I decided to share some thoughts about the current state of the market regarding AI. I have become very cautious due to recent financing developments, the projected amount of capital to be raised, and the general valuation levels of many of these companies.
Could the end result be similar to the tech boom of 2010s? I read somewhere that because companies overbuilt networking capacity, post dot-com bubble internet was cheap, helping the development of all the internet companies during 2010s.
Some great points here. I do feel that you might be underestimating OpenAI's/Anthropic's ability to continue pulling in capital at high valuations to support these endeavors. OpenAI is the most in-demand equity asset that I can ever recall from my almost 15 years in the venture and tech space. Even after the $100B commitment from NVDA, I suspect that Sam Altman could pull down capital in $5B or $10B chunks from various entities (e.g. Saudi government) pretty much whenever he feels like it. It's hard for me to imagine scenarios that will interrupt OpenAI's revenue ramp unless models commodify in a profound enough way that the end-user price of them falls to zero.
“OpenAI, with its deal with Nvidia and AMD on top of their Stargate datacenter, plans to build a total of 26GW of data centers in the next few years.”
26 GW is about the installed capacity of Switzerland, one of the most electrified countries in the world, if not the most. Took us 100 years.
Hard to guess the replacement cost in today’s CHF. An easier data point: UK’s Hinkley Point C will likely get to £50bn for 3.2GW. The construction time will be 13-15 years by EDF, ex permits et al.
If they go for combined cycle gas turbines, they must come from Siemens Energy, Mitsubishi Heavy or GE Vernova. All are basically booked out and will pass on huge cost inflation plus a natural monopoly premium - such turbines are, perhaps, the most difficult tech kid humans have ever created.
Hope: GE wants to double capacity I read. We will see.
Coal plants would likely be the path of least cost resistance, except that there is nobody left to build them except the Chinese or perhaps a Russian firm. No plant was build in the US since 2012. Even longer for Europe which is phasing it out by law.
They are all dreaming with their timetables. They also drive cost inflation with it. Their own vanity is their biggest enemy.
PS: ordinary people will resist data centers sooner rather than later if their electricity bills goes up. Etc etc
Could the end result be similar to the tech boom of 2010s? I read somewhere that because companies overbuilt networking capacity, post dot-com bubble internet was cheap, helping the development of all the internet companies during 2010s.
Yes
Some great points here. I do feel that you might be underestimating OpenAI's/Anthropic's ability to continue pulling in capital at high valuations to support these endeavors. OpenAI is the most in-demand equity asset that I can ever recall from my almost 15 years in the venture and tech space. Even after the $100B commitment from NVDA, I suspect that Sam Altman could pull down capital in $5B or $10B chunks from various entities (e.g. Saudi government) pretty much whenever he feels like it. It's hard for me to imagine scenarios that will interrupt OpenAI's revenue ramp unless models commodify in a profound enough way that the end-user price of them falls to zero.
“OpenAI, with its deal with Nvidia and AMD on top of their Stargate datacenter, plans to build a total of 26GW of data centers in the next few years.”
26 GW is about the installed capacity of Switzerland, one of the most electrified countries in the world, if not the most. Took us 100 years.
Hard to guess the replacement cost in today’s CHF. An easier data point: UK’s Hinkley Point C will likely get to £50bn for 3.2GW. The construction time will be 13-15 years by EDF, ex permits et al.
If they go for combined cycle gas turbines, they must come from Siemens Energy, Mitsubishi Heavy or GE Vernova. All are basically booked out and will pass on huge cost inflation plus a natural monopoly premium - such turbines are, perhaps, the most difficult tech kid humans have ever created.
Hope: GE wants to double capacity I read. We will see.
Coal plants would likely be the path of least cost resistance, except that there is nobody left to build them except the Chinese or perhaps a Russian firm. No plant was build in the US since 2012. Even longer for Europe which is phasing it out by law.
They are all dreaming with their timetables. They also drive cost inflation with it. Their own vanity is their biggest enemy.
PS: ordinary people will resist data centers sooner rather than later if their electricity bills goes up. Etc etc
I see an $18bn debt raise from ORCL based in their filing. Where did you get the $38bn figure from?