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OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

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Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#341

Post by _2d30 »

bob1029 wrote: post #243
_2d30 wrote: post #156

Earlier quoted context omitted.

Except that this is isn't round-tripping at all. Round-tripping doesn't result in a company actually incurring expenses to create more product. Round-tripping is the term for schemes that enable you to double count assets/revenue without any economic effects taking place. Every time HackerNews talks about anything in the legal or finance realm, people trip over themselves to make arguments for why something a big tec…

At some point one might simply argue that the nature and timing of these wildly fantastical press releases is tantamount to a "scheme to defraud".

“ Every time HackerNews talks about anything in the legal or finance realm, people trip over themselves to make arguments for why something a big tech is doing is illegal.”

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#342

Post by mgh95 »

humanizersequel wrote: post #324
mgh95 wrote: post #305

Earlier quoted context omitted.

Revenue != profit, and you don't need to become net negative margin to be net unprofitable. Expensive researchers, expensive engineers, expensive capex, etc. Inference has extremely different unit economics from a typical SaaS like Salesforce or adtech like google or facebook.

All of those expenses could be trimmed in a scenario where OpenAI or other big labs pivot to focus primarily on profitability via selling inference.

Currently, selling LLM inference is a red queen race: the moment you release a model, others begin distilling and attempting to sell your model cheaper, avoiding the expensive capitalized costs associated with R&D. This can occur because the LLM market is fundamentally -- at best -- minimally differentiated; consumers are willing to switch between vendors ("big labs", as you call them, but they aren't really research labs) to whomever offers the best model at the lowest price. This is emphasized by the distributors of many LLMs, developer tools, offering ways to switch the LLM at runtime (see https://www.jetbrains.com/help/ai-assistant/use-custom-model... or https://code.visualstudio.com/docs/copilot/customization/lan... for an example of this). The distributors of LLMs actively working against LLM providers margin provides an exceptionally strong headwind.

This market dynamic begets a low margin race to the bottom, where no party appears able to secure the highly attractive (think the >70% service margin we see in typical tech) unit economics typical of tech.

Inference is a very tough business. It is my opinion (and likely the opinion of many others) that the margins will not sustain a typical "tech" business without continual investment to attempt to develop increasingly complex and expensive models, which itself is unprofitable.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#343

Post by theptip »

mgh95 wrote: post #283
radu_floricica wrote: post #263

Earlier quoted context omitted.

But real GPUs are being built, installed and used. It's not paper money, it's just buying goods and services partly with stock. Which is a very solid and time honored tradition which happens to align incentives very well.

What revenues do these GPUs generate for OpenAI? OpenAI is not currently profitable, and it is unclear if its business model will ever becomes profitable -- let alone profitable enough to justify this investment. Currently, this only works because the markets are willing to lend and let NVIDIA issue stock to cover the costs to manufacture the GPUs. That's where the belief that we are in a bubble comes from.

OpenAI is profitable if they stop training their next generation models. Their unit economics are extremely favorable.

I do buy that they are extremely over-valued if they have to slow down on model training.

For cloud providers, the analysis is a bit more complex; presumably if training demand craters then the existing inference demand would be met at a lower price, and maybe you’d see some consolidation as margins got compressed.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#344

Post by mNovak »

tmiku wrote: post #188
onlyrealcuzzo wrote: post #140

Earlier quoted context omitted.

I dunno. Google is pretty useful. It uses >15 TWh per year. Theoretically, AI could be more useful than that. Theoretically, in the future, it could be the same amount of useful (or much more) with substantially less power usage. It could be a short-term crunch to pull-forward (slightly) AI advancements. Additionally, I'm extremely skeptical they'll actually turn on this many chips using that much energy globally in…

For other readers: "15 Twh per year" is equivalent to 1.71 GW, 17.1% of the "10GW" number used to describe the deal.

This is ignoring the utilization factor though. Both Google and OpenAI have to overprovision servers for the worst case simultaneous users. So 1.71 GW average doesn't tell use the maximum instantaneous GW capacity of Google -- if we pull a 4x out of the hat (i.e. peak usage is 4x above average), it becomes ~7 GW of available compute.

More than a "Google" of new compute is of course still a lot, but it's not many Googles' worth.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#345

Post by psunavy03 »

truelson wrote: post #269
JCM9 wrote: post #108

This is throwing more cards on the house of cards. Nvidia is “investing” in OpenAI so OpenAI can buy GPUs from NVidia. Textbook “round tripping.” I generally like what’s been happening with AI but man this is gonna crash hard when reality sets in. We’re reaching the scary stage of a bubble where folks are forced to throw more and more cash on the fire to keep it going with no clear path to ever get that cash back. If…

Going to leave this link here: https://www.hussmanfunds.com/comment/mc250814/ By many different measures, we are at record valuations (though must be said, not P/E however). Tends not to end well. And housing prices are based on when mortgages were at 3% and have not reset accordingly. We are in everything bubble territory and have been.

Housing prices have not reset because of supply and demand. People are sitting on those 3 percent mortgages and not selling.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#346

Post by NooneAtAll3 »

cj wrote: post #79
thrtythreeforty wrote: post #6

Earlier quoted context omitted.

Safely in "millions of devices." The exact number depends on assumptions you make regarding all the supporting stuff, because typically the accelerators consume only a fraction of total power requirement. Even so, millions.

"GPUs per user" would be an interesting metric. (Quick, inaccurate googling) says there will be "well over 1 million GPUs" by end of the year. With ~800 million users, that's 1 NVIDIA GPU per 800 people. If you estimate people are actively using ChatGPT 5% of the day (1.2 hours a day), you could say there's 1 GPU per 40 people in active use. Assuming consistent and even usage patterns. That back of the envelope math…

I'm kinda scared of "1.2 hours a day of ai use"...

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#347

Post by mgh95 »

crowcroft wrote: post #333
mgh95 wrote: post #283

Earlier quoted context omitted.

What revenues do these GPUs generate for OpenAI? OpenAI is not currently profitable, and it is unclear if its business model will ever becomes profitable -- let alone profitable enough to justify this investment. Currently, this only works because the markets are willing to lend and let NVIDIA issue stock to cover the costs to manufacture the GPUs. That's where the belief that we are in a bubble comes from.

The counter point to this is that while not profitable, the cashflow is real, and inference is marginally ROI positive. If you can scale inference with more GPUs then eventually that marginal ROI grows large enough to cover the R&D and other expenses and you become profitable.

"Marginally ROI positive" works in a ZIRP environment. These are huge capital investments; they need to at least clear treasury return hurdles and importantly provide attractive returns.

I am fundamentally skeptical of "scaling inference". Margins are not defensible in the market segment OpenAI is in.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#348

Post by fatal_errr »

agentultra wrote: post #298

Water is a critical resource in dwindling supplies in many water-stressed regions. These data centers have been known to suck up water supplies during active droughts. Is there anyone left at the EPA that gets a say in how we manage water for projects like this?

the e p what?

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#349

Post by rapsey »

Imustaskforhelp wrote: post #326
rapsey wrote: post #286

Earlier quoted context omitted.

People are quite bearish and the stock market is making all time highs. This is actually a very good sign, because we are far from any euphoria. Always keep in mind the old saying: pesimists get to be right and optimists get to be rich.

That quote definitely has some insane survivor bias in it. Optimists go bankrupt or something and you blame them on their work ethic or something and you discard any of those optimists who didn't really succeed and cherry pick those optimists which went right... Its a classic survivorship bias. I am pessimistic in US stocks because they are so concentrated on AI for returns and its definitely a bubble or approaches i…

> I am pessimistic in US stocks because they are so concentrated on AI

The russel 2000 index just made an all time high. The bull market is diverse and global. Indexes of many countries are also at all time highs.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#350

Post by kapone »

mrandish wrote: post #323
truelson wrote: post #269

Earlier quoted context omitted.

Going to leave this link here: https://www.hussmanfunds.com/comment/mc250814/ By many different measures, we are at record valuations (though must be said, not P/E however). Tends not to end well. And housing prices are based on when mortgages were at 3% and have not reset accordingly. We are in everything bubble territory and have been.

> Tends not to end well. I'm no financial guru but this time around the boom/bust cycle, there's a new, additional factor that's concerning. Even though I sold my individual tech company shares a few years ago and diversified all my equity holdings in broad market ETFs like VTI, the so-called "Magnificent 7" tech companies have inflated so much, they now occupy a disproportionate percentage of even broad market ETFs…

Two words. Passive flows.

Where do you think your 401K money is going...right into the S&P 500...and who gets the lion's share of allocation out of that? The Mag7 et al.

If you chart the last 25 years, Gold (yes, that one...the useless metal) has outperformed the S&P (and it's making new highs even today). What does that say about hard assets vs these companies?

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