""They're more like supermarkets than traditional tech or industrial enterprises, but their turnover isn't in the likes of grocery items. It's the stuff that generate their large language models, vector search and other products.""
""The problem, Brightman asserts, is that hyperscalers are taking losses on the large language models, vector databases and other products they're selling to companies and consumers, so the more hardware they buy, the more money they lose.""
""The immense spending needed to maintain those 'moats' and keep rivals at bay could generate puny returns going forward, and harm their overall profitability.""
Hyperscalers are investing heavily in AI hardware, but this equipment quickly becomes obsolete. Companies are not investing traditionally; instead, they are rapidly churning equipment to generate sales. This model resembles supermarkets, where turnover is fast but involves high-tech products. Despite the surge in AI capital expenditures, companies are incurring losses on products like large language models. The immense spending to maintain competitive advantages may lead to low returns and negatively impact overall profitability.
Read at Fortune
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