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tonoto 4 hours ago [-]
Ouch, investment in GPU isn't a one off, you also need to invest newer generations (that naturally comes with a bigger price tag) to attract customers long term. How will this business ever become profitable before the bubble bursts?
Twirrim 4 hours ago [-]
You're somewhat assuming there aren't customers lined up wanting capacity.
segfaultex 4 hours ago [-]
To what extent is that demand from frontier labs? Purportedly, Anthropic is a significant chunk of GCP rev.
How much runway will the creditors give those labs until they expect a ROI?
The financial underpinning the AI build out make zero sense, but we've seen the market remain irrational for long periods of time.
keeda 3 hours ago [-]
We have some idea about the demand. As a data point, the cloud hyperscalers have in aggregate 2.3T in backlogs or “Remaining Performance Obligations” — i.e. payments committed by customers for remaining services provided over the next few years — of which about ~1T is from OpenAI and Anthropic. That still leaves 1.3T from other customers.
As another data point, these backlogs were at ~0.5T in 2022, before the AI boom started. Google for instance registered a 390% growth YoY in backlogs.
That’s not too far from the trillions being invested in the buildout.
I would say the irrationality of this buildout is exaggerated. It makes more sense to look at it as these companies making an existential bet on their futures.
zamalek 3 hours ago [-]
You don't address circular financing at all.
keeda 48 minutes ago [-]
That's a fair consideration. I look at it two ways, rationalizing and data:
Firstly, I would just ask, from a game theoretical perspective, why would these companies, all bitter competitors, most with very high fiscal discipline and absolute firehoses of double-digit billions of free cash flow per quarter pre-AI, actively do something that would be so destructive to themselves and the world economy?
Secondly, there are a ton of sources indicating significant growth and revenue coming from outside the AI industry. A few references:
1. The State of the AI Economy is the most thorough evaluation of deduplicated AI revenues I've found: https://www.exponentialview.co/p/the-state-of-the-ai-economy -- see especially the linked PDF report. I'm not a financial analyst, but they seem to cover all the bases. If nothing else, you should read this, it paints a very nuanced picture.
- https://www.genaiadoptiontracker.com/?tab=genAIwork&view=ove... - Toggle "Overall" and check the drop down for the variety of industries using GenAI; apparently 40% of "Agriculture, Forestry, Fishing, and Hunting" workers use GenAI. Also relevant: one tab over shows how much work hours they use AI for -- still only at ~5%.
There are many more of such sources out there, Google AI overview is pretty good at surface them.
lumost 3 hours ago [-]
There is a big question on the ROI of those customers. It's clear that the frontier labs are delivering something people care about, but how much do the tier 2 labs deliver that people are paying for now?
tonoto 4 hours ago [-]
Of course there's still a big demand as there are massive plans on building AI DC all over the planet, but at the same time this are supposedly not an anomaly - wouldn't most customers eventually want newer gear (or reduction in cost)?
PeterStuer 4 hours ago [-]
At what price? I would have unlimited customers lined up selling dollars for 50ct.
Analemma_ 4 hours ago [-]
Before Tuesday the plan was to get a bailout from their buddies in the White House on "national security" grounds. That became much less viable now that Trump is a lame duck and anti-datacenter ballot measures passed everywhere, which is probably why e.g. CoreWeave is down 20% since the election.
Betelbuddy 3 hours ago [-]
"UUUAAAAHHHH!!!"
That was the sound of Ed Zitron ghost....
dude250711 4 hours ago [-]
Given the average bubble-prediction accuracy, there might as well be a few centuries before it bursts. Which would give some time.
neural_thing 4 hours ago [-]
This is a nothingburger. Microsoft declining to renew a deal for 2023 A100s that power Bing because they want newer chips in house.
Oracle can re-rent them at spot at a higher price anyway.
Apparently a lot of market participants are too scared to be able to read today.
How much runway will the creditors give those labs until they expect a ROI?
The financial underpinning the AI build out make zero sense, but we've seen the market remain irrational for long periods of time.
As another data point, these backlogs were at ~0.5T in 2022, before the AI boom started. Google for instance registered a 390% growth YoY in backlogs.
That’s not too far from the trillions being invested in the buildout.
I would say the irrationality of this buildout is exaggerated. It makes more sense to look at it as these companies making an existential bet on their futures.
Firstly, I would just ask, from a game theoretical perspective, why would these companies, all bitter competitors, most with very high fiscal discipline and absolute firehoses of double-digit billions of free cash flow per quarter pre-AI, actively do something that would be so destructive to themselves and the world economy?
Secondly, there are a ton of sources indicating significant growth and revenue coming from outside the AI industry. A few references:
1. The State of the AI Economy is the most thorough evaluation of deduplicated AI revenues I've found: https://www.exponentialview.co/p/the-state-of-the-ai-economy -- see especially the linked PDF report. I'm not a financial analyst, but they seem to cover all the bases. If nothing else, you should read this, it paints a very nuanced picture.
2. Enterprise surveys:
- https://knowledge.wharton.upenn.edu/special-report/2026-ai-a... (has links to reports from prior years, but enterprises)
- https://menlovc.com/perspective/2026-the-state-of-enterprise... (Enterprise AI deployment spend up to 177B, 5x YoY)
- https://a16z.com/state-of-markets-ii/
- https://www.deloitte.com/us/en/what-we-do/capabilities/appli...
3. Government surveys:
- https://www.federalreserve.gov/econres/notes/feds-notes/moni...
- https://www.genaiadoptiontracker.com/?tab=genAIwork&view=ove... - Toggle "Overall" and check the drop down for the variety of industries using GenAI; apparently 40% of "Agriculture, Forestry, Fishing, and Hunting" workers use GenAI. Also relevant: one tab over shows how much work hours they use AI for -- still only at ~5%.
- https://ec.europa.eu/eurostat/statistics-explained/index.php...
- https://www.oecd.org/en/about/news/announcements/2026/01/ai-...
4. Payment processor data:
- https://stripe.com/guides/indexing-the-ai-economy
- https://ramp.com/data/ai-index (also here: https://fred.stlouisfed.org/blog/2026/10/which-businesses-ar...)
This link mentions a bunch of the above and more: https://www.ryzlabs.com/guides/enterprise-ai-adoption-statis...
There are many more of such sources out there, Google AI overview is pretty good at surface them.
That was the sound of Ed Zitron ghost....
Oracle can re-rent them at spot at a higher price anyway.
Apparently a lot of market participants are too scared to be able to read today.