Paul Kudrowski

The providers of these services will find high margin businesses that will support those rental prices, the de facto subsidy from private credit and venture capital and others that allow these prices to stay so people continue to pay.

That's not going to go away.

That's the argument from the other side.

So I'll start with a naive projection.

So a naive projection given current decline rates would put you into about two and a half years out where they're no longer earning a risk adjusted return commensurate with the cost of doing business as a data center.

Meaning that it no longer becomes a productive investment because I'm not earning enough in rental prices to compensate for the cost of doing all of the things you just described.

Not just building the data center, but having built the data center, continuing to refurbish, continue to rebuild the GPU constellation inside of this data center footprint.

So a naive projection puts you out like two and a half years.

It's hard to imagine, absent something changing materially with respect to the amount that companies are earning from selling AI services, that it doesn't happen even faster than that.

So my guess is two to two and a half years, we'll suddenly see these two numbers come very close into alignment.

And that's when you really have to be saying to yourself, I don't see how this can continue at that point.

The subsidy goes away, data center construction stop, something in these moving pieces has to stop at that point.

Because if you can't earn on that rate, a competitive rate of return is no different than having an office building whose costs are higher than the amount I'm able to rent it out to to my favorite law firm.

So I wrote a piece recently related to this where I said, I think we went, chat GPT is kind of the original sin, meaning that we as humans get sucked into things that sound like us.

Dating back to Eliza, the original fake psychologist online where you could ask it questions and it would say, why do you feel that way?

Chat GPT is that to a different level of verisimilitude.

It sounds so much like us that we want it to be our friends.

So the most interesting applications of these tools and of this whole idea of large language models and predictive next tokens and all the technical gobbledygook is at a deeper level.

Think about I'm a small manufacturer and I'm trying to bring on a bunch of new suppliers.

All of them have different systems.