maxglute

PRC just doing innovating AND value engineering - they have both. IMO with respect to energy efficiency tech is one of those "any idiot can build a bridge that stands, but it takes an engineer to build a bridge that barely stands". The primary metric for "quality" of energy transition products is efficiency / $, and in that JP fails hard. Only PRC is scaling efficiency / $ effectively, which has much greater value than JP trying to push top end, because frankly that's all they can do. Which has it's economic rational, i.e. TOC in wealthy countries where installation/labour expensive, but its still net, lower "quality" innovation because $ spend on JP premium nets less aggregate efficiency.

Arguably, PRC price / value engineer is their innovation and by far more MORE important than vs minute efficiency differences. Ultimately it's about TCO and global adoption, if JP can't bring their prices down, if they can't fractionalize cost, then they're doing more harm than good for net transition - there's better things to with that 30-50% premium.

Eitherway, hard to say, but look at proxy indicators, there's fuckload of "dumb" Chinese international students... i.e. those who couldn't hack GaoKao that are basically A students in western tertiary. And as others have mentioned, BSJZ + kids that pass zhongkao is basically more 2+ standard deviation talent pipeline than OCED combined, disproportionately directed at technical tertiary, i.e if you want to know who has most big brains whose going to be doing the cooking in the future, BSJZ is good indcator.

IMO the parsimonious answer seems to be OpenAI has a pretty good model (because it did finish) and stole someones work... and threatened them over it. TBH all OpenAI need to do is solve another millennial problem and none of it would matter - people expect them to behave heinously regardless - but if they have generalized superhuman math model... well I guess they're allowed io.

E: also waiting for this formfactor to get optimaxxed

https://www.youtube.com/watch?v=IL05zoHBGwA

Little eink dogtag that flips through one sentence at time.

the parthian chicken was stupid easy and tasty

For reference, when my wechat account was blocked a few years ago, I got escalated to talking a real person and sorted everything out in a few days.

The economic logic is if current spend vs revenue gap is not sustainable... hardware prices / margins will revert towards mean. That $10 hammer will be compared against a $2 identical hammer (margin reversion/compression)... or worse, a $3 future hammer that does $4 / past $20 of work. The future player who only paid $2 can charge much less... i.e. simply paying $10 limits ability to price competitively. The future player who pays $3 has 50% more compute than incumbent who paid $10. The important DC TOC consideration, is in world where DC cost regress towards mean, opex > capex... so merely continuing to use that old $10 hammer is losing MORE than buying a $3 better hammer, i.e. the asset is economically stranded, it is COSTING MORE to run old hardware than simply buying new hardware. It's MORE than economically useless and $10 past purchase price not just sunk cost but dragging down balance sheet as amortized liability aka it is full write down / loss.

Someone in deep debt backstopping with maxing credit cards is not dunking on outside observer saying this arrangement ultimately not sustainable. The article is nitpicking over short term micro/liquidity when ultimate macro/solvency. Now maybe there's plenty of credit cards to max out, but systematically someone is going to end up holding the bag, and politically that could be public socializing costs. If folks want to use article to dunk on Zitron short term forecasts, it's whatever, but I think important to point out it doesn't refute his long term thesis around fundamentals, which again does not mean fundamentals cannot be overridden by non market means, but that's also a crux of the long term thesis - in lieu of correction/market clearing, we're going to see non market interventions to save current model from its fundamentals.

Investors exuberantly build $10 of housing when there is $5 of demand, builders extract $8, when they normally extract $2 under normal margins, builders raking it, but arrangement is net loses vs world where investors build same housing for $4 and make a profit. Intermediaries margins can compress but what they already extracted for current build out is already built in balance sheet.

>What does "capex premium" even mean? >Of course you spend more on capex when you build a data center than opex!

No. Historically DC opex > capex, i.e. 60-80% goes towards power... because hardware costs were relative low % of TCO. Historically without delulu AI demand, IC producers capturing much less margin and TCO of DC was much lower than it is now. It's not opex vs capex it's TCO. AI is paying $10 vs $4, when demand is $5, $10 isn't sustainable, $4 is.

Now builders will be fine in case of crash, they'll compress margins for next round of buildouts, i.e. bubble bursts, current spend proves not sustainable. This is where the crux of argument is...

Future investors post crash when margins revert towards mean will be spending $4 to supply $5+ of demand. And due to nature of compute deprecatiion (i.e. tulips) they will have more efficient hardware with less opex/capex TCO per unit of compute, with much more sustainable balance sheet. The builders are still fine with their $2 margins, it sucks its not $8. But that leaves the current investors who spent $10 with stranded assets that are not competitive with more efficient $4 future build out, i.e. current investors have balance sheet black hole that cannot compete with none bubble market force.

This does not mean AI is doomed, it just means incumbents from current tranch of bubble driven, stupid high TCO build out is most likely doomed relative to future entrants. Unless incumbant has unassailable moat, or other hedge/cards (i.e. political bailout/intervention). That is the actual argument, Zitron is saying current ecosystem economics not sustainable, not that there is not a future model that isn't sustainable. But it does mean a lot of current players are balance sheet zombies, who _should_ die. But a reasonable disagreement is reality is size of bubble + contagion risk + influence of incumbents i.e. trillion dollar companies is such that they have non market lever (i.e. politics) to save themselves... but someone else is going to be doing the paying for a model that is net loss.

No, the whole thesis is XYZ likely fail because REVENUE RECORDS is not enough to dig out of hole relative to MAGNITUDE MORE SPEND. Saying Zitron wrong because XYZ made $2 for every $10 it spends revenue needed to justify spending. Fixtaing on the $1-$2 is misdirection/innumeracy, the thesis is in reaching the $10 relative to time, i.e. that $2 has to be $10 in X time, but the current velocity suggest it will not be.

I agree with Zitron directionally on accounting, I in fact disagree with him on AI... I am extremely AI pilled, i.e. I think there is a future where AI is worth trillions and will capture large swatch of economy. The transformation will be extreme, unlike any past revolutions... but the accounting suggest that future isn't coming in time to rescue current AI incumbents from finance blackhole, which some may survive, i.e. bail outs, nationalization... but the $$$ suggest however we get there, there will likely be massive $$$ corrections involved irrespective of adoption.

The numbers being cited is ~100B is well within accounting/ledger maxxxing tricks relative to current pool of investment. Luu is not analyzing number's he's just listing and believing numbers, and analytically entirely avoids the core Zitron thesis... once you tap out of easy investor $$$, FAANG warchest, accounting tricks... where is the rest of the order magnitude more $$$ that justifies existing spent relative to time frame coming from?

> it's not enough

It's enough for some of us, like his broad predictions that work on timescale of business cycles seem directionally correct. Even considering we're dealing with fast hardware deprecation cycles it will take years to play out especially with investors and incumbents burning through accumulated war chest. Luu seem oblivious to notion that companies with trillions in market cap can certainly out manipulate fundamental short / medium term market sanity. Part of Zitron's rant I find similarly compelling is the danger of dismissing directionally "satisfying" vibes because $$$ can capture reporting distort reality, which is only going to lead to bigger/more painful correction because directionally "correct" was dismissed as merely directionally "satisfying."

Like one can believe AI is speciation event technology eventually, but still given actual constraints, i.e. literally not enough investors for $$$, not enough hardware, not enough infra over xyz time horizon that these companies carrying stupendous debt and mathematically guaranteed stranded / deprecated compute infra is only digging themselves deeper vs future competitors. Sure AI can eventually capture 30% of GDP and knowledge worker's life time achievement is worth a few $100 of compute or a few pennies in thinking sand. But ultimate winners is probably going to be some future startup that pays pennies for thinking sand not incumbent who paid magnitude more and simply can't operate profitably due to balance sheet.