Keeping in mind that Alphabet is the only one of the Mag 7 stocks that has managed to outperform the S&P 500 in 2026.
Apple stock is up 18% in 2026
Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
141–150 of 306 posts
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#142I'm thinking Apple has been really smart in their AI strategy here. It seems a mistake to make unprecedentedly large capital expenditures, in a very very crowded space, without much evidence of a moat. Presumably people thought the moat would be singularity-like self-improvement of AI, but the singularity is merely a religious concept, and nobody should take religious myth as fact, it's merely narrative for orientati…
Their strategy to let Siri stagnate for 15 years and let everyone else take that market? Their strategy to put a bunch of not ready for consumer use AI features on their devices and then roll them back?
They just have such a strong hardware + os ecosystem that they can sit on the sidelines. They'll be able to negotiate with some LLM provider at a good discount when the time is right and put harnesses around it for actual useful features.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#143They just raised $85 billion and they're sitting on a mountain of cash - if their spending didn't increase in this context, it'd be bad management. The real story here is that they have decided to spend that mountain of cash on AI CapEx.
That $85 billion was bonds, and requires ongoing repayments of billions every year in interest payments
And then the $85bn to be repaid too.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#144So tired of media doomposting and exaggerating everything.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#145Earlier quoted context omitted.
> Everyone is in too deep to now admit that there’s a problem I'm not sure how to square this with the dramatic improvement in LLM capabilities in the last 8-9 months. If anything, it makes the earlier investments look prescient?
The problem is that the dramatic improvement in capabilities is not translating to a dramatic increase in revenue.
Moreover there’s no guarantee that eventual AI profits (if any) will go to the companies investing all this cash. If the worst case scenario of Chinese labs building and serving frontier-level models on 2nd tier nvidia hardware comes to be then what will be left of all the “hyperscalers”?
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#146Earlier quoted context omitted.
My primary role is cybersecurity in a regulated entity in a regulated industry, I am highly confident it is straightforward to do so based on work accomplished in only a couple of weeks. Stand up a router, stand up a Kubernetes cluster if you don't have one, stand up the necessary VMs and compute for serving inference. Two pizza team, in my experience. Customers can switch (although we can argue the speed and pain of…
Meanwhile, in real companies, you have to wait 2 months or more to access an API endpoint in preprod. To setup a cross business kubernetes cluster will take 2 years with unknown results. On Cloud, in Switzerland, you need to call Microsoft when you need new resources, so much for agility and minute infrastructure provisioning, and I heard the same for AWS.
> Meanwhile, in real companies, you have to wait 2 months or more to access an API endpoint in preprod.
> To setup a cross business kubernetes cluster will take 2 years with unknown results.
Do you seriously believe those times will not go down 95% if the CEO pushes for it to get done yesterday because it will save the company millions in expenses?
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#147Earlier quoted context omitted.
Why? GPUs are replaced every 3 to 5 years. This is going to be an ongoing operational cost forever. It will probably increase more if larger models require bigger VRAM sizes.
That cost has always been there and allowed for their lucrative margins. It's the upfront cost of building/populating their datacenters (many more than before) that is eating those margins.
I mean the issue is scaling, the worlds for cloud never kept getting bigger and bigger and compute scaling had stopped a while ago in the CPU space.
With AI every new generation with both massive hardware and software stack changes from Nvidia makes prior chips extremely inefficient to run, basically we are comparing an ASIC industry to a general purpose compute industry where all work loads are the same shape and size and so on.
Margins for ASIC based mining companies or ASIC solutions providers were never high, Optane and other weird solutions are niche and great for a specific category or moment in time, but they become obsolete pretty quickly.
The fear is we don't know if this Capex can stop. The worst type of fear is if this Capex will stop then what? Someone is very overpriced in this market, the cloud companies, the hardware providers or both.
I don't see how we reconcile this without a massive wave of repricing, ofc markets can stay irrational and we don't see the actual books but AI doesn't have so much revenue. Suddenly the AI token/cloud revenue won't 100x in a year or two...
Especially when intelligence will continue to get cheaper, the margin compression is a massive risk.
All the data centers for hyper scalers were a miniscule part of their story the real moat was the software layer on top otherwise Hetzner would be priced like an Amazon as well.
Something is shaky with this market I don't know what it's very opaque even as an insider working on for big tech and startups. I have no clue who falls first and which bottleneck cracks but there is not enough revenue for tokens, we will see a strong 2-3x growth in the next few years, from here which is absurd, but it's not enough, not nearly enough. If the capex keeps high and increasing.
Ofc they can stop the capex and the otherside gets repriced it's not like nvidia, micron and co aren't worth trillions.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#148I've been seeing quite a few companies juicing short term margins and quarter to quarter maxxing even more than before, one such example: https://x.com/MaxAnderson/status/2080229375773941871 https://xcancel.com/MaxAnderson/status/2080229375773941871 --- As someone who has personally spent $500k / mo+ on Google Ads for years, I can tell you with certainty: This revenue growth in Search is artificial & extremely unheal…
Thanks for this informative post. Many have been puzzled as to why Google keeps claiming search isn't affected by chat apps, when clearly it is.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#149The current commitment by hyperscalers is around 1.7T USD, reported liabilities 1.3T and this year global debt related to AI is 570B. So that’s around 3T total. For this to make sense AI must generate 2T in new revenue per year by the end of the decade. And that would be only a 10% ROIC. For context ROIC for big tech is around 35% so at 10% they will be barely breaking even. The SP500 gives 10-12%. With 10% ROIC from…
> GPUs become obsolete in 5 years
The GPUs are far from worthless after 5 years. E.g. the A100 80GB PCIe version cost around $15k when it was introduced in 2021 and now sells for $10k used.
Things might be slightly worse for the data center servers, but I am sure they will find find buyers.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#150The current commitment by hyperscalers is around 1.7T USD, reported liabilities 1.3T and this year global debt related to AI is 570B. So that’s around 3T total. For this to make sense AI must generate 2T in new revenue per year by the end of the decade. And that would be only a 10% ROIC. For context ROIC for big tech is around 35% so at 10% they will be barely breaking even. The SP500 gives 10-12%. With 10% ROIC from…
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