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Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

reuters.com

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Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#251

Post by justsid »

fooker wrote: post #158
tedggh wrote: post #113

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…

Isn’t that the same bet that famously profitable companies like Uber did in the ride share market?

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#252

Post by infecto »

khurs wrote: post #161
infecto wrote: post #109

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.

Are you clicking on more ads now or less. Are you using google search more now or less. 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.

Have you checked the numbers? I thought for most of the ad driven companies the numbers are up.

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#253

Post by epistasis »

fullshark wrote: post #142
epistasis wrote: post #59

I'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 ac…

I was talking more about massive investments in compute and model development. Voice assistants are barely AI, but real AI might help make better ones in the future. Similarly, I think Apple's failed attempts to add AI to macOS and iOS are a huge justification of avoiding capital investments in compute and AI frontier models.

There's two separate things here: 1) the underlying models, and 2) how they are applied to real world tasks. Both are changing at tremendous speed. The underlying models, 1), can be purchased as a component, so there's little advantage to vertical integration, as long as there's a robust competitive market, and boy is there ever. And Apple was never going to be the big B2B provider for LLM compute and models, such sales are just not in their corporate DNA.

For 2), application of AI in Apple's products, nobody knows how to do that correctly yet, and it's going to a wild few years of people trying things and failing before something comes to pass. Waiting to see where to actually find a competitive edge totally makes sense. Microsoft's Copilot bungling was far worse than Apple AI's bungling, for example. I can't even get access to Microsoft Office anymore, it seems, I'm instead confronted with a dumb chat interface that doesn't even know how to launch a new document or open existing ones. At least Apple never destroyed their brand like that...

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#254

Post by QuantumFunnel »

phyrex wrote: post #217
Zigurd wrote: post #84

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…

Meta glasses are a direct result of this investment, and they're selling like hotcakes

Great, let's keep expanding privacy-destroying products and hyper-surveillance in the name of corporate profits!

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#255

Post by summerlight »

prash20026 wrote: post #192
alanfranz wrote: post #179

Earlier quoted context omitted.

What's the risk of NOT doing this? That's the problem. That's the risk that few (if any) hyperscalers want to take.

Apple might be a good counter example of what happens if you don't focus entirely on AI. Right now it seems to be doing ok.

Apple can enjoy because it controls a significant fraction of consumer computing platform so they can simply collect tax from everyone else. This is not true for the rest of big tech. Only Google has Android but it cannot sit and enjoy because they still don't control hardware and AI is an existential problem for their search business.

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#256

Post by etempleton »

fooker wrote: post #158
tedggh wrote: post #113

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…

This is absolutely the calculus. There is no moat. It is survival of the best financed. Open AI and Anthropic are in very precarious situations.

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#257

Post by etempleton »

levocardia wrote: post #241
tedggh wrote: post #113

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…

So you're short the market, right?

Shorting the market always has a greater risk even if you are fairly confident something is true. You also have to be fairly confident of the timing.

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#258

Post by duncangh »

Laurel1234 wrote: post #224
itkovian_ wrote: post #220

Earlier quoted context omitted.

I just don’t understand this view. This is the most significant technology ever developed. The uncertainty currently is whether it 1) has massive impact, completely altering society and the making world significantly significantly better or 2) if we go into a fast takeoff/rsi loop. Personally I’ve always been highly skeptical of the later, but that seems like a genuine possibility now. It’s not ‘are we going to be ab…

> It’s not ‘are we going to be able to generate 10% roic on compute’ the answer to that is yes. Based on what? No AI company has ever made a cent in profit (exept for Nvidia lmao).

Yeah but space data center Econs are going to revolutionize the tulip marketplace

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#259

Post by summerlight »

tedggh wrote: post #113

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…

I would be more careful before assuming 5 years depreciation schedule. Currently price tags are attached to computing power, not the production cost. Computing is not getting meaningfully cheaper with newer GPUs but it only allows better scaling, which makes older hardware more relevant for many use cases. This is why A100 is still selling like hotcakes. I don't think this trend will change soon.

Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

#260

Post by gmadsen »

lardosaurusrex wrote: post #209
kingleopold wrote: post #201

Earlier quoted context omitted.

not to miss, future models will be more compute hungry too. Current hardware prices are still goin up and no it's not cheaper to run your AI for like %99 of the people because of lots of costs, it's not just hardware.

I think this fails to take into account how many people are fine with "fast enough" vs "fastest". I've seen people happily use AI that takes several minutes to generate text or edit an image because to them they already aren't using their computer when they tell it to start; they just grab their phone and walk away and come back only to check in on it. I feel like people here and on other technology discussions -- al…

That is completely discounting future capabilities and new use cases. Sure in 10 years you will have current SOTA locally, but in no way is it obvious we are anywhere near the limit of marginal value from improved capability
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