Two AI stories, kinda different but maybe the same?

Investment Analysis Clubs Macro Economic Trends and Risks
1

Will Someone Finally Blink in the AI Spending War?

If Meta does rent out excess compute, it could signal that big tech has overbuilt

https://www.wsj.com/tech/ai/will-someone-finally-blink-in-the-ai-spending-war-0f59aa60?mod=hp_lead_pos4

Big tech reining in its AI spending may be a tantalizing prospect for some. It would also be a costly one.

That doesn’t seem in the cards yet. Second-quarter reports coming later this month will likely show another period of [blowout AI investments]. Wall Street analysts estimate that combined capital spending by Google, [Microsoft], [Amazon].com and [Meta PlatformsMETA surged 74% year over year to hit $168 billion in the June-ending quarter, according to consensus estimates from Visible Alpha.

This spending is crimping [both the free cash flow] and stock prices of those four companies; only Google-parent [Alphabet] has managed to outperform the S&P 500 this year.

But there are also some signs that AI’s big spenders are looking for more ways to at least rationalize their investments. Before [SpaceX] went public last month, its xAI business signed a major deal to effectively share its computing capacity with Anthropic—for $1.25 billion a month.

And

AI Giants Are Handing Out Tons of Free Computing Power to Grab Startup Share

Pitched battle for business users comes as AI companies seek lasting streams of revenue

https://www.wsj.com/tech/ai/ai-giants-are-handing-out-tons-of-free-computing-power-to-grab-startup-share-c00a5c5c?mod=Searchresults&pos=1&page=1

Hans Ibarra, a founder building an AI-voice startup, has found himself on the receiving end of a big opportunity: Top artificial-intelligence companies such as [OpenAI], Anthropic and others desperate to win his business are ramping up discounts.

Across Silicon Valley, startup founders like Ibarra are enjoying a wave of computing credits and fielding competing offers from AI-model makers racing to land new enterprise customers. Cursor, the AI-coding company bought by Elon Musk’s [SpaceX], offered a 75% discount through July 5.

The offers from growing AI-sales armies at companies such as OpenAI and Anthropic are so rich that some early-stage startup founders say they won’t need to raise money as soon as they expected, and others have been able to play AI companies off one another. Startups have received offers that in some cases amounted to more than $3 million in credits from multiple companies for cloud computing and tokens, the central units used to measure and charge for AI usage, founders say. That is the size of the median U.S. seed round, according to PitchBook.

[Alphabet’s] Google Cloud is giving some startups up to $500,000 in cloud credits and early access to Gemini models

“Free samples” is a trick as old as marketing itself, but if the products are mostly fungible, then it doesn’t result in lasting competitive advantage. And at some point the spending - and consequent diminution of earnings - has to come to a slowdown, if not stop completely. I wonder when that will be.

I’m also starting to think that except for this gargantuan spend, our economy might already be in recession.

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2

Q1 GDP came in at 2.1%.

(remember when (unserious) people were throwing out numbers like 4%, 5% ?)

Consumer spending only contributed 0.37% of that 2.1%.

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3

Corning is up 254% in the past year. Apparently Data Center designers have found copper wire to be too slow and are replacing everything with fiber optic cable.

The good news here is that even if the data centers are over built, the excess capacity
can be repurposed to mass surveillance of an increasingly restive unemployed workforce.

intercst
(25 year GLW shareholder)

4

In my area the phone company has miles and miles of heavy cable on poles filled w twisted pair copper wire. It’s no good for high speed data. Obsolete but still in service.

It will be replaced w fiber. Everywhere I look fiber is being installed. Most profitable first. But all twisted pair cable must be replaced w fiber (unless you think cell towers have the capacity/bandwidth required).

Corning is the leading supplier of fiber in the U.S. and likely to continue to grow long term.

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