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by vlovich123 35 days ago
> They're on a treadmill where stopping is death, and the treadmill costs $10bn a year to keep running.

You’re literally describing all companies. Google takes about $270bn/year to run. If they stopped spending that they’d die pretty darn quick. It’s also a description of working - unless you’d built up significant savings, if you stopped working you’re also going to die.
2 comments
bjt 35 days ago
> You’re literally describing all companies.

No, not quite. It really comes down to opex vs capex and the depreciation schedule for your investment.

Software development is typically categorized as capex, on a 3-5 year depreciation schedule. You assume the software you write today will be generating value for you that long.

If a big, expensive model training project only gives you value for a year or less, that is not like most companies.

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vlovich123 35 days ago
No, the IRS made that change a while back as part of the TCJA but that’s been reverted in the OBBBA. If you build something and never touch it, sure that should probably be capex you have to depreciate. But if you’re investing continuously in it over time, I don’t see how it’s anything other than opex - there’s nothing being depreciated because you’re constantly improving it. Automobile manufacturers don’t have to count their labor force as capex. Indeed I can’t think of any other industry where labor is capex.

But believing that the financials of a project are governed solely by how IRS rules force you to account for headcount is kind of silly.

> If a big, expensive model training project only gives you value for a year or less, that is not like most companies.

The model itself that gets built? Sure (although clearly the timelines are getting longer). However the important bit here is the research that got done along the way and the infrastructure built to make that model building process cheaper, better etc. all of that stuff sticks around but because it’s hard to appreciate externally you discount it to 0 when it’s literally what they actually spent the money on.

But none of that even matters. Google had 270B in opex and their capex has grown from 50B in 2024 to 90B in 2025 and is projected to grow to ~175B for 2026. But even if you discount the “AI” treadmill, you’re still looking at many tens of billions in capex that if they stopped they’d die.

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bjt 34 days ago
You're saying no one capitalizes software development costs anymore? The rest of the internet disagrees strongly. The finance team at my employer would disagree strongly. Accountants talk to dev teams all the time about how many hours went into new development vs maintenance. It's not just a temporary IRS rule. It's GAAP.

It's the same in other industries. In your example, if labor went into building a whole new assembly line that pays itself off over several years, capex. If it just goes into building products to sell, opex.

https://www.hibob.com/blog/r-and-d-capitalization/

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Anon1096 35 days ago
Software that is sold as a service and requires ongoing maintenance like running in the cloud (and people to keep it running in the cloud) is opex not capex. Google Search is most definitely opex.
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vlovich123 34 days ago
There was some accounting changes passed during the Biden administration’s funding bill that made it capex for a few years. It’s been rolled back in the Trump administration’s bill and I suspect no one will ever let it happen again.
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agwa 34 days ago
Those changes were passed during the first Trump administration by a Republican congress, though they didn't go into effect until Biden was in office.

https://kpmg.com/kpmg-us/content/dam/kpmg/pdf/2023/tcja-chan...

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Danox 35 days ago
The problem is I don’t think computing is going back to the mainframe era you know where all the computing is done remotely and the only thing you have in front of you is a terminal that is the AI slop maker’s dream, the computing power on the desktop/laptop/tablet/phone is getting better and the models are getting smaller and quicker.

There is no moat. In the end, what we are calling AI today will just be something that is incorporated into an existing programs that people will use to help them accomplish a task. The public will not be paying more for it. It will just be a commodity added to the existing ecosystems we have today. They

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