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

businessinsider.com

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

#421

Post by cjonas »

duped wrote: post #402
darth_avocado wrote: post #295

Earlier quoted context omitted.

Isn’t that what Michael Burry is complaining about? That five years is actually too generous when it comes to depreciation of these assets and that companies are being too relaxed with that estimate. The real depreciation is more like 2-3 years for these GPUs that cost tens of thousands of dollars a piece. https://x.com/michaeljburry/status/1987918650104283372

How different is this from rental car companies changing over their fleets? I don't know, this is a genuine question. The cars cost 3-4x as much and last about 2x as far as I know, and the secondary market is still alive.

I think it's a bit different because a rental car generates direct revenue that covers its cost. These GPU data centers are being used to train models (which themselves quickly become obsolete) and provide inference at a loss. Nothing in the current chain is profitable except selling the GPUs.

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

#422

Post by rootnod3 »

ojr wrote: post #420

As long as the dollar remains the reserve currency of the world and US retains its hegemony, a lot of the finances will work itself out, the only threat to the US empire crumbling is by losing a major war or extreme civil unrest and that threat is astronomically low. The US is orders of magnitude stronger than the Roman Empire, I don't think people realize the scale or control.

Famous last words of empires. I doubt that if current situations continue that the US will in any sense be still thought of as the reserve currency.

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

#423

Post by i000 »

Archelaos wrote: post #419

Gartner estimates that worldwide AI spending will total 1.5 Trillion US$ in 2025.[1] As of 2024, global GDP per year is 111.25 Trillion US$.[2] The question is how much this can be increased by AI. This describes the market volumn for AI. Todays investments have a certain lifespan, until they become obsolet. For custom software I would estiamte that it is 6-8 years. AI investments should be somewhere in this range. T…

What makes you think that this 'surplus' GDP will be captured by those who do the investments?

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

#424

Post by mh8h »

Archelaos wrote: post #419

Gartner estimates that worldwide AI spending will total 1.5 Trillion US$ in 2025.[1] As of 2024, global GDP per year is 111.25 Trillion US$.[2] The question is how much this can be increased by AI. This describes the market volumn for AI. Todays investments have a certain lifespan, until they become obsolet. For custom software I would estiamte that it is 6-8 years. AI investments should be somewhere in this range. T…

except that a big chunk of the AI investments is going into buying GPUs that go obsolete much earlier than the 6-8 year time frame.

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

#425

Post by chii »

duped wrote: post #402
darth_avocado wrote: post #295

Earlier quoted context omitted.

Isn’t that what Michael Burry is complaining about? That five years is actually too generous when it comes to depreciation of these assets and that companies are being too relaxed with that estimate. The real depreciation is more like 2-3 years for these GPUs that cost tens of thousands of dollars a piece. https://x.com/michaeljburry/status/1987918650104283372

How different is this from rental car companies changing over their fleets? I don't know, this is a genuine question. The cars cost 3-4x as much and last about 2x as far as I know, and the secondary market is still alive.

> the secondary market is still alive.

this is the crux. Will these data center cards, if a newer model came out with better efficiency, have a secondary market to sell to?

It could be that second hand ai hardware going into consumers' hands is how they offload it without huge losses.

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

#426

Post by tharkun__ »

AdrianB1 wrote: post #281
bigwheels wrote: post #205

Earlier quoted context omitted.

Because usually it's more efficient for companies to retire the hardware and put in new stuff. Meanwhile, my 10-15 year old server hardware keeps chugging along just fine in the rack in my garage.

I thought the same until I calculated that newer hardware consumes a few times less energy and for something running 24x7 that adds up quite a bit (I live in Europe, energy is quite expensive). So my homelab equipment is just 5 years old and it will get replaced in 2-3 years with something even more power efficient.

Where in Europe?

Asking coz I just did a quick comparison and it seems to depend but for comparison I have a really old AMD Athlon "e" processor (like literally September 2009 is when it came out according to some quick Google search, tho I probably bought it a few months later than that but still ...) that runs at ~45W TDP. In idle conditions, it typically consumes around 10 to 15 watts (internet wisdom, not kill-a-watt-wisdom).

Some napkin math says it would cost me about 40 years worth of amortization to replace this at my current power rates for this system. So why would I replace it? And even with some EU countries' power rates we seem to be at 5-10 years amortization upon replacement. I've been running this motherboard, CPU + RAM combo for ~15 years now it seems, replacing only the hard drives every ~3 years. And the tower it's in is about 25 years old.

Oh I forgot, I think I had to buy two new CR2032 batteries during those years (CMOS battery).

Now granted, this processor can basically do "nothing" in comparison to a current system I might buy. But I also don't need more for what it does.

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

#427

Post by chii »

marcosdumay wrote: post #305
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…

Historically, GPUs have improved in efficiency fast enough that people retired their hardware in way less than 5 years. Also, historically the top of the line fabs were focused on CPUs, not GPUs. That has not been true for a generation, so it's not really clear if the depreciation speed will be maintained.

> that people retired their hardware in way less than 5 years.

those people are end-consumers (like gamers), and only recently, bitcoin miners.

Gamers don't care for "profit and loss" - they want performance. Bitcoin miners do need to switch if they want to keep up.

But will an AI data center do the same?

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

#428

Post by brokenmachine »

zozbot234 wrote: post #211
carlCarlCarlCar wrote: post #32

Earlier quoted context omitted.

MTBF for data center hardware is short; DCs breeze through GPUs compared to even the hardest of hardcore gamers. And there is the whole FOMO effect to business purchases; decision makers will worry their models won't be as fast. Obsolete doesn't mean the reductive notion you have in mind, where theoretically it can still push pixels. Physics will burn them up, and "line go up" will drive demand to replace them.

Source? Anecdotally, GPUs sourced from cryptomining were absolutely fine MTBF-wise. Zero apparent issues of wear-and-tear or any shortened lifecycle.

Anecdotally, I killed two out of two that I was hobby-mining on for a couple of years. They certainly didn't sound like they would work forever.

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

#429

Post by [deleted] »

rootnod3 wrote: post #422
ojr wrote: post #420

As long as the dollar remains the reserve currency of the world and US retains its hegemony, a lot of the finances will work itself out, the only threat to the US empire crumbling is by losing a major war or extreme civil unrest and that threat is astronomically low. The US is orders of magnitude stronger than the Roman Empire, I don't think people realize the scale or control.

Famous last words of empires. I doubt that if current situations continue that the US will in any sense be still thought of as the reserve currency.

[deleted]

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

#430

Post by mNovak »

mywittyname wrote: post #167
senordevnyc wrote: post #38

Earlier quoted context omitted.

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…

Broad estimates I'm seeing on the cost of a 1GW AI datacenter are $30-60B. So by your own revenue projection, you could see why people are thinking it looks like a pretty good investment.

Note that if we're including GPU prices in the top-line capex, the margin on that $70-150B is very healthy. From above, at 0.4J/T, I'm getting 9MT/kWh, or about $0.01/MT in electricity cost at $0.1/kWh. So if you can sell those MT for $1-5, you're printing money.

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