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Compute is also a rapidly depreciating asset. I want to make a comparison with a car rental business and say that it would be like valuing Hertz entirely on th

• BoorishBears 4mo ago
  Compute is about to come an appreciating asset in the near-term, and it some ways it already is. The frontier labs are shifting from pricing grounded in the price of compute, to pricing grounded in the intelligence provided, or more specifically the economic value of that intelligence downstream. The margins on that allow them to pay a hefty premium on compute and still come out ahead. As they buy more compute at high prices, they're also pricing out competition from cheaper models. It's already become materially more difficult to get compute to run open weight models at competitive prices as a result of frontier labs in the last year.
  • enos_feedler 4mo ago
    There is zero evidence of this shift in pricing occurring. It’s still a dream which seems unlikely
    • dylan604 4mo ago
      It feels like this is the line people are using to justify the expense of compute capex
      • otterley 4mo ago
        The fact that you can sell or lease out something for more than you bought it for is justification in and of itself.
        • adgjlsfhk1 4mo ago
          Not necessarily. The GPU leases Spacex has made are month to month, so they are taking on all of the risk. If demand goes down, they're the ones stuck with the assets.
          • otterley 4mo ago
            That's a very big "if," which this what thread has been about.
      • BoorishBears 4mo ago
        I run a consumer AI product and the current reality of trying to get compute vs what it was 6-12 months ago is enough to justify it to anyone who has the money. I think OpenClaw created a mania that was completely unfounded (Apple Silicon is worth dirt compared to literally anything from NVIDIA including consumer GPUs), but the prediction of compute becoming scarce was correct
    • BoorishBears 4mo ago
      News to me? Opus 4.7 has all the signs of a smaller model distilled from a newer pretraining run... except a smaller price. Flash 3.5 raised in price pretty meaningfully over Flash 3 GPT 5.4 got a small price bump over gpt-5.3-Codex/gpt-5.2, then gpt-5.5 doubled pricing over gpt-5.4 Even open weights isn't immune: Kimi K2.6 was originally priced higher despite openly being 2.5 + more post-training, same with GLM 5.1 vs 5 - All while rental prices are spiking month over month, and NVIDIA Inception discounted prices for buying are higher than undiscounted prices for buying 6 months ago...
    • koolala 4mo ago
      Dream? It is a nightmare that computers aren't getting significantly more efficient anymore.
  • leoedin 4mo ago
    In the short term, compute becomes an appreciating asset. In the medium term, everyone ramps up production. Huawei and other Chinese companies work really hard to develop in-house alternatives. At some point, the hype cycle will peak and less money will flow into datacentres (yes, this will happen. It always does. Even for technologies that change society. The bubble always bursts). The question is not if this will happen. It will happen. It's just a question of when it happens and how big the magnitude of the cycle is.
• shdh 4mo ago
  It is depreciating, but demand has been very high. There's a reason old 3090's went from $600 in 2022 o to over $1K in 2026.
  • noosphr 4mo ago
    My local inference rig now costs three times what I bought it for. If I'd gotten the max ram I could at the time I would have made $10k after selling the excess to my current spec. How someone can look at an asset class thats appreciated an order of magnitude in the last two years and say it will depreciate in value when the tailwinds are even stronger now is beyond me.
    • shdh 4mo ago
      Fundamentals dictate hardware is a depreciating asset, they're not wrong. They're just ignoring the reality of the current market.
      • noosphr 4mo ago
        This was true when Moores law wasn't dead. Per watts performance has been flat since Ampere. There is a reason why undervolted 3090s are still used.
        • codechicago277 4mo ago
          GPUs do have a life expectancy. They don’t run forever, especially at high temperatures and full utilization.
          • noosphr 4mo ago
            You undervolt them because the last 50% of power adss 10% of compute.
            • baq 4mo ago
              Undervolting is not running at max utilization by definition almost. …but the real question whether you want to undervolt your asset if you’re renting it out is why bother? You probably expect to replace it anyway after it’s spec lifetime, for sure want to replace it when a more efficient solution is available since datacenters are power and volume constrained and customers care about performance much more than hardware longevity (otherwise they’d buy instead of rent).
• iririririr 4mo ago
  no need for a car analogy. the comment you replied to is word-by-word what people hyping canadian telecoms were saying before the dotcom crash!
• nl 4mo ago
  > Compute is also a rapidly depreciating asset. That's the default assumption but in the new GPU+Memory constrained age isn't true. Time on 4 year old H100 servers costs more now than when they were new (!!)
  • RealityVoid 4mo ago
    > That's the default assumption but in the new GPU+Memory constrained age isn't true. Is it an age or a temporary situation?
    • frognumber 4mo ago
      It's very unclear to me. The key question is on direction of LLMs. Right now, LLMs are taking over human jobs. If the cost of silicon+power < cost of human being doing the same work, what rational reason is there to employ a human being? If this applies to SWEs, lawyers, business analysts, many research scientists, .... this situation could persist for a long, long time. While capital costs less than the inputs of labor (nominal food, housing, etc.), there is no need for labor. The key question is about continued progress in models, and of the tooling around them: - Plateau: Old silicon obsoletes in due course - Rise quickly: Old silicon maintains value for a long time
      • paulhebert 4mo ago
        > what rational reason is there to employ a human being? To maintain a functioning society and social contract? Is wanting low unemployment in our society not rational?
        • hackyhacky 4mo ago
          Correct. Unfortunately, that's not how capitalism makes decisions.
          • tirant 4mo ago
            Capitalism does not decide anything. Capitalism allows individuals to take decisions in a free market. If you want to complain about selfishness then do it on selfish individuals, which by the way, are present in all types of economic systems.
• latchkey 4mo ago
  "depreciating" is not being used in the right sense. There is depreciation, which is taking the purchase price and dividing it across N number of years (typically 5). That's the D in EBITDA and is mostly used as a profitability calculation. The depreciation of a GPU also gets mucked up in the current GPU financed market as well. DDTL loans. The people running the GPUs often don't even own the GPU, they lease it, so there is nothing for them to depreciate (D). The analogy that a GPU is like a used car makes zero sense. There is no oil or tires to change on a GPU. They don't wear out in the same way that a rental car would. They are housed in climate controlled locations with clean power. They just don't fail the way that is portrayed in the press. Useful life of a GPU is based on profitability. When does opex cost more than profitability? Some companies, like mine, also have support contracts. Anything goes wrong with the GPU (or any part of the system), Dell comes and fixes it at no extra charge. We just migrate customers and workloads to hot spares while the parts are replaced. As for compute going down in value... the 122TB of enterprise nvme and 2GB of ram in each server that I bought 2 years ago is now worth vastly more than I paid for it. I'm also renting my GPUs out for more money now due to supply being so tight and demand being so high.
• scionaura 4mo ago
  it’s more like if you were to value Hertz as if they were a self-driving car company, only to find they’re a car rental company
• rolisz 4mo ago
  > if there are no customers they’re not costing you more money, unlike your computer which you are using for training So are you using the computers or not? I'd argue that if you're using them for training, then it's not wasted capacity. And if you're not using them, then you can turn them off, so you're not sucking up energy.
• eecc 4mo ago
  Compute is also a rapidly depreciating asset. I don’t know but this dude at my son’s school has a 32GB RTX 5090 and it’s worth more than what he paid for; and he did the same trick with the RTX 4090 before that. Until shortages are the rule, these assets are appreciating
• jubilanti 4mo ago
  Car rentals are a great comparison, but not for the reason you think. Cars depreciate value similarly to GPUs. The depriciation lifecycle timeframe is actually similar between hyperscaler GPUs and mainstream corporate car rental companies ike Hertz. They sell their cars after 2-3 years or 20-40k miles. There is a huge market for used cars. Hertz runs their used car sales out of their rental retail offices and a lot of overhead is shared. So take the difference in cost to buy new in bulk from the manufacturer from the retail sales price for a 2-3 year old car. As long as Hertz can make more money renting it out in that time, that's revenue positive. Same with GPUs. There is also a huge market for used GPUs from 1-2 generations ago. The A100 is a six year old chip at this point and is still running strong, especially for inference. Like cars, chips can be refurbished and repaired. A hyperscaler or even mid level player here isn't going to hold onto chips for their entire usable lifespan.