Why $1.5T of AI CapEx can still pencil out against $300B of revenue

Transcript

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

1. 1:04:10

   And if we compare this to the total incremental inference revenue, so the thing that the market gets worried about, you know, back to my Sam Altman podcast, you know, in October of last year, can we really afford to spend $1.5 trillion of CapEx a year if we're only generating X amount in inference revenue? The thing I think that lit the fuse this year was Anthropic showed up in a major way with revenue, right?

2. 1:04:35

   And so we have, you know, the AI lab revenue, everybody combined at around $300 billion next year, right? So can't, you know, and roll that out to 2027, or that is 2027, $300 billion. So we're spending $1.5 trillion of CapEx on $300 billion of inference revenue. Does that math math for you? And what would cause you, you know, to get more nervous again about our ability to continue to make these investments?

3. 1:05:04

   Because the second we get nervous about it, the entire semi-complex is going to come down a lot. Well, what do you think the gross margins are on that $300 billion? Yeah, let's call it 50%. I would guess they're probably a little bit higher than that. I might say $60 or $70. But, I mean, that math starts to math. And what I would just say is I think that $300 billion is low, man. I just think it's low.

4. 1:05:25

   From your mouth? Yeah, exactly. I think we end this year well over 200 billion in inference revenue, well over. And so I think the math really maths. And I do think we have to give Jensen, our friend, some credit because he said some things that seemed outlandish. And he was conservative. He was low. He said a trillion two years ago. And I mean, he was really low. And so let's give the guy some credit and think about what he is saying right now.

5. 1:05:55

   Yeah, for sure. And listen, I would say consistently, Elon's been taking the over. Sundar's been taking the over. Sam, Dario. Dario did the podcast with Dworkish when he was talking about country geniuses in a data center. He said that will be here by 2028. He said revenues will go into the low hundreds of billions by 2028. So let's call that 300, 400 billion of revenue by 2028. And he said that a while ago now, so he may even be revising up his number. And he said, it's hard for me to see that there won't be trillions of dollars in revenue before 2030.

6. 1:06:32

   And if you're on that revenue trajectory, if we're on a trajectory to 200 by the end of this year, let's call it 400 or 500 by next year, and a path to trillion plus by 2029, then the math, maths. And we got to keep in mind that half of the spending is there for training, maybe a little less than half. What is it, Foxy? It's probably, it depends on the lab, but I would say it's increasingly less than half. Yes. Okay. So we'll call it 35% is spending that's not revenue generating that is going to kind of make the next model. So I think the math, maths. And there's still this prisoner's dilemma where if you opt out, that may be an existential decision. For sure.

7. 1:07:09

   And I think like coming into this year, going back to this kind of what narratives were violated,