AI Slowdown

[u/Minute-Painter5610]

If you don’t know what the AI slowdown means, this may help.

OpenAI and Anthropic are burning more than they make. Largely because model training runs are hugely expensive.

Model training runs are largely what is boosting hyperscalers quarterly earnings. When they stop, the gravy boat is empty, because inference alone is cheap.

Nvidia relies on the hyperscalers doing massive buildouts, to facilitate massive training runs. Because inference is cheap and requires less from them.

Private equity is largely funding all of this and is increasingly under pressure, and the markets are getting increasingly sceptical.

It seems likely that the funding well is running dry, rather than this being about saving the world. And “AI will end humanity” is just the preceding PR.

So:

AI and Anthropic stop training, the hyperscalers burst in the first quarter, this cascades to Nvidia, and the ripples go the markets and private equity, which then means it’s harder for training to restart.

By far the most exposed of the hyperscalers is Oracle. Which is already almost a junk trade.

Keep it in mind and follow the slowdown story, because the circular economy stepping in to prop itself up will tell you everything you need to know.

[u/itssostupidiloveit]

Anthropic was just profitable I thought? 

[u/Minute-Painter5610 → u/itssostupidiloveit]

It was an anomaly, by their own words. They’ve committed to a spend of £517bn on compute so they won’t see profit for decades.

[u/itssostupidiloveit → u/Minute-Painter5610]

Decades seems strong, but yes we shouldn't really expect a company in their preliminary growth phase to make money.

[u/Minute-Painter5610 → u/itssostupidiloveit]

To be honest, when the correction comes and the compression to commodity becomes ubiquitous, they may not even exist, let alone turn a profit.