Oracle laid off ~13% of its staff to fund a $300B computing deal with OpenAI. Now, a credit downgrade and $7B in required power grid guarantees put the massive project in jeopardy.
You are correct. OpenAI etc. valuations are based on the difference between revenue and cost. The key part is that open source breaks the monopoly. It stops excessive rent being charged (now or in the future) to use Ai models.
Tech giants will still exist, but closed model advantages won’t.
The expectation is that development costs will get cheaper (model design solidifies), Training costs will get cheaper (no need to retrain the whole model) and running costs will get cheaper (datacenter economies of scale).
All this is still true.
OpenAI, anthropic, Google etc. will generate excessive by being able to charge more than cost because their models are vastly superior.
Datacenter economies of scale do not seem to be panning out, 'cause they’re buying into a RAM cartel who knows they’re desperate.
Coreweave’s reports say that the GPUs are 85% of the cost of a data center, and that they’ll last 6 usable years. This isn’t like building a facility like TSMC, datacenters feel more like COGS than capital to me, and those aren’t businesses I would want anything to do with even if I didn’t think they were all run by conmen who are rapists or racists or both.
You are correct. OpenAI etc. valuations are based on the difference between revenue and cost. The key part is that open source breaks the monopoly. It stops excessive rent being charged (now or in the future) to use Ai models.
Tech giants will still exist, but closed model advantages won’t.
If the valuation were based on the marginal cost OpenAI and Anthropic would be worth negative a trillion dollars…
Current marginal cost is certainly negative.
The expectation is that development costs will get cheaper (model design solidifies), Training costs will get cheaper (no need to retrain the whole model) and running costs will get cheaper (datacenter economies of scale).
All this is still true.
OpenAI, anthropic, Google etc. will generate excessive by being able to charge more than cost because their models are vastly superior.
Is likely to be false.
Datacenter economies of scale do not seem to be panning out, 'cause they’re buying into a RAM cartel who knows they’re desperate.
Coreweave’s reports say that the GPUs are 85% of the cost of a data center, and that they’ll last 6 usable years. This isn’t like building a facility like TSMC, datacenters feel more like COGS than capital to me, and those aren’t businesses I would want anything to do with even if I didn’t think they were all run by conmen who are rapists or racists or both.
i thought tech valuations were based off of vibes and social currency
Initially maybe. Long term, money has to be returned.