GPU price drops can be riskier than continued scarcity

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 18:17

   constrained for a while. So you kind of have to do that. Like, do you agree with that? Or do you think this is just like a moment in time? I don't necessarily agree with that. I mean, And like NVIDIA is delivering, you know, several hundred thousand black walls, you know, a month. Right. And I don't want to say like the market is like 100 percent efficient. But like, you know, in general, like if you're willing to pay a high price, you can get GPU capacity.

2. 18:39

   Right. Like if you're willing to pay more than everyone else. And of course, Anthropic and OpenAI is buying up as much as they can. And but fundamentally, like there's constantly supply coming on the market. And so I don't necessarily think it's like a fully cornered resource. prices are going up and i do think it's worth kind of reflecting on that it's like the normal state of hardware is like it's like kind of like gravity like eventually hardware prices always go down so we're a little bit in like a weird sort of period of time where like hardware prices are going up and you know it's hard to say you know how long is this going to last you know could be another six months could be another 36 months like it's really hard to know how long and but but i i fundamentally don't know if like it's true to say like you know you need to buy capacity in order

3. 19:23

   to me that's a little bit sort of almost like the great toilet paper shortage of you know the pandemic or whatever right like you know at least this like you know run on the bank type situations and but that being said like you know capacity is going to be tight for a while and and you know prices are going up and you know luckily i think you know it's not even necessarily bad for us if prices go up because because you know scarcity it also means like we can charge more from our customers and you know and the fact that we have a lot of reservations locked in at a rate means like to some extent we're effectively like long gpu prices already um so um i i don't necessarily worry too much about prices going up i do worry more about actually prices collapsing i don't think that's going to happen anytime soon but i think that would be a quite bad thing for a lot

4. 20:09

   of the players in the market why would that be bad i think it would be bad for if for anyone who's locked in a lot of supply. Yeah, because they paid way too much. They paid too much. So there's a risk of buying at the top, right? And again, I don't worry about that that much. I don't think it's going to happen anytime soon. But like I said, hardware prices in the very long run, they tend to go down.

5. 20:32

   And so it's worth reflecting on that. Right now, I think your capacity is constrained and that leads to sort of, in economic terms, there's a scarcity rant, right? Like who captured the scarcity rant? I think that primarily goes to two places, mostly NVIDIA, but of course, but also to some extent, NeoClouds. Like NeoClouds, and in general, like anyone owning capacity has better economics. Like that's undeniably true today with capacity being constrained.

6. 21:03

   Long-term, in the very long run, I don't think that's necessarily entirely true, right? Like there's always going to be a little bit of a premium you can get from owning GPUs, but is it worth the risk? Is it worth the risk holding these very expensive assets on your balance sheet? I'm not so sure. But we're going to see. It's going to take a few years to get through this. And in the long run, we might own some.

7. 21:25

   We might rent some. Maybe a combination. Maybe do some other crazy stuff. Joint ventures. Who knows? Maybe some complex SPDs or whatever.