161–170 of 306 posts
It could absolutely harm their long term value but keep in mind Alphabet and the other hyperscalers are generally flush with cash. Is this a lot of debt? Absolutely but the businesses are generating a lot of cash too.
I'm using it a lot less.
Don't think Google can point to past revenue an indicator of future revenue, they need to establish new streams of revenue.
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That would only happen if they need to invest like this forever, otherwise it's just a short-term dent in their margins while they re-calibrate.
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.
Also, TPUv2 was introduced in 2018, and still not completely retired in all regions, from accounting pov, it has been written down to 0, but they are still working.
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Diversify! Historically, the average length of a recession has been 12-24 months. So set up a system whereby you won’t screw’s yourself over by selling when things are low, but instead you can weather the storm. Build a rainy day fund. Determine how much cash you will need if you are out of a job and how long you think that will last, allocate some portion of that amount into low risk bonds. Russ way if you need cash…
But diversify into what? If we assume this takes down the US economy and bonds, what then? International bonds/stocks? Won't those also be too entangled? Precious metals?
Build your emergency fund first if you don't have one. 6-12 months of salary in cash or CDs. Then dollar-cost average into well diversified equities. Don't watch them day-to-day. You're concerned about their value in 20-30 years, not tomorrow.
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> 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.
They hold value as there is insane demand. The same reason a consumer RTX4090 costs more today than bew in 2021. Once the tide drops enough for hardware lead times to shorten to weeks, they will go the way of other used DC hardware - written off after 5 years.
Which will not be any time soon according to SK Hynix CEO:
> We still forecast that customer demand will remain higher than our supply capacity even beyond 2030
https://www.reuters.com/world/asia-pacific/sk-hynix-ceo-sees...
The 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…
> The SP500 gives 10-12% the historical average is closer to 7%. sustained 12% would be excellent growth for any mature firm
Looking at cash burn is looking at the wrong end of the horse. Some companies, like Meta, have burned huge piles of cash in pursuit of, for example, the Metaverse and they've got nothing to show for it, not even a slight increment in ad tech, and yet they earned enough to shrug it off. There's a big difference between Google spending tens of billions on AI infrastructure and what Oracle is doing. Oracle is spending t…
Zuck has 60% voting power, otherwise he would have been fired over metaverse and then model delays
The 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…
H100 is nearing five years and costs more to buy a used one now than a new one when it was released :) You are completely missing the bet these companies are making. They think can outlast their competitors and capture a larger portion of the pie while the cost of inference keeps going down dramatically. If you haven't been paying attention, the cost is about 1/100th of what it was in 2024. This is the trajectory pre…
Looking at cash burn is looking at the wrong end of the horse. Some companies, like Meta, have burned huge piles of cash in pursuit of, for example, the Metaverse and they've got nothing to show for it, not even a slight increment in ad tech, and yet they earned enough to shrug it off. There's a big difference between Google spending tens of billions on AI infrastructure and what Oracle is doing. Oracle is spending t…
If AI flops, they’re be left holding large pools of useful datacenter/compute capacity and “revert” to one of the most profitable businesses of all time.
If you listen to Tesla's recent conference call they are going to making solar panels all the way back to making the silicon ingots and totally vertically integrate. Elon lamented on a previous call that nobody wants to get involved in these primary industries and he has to do it all himself unless he puts his whole supply chain in China. For example, Tesla recently opened a state of the art lithium refinery in Texas cause nobody outside of China does that anymore. He's opening a new fab, because everyone else is too hesitant to expand to meet the capacity he needs.