Generative AI deployments require six times more capital to deliver the same cloud 1.0 economics, which is why we downgraded hyperscalers
What becomes the catalyst for companies to realize they aren't producing results to justify the spend?
Host
Alex
Companies will slow down spending when it becomes obvious the economics don't stack up to what they've communicated, focusing on cash flow generation rather than top-line growth
How difficult is it to break from the trend when 90% of analysts have buy recommendations?
Host
Alex
We need to be independent - if figures and numbers tell a different picture, we act accordingly
Is it over-investing or completely misplaced faith in AI?
Host
Alex
Most growth in compute spending is driven by consumer inferencing and training, with enterprise adoption mainly software development
Alex
Increasing risk of overcapacity and many projects may end up not getting any value, could be negative
Why downgrade now rather than wait for overcapacity to emerge in 5+ years?
Host
Alex
Market is already telling us - stocks trading down despite beating topline expectations as investors upskill and focus on economics
Alex
AI economics fundamentally different from cloud - starting with 5-6 year server lifetimes vs cloud's 3 years
Would anything from Nvidia on Wednesday make you more positive about Amazon, Microsoft, Oracle?
Host
Alex
Not at all - this is a structural issue for the industry, not going to change our views