[munk-a]

Sure - but nothing driving up revenue value is actually being created[1]. What's missing in that system is a way that money is entering the system. These deals are (in my cynical opinion at least) being inked to create the appearance of large continued investment and market excitement to pump or sustain valuations. Oracle actually spotlit the arrangement as future sales in their recent earnings and that seemed to be what mostly drove their valuation up.

Performative actions to drive up valuation and try and attract more investors absolutely feels bubbly to me.

1. Discounting products that are not only currently operating at a loss but are priced well below actual resourcing required to produce.

[metadat]

Customers pay for the compute. There are tons of CSPs selling the capacity to small and large consuming entities alike (both OpenAI/Anthropic + other small outfits we've not heard of).

The fair criticism of the infra $ is where the non-VC non-bank-loan cash stream is, but there could be a lot of B2B deals and e.g. Meta, TikTok and other behemoths do tend to make plenty of money and pay their bills, and have extreme thirst for more AI capacity.

Take Oracle for example (as a whole, not just OCI) - tons of customers who are paying for AI-enhanced enterprise products.

It's still the early days, as the cost of creating software continues to approach zero the rules will change in ways which are hard to predict. The effect this will have on other white collar industries is even more challenging to reason about.

[Fade_Dance]

That line of reasoning conveniently left out the explosive datacenter revenue growth that generates huge free cash flows. Even disregarding AI, it's double-digit compounding growth.

NVIDIA's stock may eventually get decimated (but the company itself will be fine, they have a relatively low employee account and insane margins), the Coreweaves of the world are definitely leveraged plays on compute and may indeed end up being DotCom style busts, but a key difference is that the driving forces at the very top - the Microsofts and Amazons of the world - have huge free cash flows, real compute demand growth beyond the AI space, and fortress balance sheets.

[worik]

> as the cost of creating software continues to approach zero

"continues " is inaccurate. The cost of creating software is nowhere near approaching zero

In Sam's dreams, perhaps.

[munk-a]

I think that's a fair point and sort of speaks to one of the indicators that say this possible bubble may be different than the dotcom bubble. I think that end-user revenue for AI is a pipe-dream - but the companies interested in compute have a whole lot of resources and so long as they are willing to divert those resources to prop up AI it can keep going for quite a while (at a smaller scale though).

There is a commonly held belief that there is a level of compute (vaguely referred to as AGI) that would be extremely valuable and those companies may continue to rationally fund AI research as R&D though if the VC and loan funding dries up there will probably be serious fights with the accounting departments. It is good to point out that companies with huge war chests do seem poised to continue investing in this even if VC/etc dries up due to the lack of end-user profitability - it'll be an interesting shift but probably not as disastrous as the dot-com bubble burst was.

[fuzzfactor]

>What's missing in that system is a way that money is entering the system.

Or maybe not enough money soon enough, and at this scale that could be more of a disaster than it had to be.

So far it's not looking like a business boom much at all compared to the massive investment boom which is undeniable, and that's where a good amount of remaining prosperity is emanating from.

If you were a financial person wouldn't you figure there were a lot bigger bonuses by getting involved with the amount of cash flow being invested rather than the amount resulting from profits being made in AI right now?