Quoting David Cahn

2024-07-28T10:40:40+00:00

The key to understanding the pace of today’s infrastructure buildout is to recognize that while AI optimism is certainly a driver of AI CapEx, it is not the only one. The cloud players exist in a ruthless oligopoly with intense competition. [...]

Every time Microsoft escalates, Amazon is motivated to escalate to keep up. And vice versa. We are now in a cycle of competitive escalation between three of the biggest companies in the history of the world, collectively worth more than $7T. At each cycle of the escalation, there is an easy justification—we have plenty of money to afford this. With more commitment comes more confidence, and this loop becomes self-reinforcing. Supply constraints turbocharge this dynamic: If you don’t acquire land, power and labor now, someone else will.

— David Cahn

Tags: ai, david-cahn

Quoting David Cahn

2024-07-03T20:49:06+00:00

If you own the tracks between San Francisco and Los Angeles, you likely have some kind of monopolistic pricing power, because there can only be so many tracks laid between place A and place B. In the case of GPU data centers, there is much less pricing power. GPU computing is increasingly turning into a commodity, metered per hour. Unlike the CPU cloud, which became an oligopoly, new entrants building dedicated AI clouds continue to flood the market. Without a monopoly or oligopoly, high fixed cost + low marginal cost businesses almost always see prices competed down to marginal cost (e.g., airlines).

— David Cahn

Tags: economics, ai, david-cahn, gpus

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Quoting David Cahn

Quoting David Cahn