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This seems like a fine decision by Amazon? If there is a ton of demand for shovels it seems fine to make more shovel factories?

notyourwork 2y ago
Agreed, investing in platform facilities and AWS capability seems like it cannot be a terrible idea.
belter 2y ago
There is a redflag here. Their CapEx is growing faster than revenue. And there is no apparent direct correlation between AWS growth, percentage wise, and CapEx surge...Using CapEx makes profits look higher today...
- scarface_74 2y ago
  What’s the alternative? Not have the capacity when needed?
- UltraSane 2y ago
  If this is a good decision or not all depends on what the ROI ends up being.
- dekhn 2y ago
  They are paying an opportunity cost to have access to future growth.
- lesuorac 2y ago
  Did we read a different article? It seems like the claim is that it pays for itself in under 2 years. > For AI servers and the datacenters that wrap around them, as we have shown here, for every $1 you spend for an AI cluster and its datacenter (including its power and cooling), you get 87.8 cents back every year that you rent that AI cluster out to customers, assuming a reasonable mix of on-demand and reserved instance hours and a $9.40 per GPU-hour rate. In 410 days, you get your bait back on the entire AI datacenter investment if you rent all the GPUs out. The model we created (riffing on an Nvidia model) shows that for the three years after that, the 87.8 cents per year goes right into your pocket.
  - belter 2y ago
    I am discussing this in the context of their disclosures for Q4 and historical reporting. The "pays itself in 2 years" is intuitively wrong and on the basis of 100% usage estimates. CapEx exploded while depreciation barely increased means Amazon pushed more spending into assets that won’t be depreciated immediately. This inflates short-term profits. In 2024, CapEx surged to almost 120% of operating income. They are spending more on investments than they earn from operations. I dont think it's sustainable.
everdrive 2y ago
This seems like a fine decision by Amazon? If there is a ton of demand for [dog shit tacos] it seems fine to make more [dog shit taco] factories?
- decimalenough 2y ago
  Welcome to capitalism. And remember that we're the ones paying for the dog shit tacos that Amazon sells to the companies that then stuff them down our throats, whether we want them or not.
  - aylmao 2y ago
    Is it us, or is it VCs? For the foreseeable future at least.
skywhopper 2y ago
If it’s clear there’s a shovel bubble, though, then it’s a bad idea to over-invest in shovel factories.

notyourwork 2y ago

Agreed, investing in platform facilities and AWS capability seems like it cannot be a terrible idea.

belter 2y ago

There is a redflag here. Their CapEx is growing faster than revenue. And there is no apparent direct correlation between AWS growth, percentage wise, and CapEx surge...Using CapEx makes profits look higher today...

scarface_74 2y ago
What’s the alternative? Not have the capacity when needed?
UltraSane 2y ago
If this is a good decision or not all depends on what the ROI ends up being.
dekhn 2y ago
They are paying an opportunity cost to have access to future growth.
lesuorac 2y ago
Did we read a different article? It seems like the claim is that it pays for itself in under 2 years. > For AI servers and the datacenters that wrap around them, as we have shown here, for every $1 you spend for an AI cluster and its datacenter (including its power and cooling), you get 87.8 cents back every year that you rent that AI cluster out to customers, assuming a reasonable mix of on-demand and reserved instance hours and a $9.40 per GPU-hour rate. In 410 days, you get your bait back on the entire AI datacenter investment if you rent all the GPUs out. The model we created (riffing on an Nvidia model) shows that for the three years after that, the 87.8 cents per year goes right into your pocket.
- belter 2y ago
  I am discussing this in the context of their disclosures for Q4 and historical reporting. The "pays itself in 2 years" is intuitively wrong and on the basis of 100% usage estimates. CapEx exploded while depreciation barely increased means Amazon pushed more spending into assets that won’t be depreciated immediately. This inflates short-term profits. In 2024, CapEx surged to almost 120% of operating income. They are spending more on investments than they earn from operations. I dont think it's sustainable.

everdrive 2y ago

This seems like a fine decision by Amazon? If there is a ton of demand for [dog shit tacos] it seems fine to make more [dog shit taco] factories?

decimalenough 2y ago
Welcome to capitalism. And remember that we're the ones paying for the dog shit tacos that Amazon sells to the companies that then stuff them down our throats, whether we want them or not.
- aylmao 2y ago
  Is it us, or is it VCs? For the foreseeable future at least.

skywhopper 2y ago

If it’s clear there’s a shovel bubble, though, then it’s a bad idea to over-invest in shovel factories.