Dylan Patel: evaluation

Transcript context

…One thing I’m confused about is, does the market come into equilibrium? If it comes into equilibrium, would you just expect the price of compute to equal whatever Anthropic and OpenAI can generate from it, or be very close to it with a small amount of markup for Anthropic and OpenAI? Right now it’s really weird that there is a 4x or more difference between what compute sells for and how much money Anthropic can make from it. In a world where the revenue per gigawatt continues to increase, if Anthropic’s ability to monetize a gigawatt doubles or triples, it’d be weird if the gap continued to increase. Anthropic, just by having some weights, can take something that cost them $10 and turn it into $100. This is always a fun question. Where does the value go in AI? AI’s generating all this value. You’ve got the end user, which I think we all agree is generating more value than anyone else, hence they’re paying a lot for these models. Then you have the app layer. So far the app layer’s generated very little value. Then you’ve got the model layer, which up until a year ago was generating negative gross margins and is now generating massive positive gross margins. It looks like it’s on the path to generating $100 million per megawatt. So turning $10-15 into $100, as you said. But if we go back a year ago, the hardware supply chain was generating all this gross margin while literally everyone else was losing money on it. OpenAI and Anthropic were just plowing VC money in, as were many other startups. Many of these hyperscalers were building infrastructure without knowing if there was going to be a payoff. So ultimately you had this negative value being created on the model layer, if you will, because they were selling the tokens for less than it cost them on the infra side. All the value was being captured at the chip, the fab. Initially in 2023, the memory guys were making no money off of HBM or memory for AI, even though theoretically the value they were delivering was humongous. Now you’ve got… Well, actually TSMC captures way less value than the memory guys. So the value capture’s shifted around a lot, which is very fun for people tracking the market or participating in the market, like Jane Street as an example. This is not an ad. This is not an ad. This is not an ad. They’re a sponsor but you don’t have to plug them that hard.…

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