8 ms·

No, I get this; it is not a problem. It becomes one when they cannot pay back this financing, in the event that they cannot build a sustainable business, which

No, I get this; it is not a problem. It becomes one when they cannot pay back this financing, in the event that they cannot build a sustainable business, which they cannot, because the capital cycle leads to overinvestment, meaning the financiers cannot meet their returns. https://s-1.vercel.app/posts/the-capital-cycle-theory/ https://s-1.vercel.app/posts/the-capital-cycle-theory/

fooker 1mo ago
It's a problem when there's 10x leverage AND the underlying asset massively deprecates in value. Neither of those look likely yet.
- PaulRobinson 1mo ago
  You don’t think GPUs depreciate massively in value? I think they are written off to zero in less than 5 years. And if you look at the ARR of the companies “buying” them, I think we can see there’s some significant leverage going on.
  - fooker 1mo ago
    H100, almost a five year old GPU, costs more to buy used now than it was to buy brand new at release. Of course, everything has a lifespan. Consider a simple arithmetic problem, and this mania will start making sense. An H100 costs approximately 30k. You can run a decent latest open model on it at 1000 tokens per second batched. Cost on open router is 4$ per 1m tokens. That's about 120k revenue per year if there's demand. So far, there's unlimited demand. You, as one person, can likely not make the logistics of this work. But this really works with the economies of scale. Now, because of that everyone wants to buy GPUs and we don't have enough. The math works much better with a newer GPU that produces more tokens per second and consumes less energy to do so, even if it costs double. So why would anyone buy an old one? Because demand is orders of magnitude more than supply.
- bonesss 1mo ago
  Taking a multi-decade perspective, I wonder if our general analysis is focused too much on the initial wave of LLM tech and current gen GPUs. Owning a massive data center connected to water and power and network that can be targeted or converted to developing needs seems like a decent problem to have for the big cloud companies. We have compute hungry companies and media, in addition to cryptocurrencies etc, and we’ll have more of them in 2045. I don’t know if I’m underestimating how purpose-built these datacenters are, or overestimating the accountants in the corporate vehicles building them, but the broader situation doesn’t seem as fragile as 1929 or 2008 (even if the businesses are overvalued and LLMs fall totally out of fashion).
  - fooker 1mo ago
    You're right. This is more like a real estate cash grab. I'd guess that it'll only get more and more difficult to obtain permits to do this in future. And expensive. Similar to how if you want to buy land and build a house, it's pretty much impossible nowadays in the vicinity of a decently sized city. But fifty year old houses are dime a dozen.

fooker 1mo ago

It's a problem when there's 10x leverage AND the underlying asset massively deprecates in value. Neither of those look likely yet.

PaulRobinson 1mo ago
You don’t think GPUs depreciate massively in value? I think they are written off to zero in less than 5 years. And if you look at the ARR of the companies “buying” them, I think we can see there’s some significant leverage going on.
- fooker 1mo ago
  H100, almost a five year old GPU, costs more to buy used now than it was to buy brand new at release. Of course, everything has a lifespan. Consider a simple arithmetic problem, and this mania will start making sense. An H100 costs approximately 30k. You can run a decent latest open model on it at 1000 tokens per second batched. Cost on open router is 4$ per 1m tokens. That's about 120k revenue per year if there's demand. So far, there's unlimited demand. You, as one person, can likely not make the logistics of this work. But this really works with the economies of scale. Now, because of that everyone wants to buy GPUs and we don't have enough. The math works much better with a newer GPU that produces more tokens per second and consumes less energy to do so, even if it costs double. So why would anyone buy an old one? Because demand is orders of magnitude more than supply.
bonesss 1mo ago
Taking a multi-decade perspective, I wonder if our general analysis is focused too much on the initial wave of LLM tech and current gen GPUs. Owning a massive data center connected to water and power and network that can be targeted or converted to developing needs seems like a decent problem to have for the big cloud companies. We have compute hungry companies and media, in addition to cryptocurrencies etc, and we’ll have more of them in 2045. I don’t know if I’m underestimating how purpose-built these datacenters are, or overestimating the accountants in the corporate vehicles building them, but the broader situation doesn’t seem as fragile as 1929 or 2008 (even if the businesses are overvalued and LLMs fall totally out of fashion).
- fooker 1mo ago
  You're right. This is more like a real estate cash grab. I'd guess that it'll only get more and more difficult to obtain permits to do this in future. And expensive. Similar to how if you want to buy land and build a house, it's pretty much impossible nowadays in the vicinity of a decently sized city. But fifty year old houses are dime a dozen.