homelessness than ever before, and more than any other state by a huge margin. The result of that giant expenditure is the problem is worse than ever. I don't want to get deep in the philosophical weeds around human behavior, techno-optimism, etc., but it is a bit reductive to say "why don't we just give homeless people money".

WA, specially Seattle, has done the same as CA with the same results.

They shouldn't just enable them, as a lot of homeless are happy in their situation as long as they get food and drugs, they should force them to get clean and become a responsible adult if they want benefits.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#165

Post by diziet »

atmavatar wrote: post #132
jkubicek wrote: post #80

Earlier quoted context omitted.

> AI datacenter spending is massive, but if you add it all up, it doesn't cover half of a years worth of government spending. I didn't check your math here, but if that's true, AI datacenter spending is a few orders of magnitude larger than I assumed. "massive" doesn't even begin to describe it

The US federal budget in 2024 had outlays of 6.8 trillion dollars [1]. nVidia's current market cap (nearly all AI investment) is currently 4.4 trillion dollars [2][3]. While that's hardly an exact or exhaustive accounting of AI spending, I believe it does demonstrate that AI investment is clearly in the same order of magnitude as government spending, and it wouldn't surprise me if it's actually surpassed government s…

> NVIDIA's total annual revenue for its fiscal year 2025 (ended January 26, 2025) was $130.5 billion

It is clearly not in the same order of magnitude

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#166

Post by amanaplanacanal »

phkahler wrote: post #108
amanaplanacanal wrote: post #42

Earlier quoted context omitted.

It could have, though. Higher taxes on the rich, spend it on social programs.

Let's pay down the debt before increasing social programs. You know, save the country first. If a penny saved is a penny earned then everyone -rich or poor- is looking for a handout.

The only person who has come close to balancing the federal budget was Clinton. But Republicans still try to position themselves as the party of fiscal responsibility.

If the voters can't even figure out why the debt keeps going up, I think you are fighting a losing battle.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#167

Post by mywittyname »

senordevnyc wrote: post #38
ic_fly2 wrote: post #25

IBM might not have a data strategy or AI plan but he isn’t wrong on the inability to generate a profit. A bit of napkin math: NVIDIA claims 0.4J per token for their latest generation 1GW plant with 80% utilisation can therefore produce 6.29 10^16 tokens a year. There are ~10^14 tokens on the internet. ~10^19 tokens have been spoken by humans… so far.

I must be dense, why does this imply AI can't be profitable?

Tokens are, roughly speaking, how you pay for AI. So you can approximate revenue by multiplying tokens per year by the revenue for a token.

(6.29 10^16 tokens a year) * ($10 per 10^6 tokens)

= $6.29 10^11

= $629,000,000,000 per year in revenue

Per the article

> "It's my view that there's no way you're going to get a return on that, because $8 trillion of capex means you need roughly $800 billion of profit just to pay for the interest," he said.

$629 billion is less than $800 billion. And we are talking raw revenue (not profit). So we are already in the red.

But it gets worse, that $10 per million tokens costs is for GPT-5.1, which is one of the most expensive models. And the costs don't account for input tokens, which are usually a tenth of the costs of output tokens. And using bulk API instead of the regular one halves costs again.

Realistic revenue projections for a data center are closer to sub $1 per million tokens, $70-150 billion per year. And this is revenue only.

To make profits at current prices, the chips need to increase in performance by some factor, and power costs need to fall by another factor. The combination of these factors need to be, at minimum, like 5x, but realistically need to be 50x.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#168

Post by mywittyname »

jamesbelchamber wrote: post #72
myaccountonhn wrote: post #17

> In an October letter to the White House's Office of Science and Technology Policy, OpenAI CEO Sam Altman recommended that the US add 100 gigawatts in energy capacity every year. > Krishna also referenced the depreciation of the AI chips inside data centers as another factor: "You've got to use it all in five years because at that point, you've got to throw it away and refill it," he said. And people think the clima…

If we moron our way to large-scale nuclear and renewable energy rollout however..

I highly doubt this will happen. It will be natural gas all the way, maybe some coal as energy prices will finally make it profitable again.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#169

Post by slashdave »

Octoth0rpe wrote: post #18

> Krishna also referenced the depreciation of the AI chips inside data centers as another factor: "You've got to use it all in five years because at that point, you've got to throw it away and refill it," he said This doesn't seem correct to me, or at least is built on several shaky assumptions. One would have to 'refill' your hardware if: - AI accelerator cards all start dying around the 5 year mark, which is possib…

5 years is long, actually. This is not a GPU thing. It's standard for server hardware.

Re: IBM CEO says there is 'no way' spending on AI data centers will pay off

#170

Post by 9cb14c1ec0 »

austin-cheney wrote: post #36
Octoth0rpe wrote: post #18

> Krishna also referenced the depreciation of the AI chips inside data centers as another factor: "You've got to use it all in five years because at that point, you've got to throw it away and refill it," he said This doesn't seem correct to me, or at least is built on several shaky assumptions. One would have to 'refill' your hardware if: - AI accelerator cards all start dying around the 5 year mark, which is possib…

It’s not about assumptions on the hardware. It’s about the current demands for computation and expected growth of business needs. Since we have a couple years to measure against it should be extremely straightforward to predict. As such I have no reason to doubt the stated projections.

> Since we have a couple years to measure against

Trillion pound baby fallacy.

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