Investors want to know who makes money from AI. Great question. Ask it before the check clears, not after.
Billions went into data centers. Concrete. Cooling fans. Land in places where cows used to have privacy. Now the people who wrote the checks want to see a profit. Adorable.
The headline calls it a "gut check." A gut check is what a doctor does. This is what happens when the doctor walks out of the room and doesn't say anything.
Here is the business model, in plain English. Spend enormous sums on chips. Plug the chips in. Hope that someone, somewhere, pays more for the output than the electricity cost. That's it. That's the plan. A lemonade stand with a nuclear power bill.
Nvidia sells the shovels. Nvidia is fine. Microsoft, Alphabet, Amazon and Meta are buying the shovels by the truckload and digging holes the size of Delaware. Whether there is gold down there is a question for the next earnings call. And the one after that. And the one after that.
Retail traders bought the dream at the top. They bought it with money they described as "fun money." Fun money is what you call it right before it stops being money and starts being a story you tell at Thanksgiving.
I look at charts. Charts do not care about data center capex. Charts do not have feelings about power purchase agreements. A chart is just a line, going up until it goes down, and then someone writes "gut check" above it.
The phase is now "more unforgiving." Wonderful. Like the earlier phase was a petting zoo. The earlier phase was people paying 40 times sales for a company whose product is a chatbot that apologizes to you.
Somebody will make money. Probably the landlord of the data center, the utility company, and a guy named Doug who sells industrial fans. The rest of you will own a slide deck.
Hold on tight, retail traders. The gut check is coming from inside your brokerage app, and your gut already knows the answer.
Photo by Frugal Flyer on Unsplash
Leave a Comment