Subsea Cables & Internet Infrastructure

 Microsoft has declined to renew a compute agreement with Oracle, partly on the grounds that the Nvidia chips are too old. This supports Michael Burry's contention that GPUs depreciate faster than the five or six years life span that the AI industry uses in accounting treatments. This in turn suggests that AI data center profits are exaggerated. "Microsoft Corp. is winding down an arrangement to rent AI computing from Oracle Corp., part of a larger reassessment of billions of dollars in cloud partnerships. In recent months, Microsoft has been turning off rented computing capacity from Oracle after declining to renew the contract, according to people familiar with the matter. Over time, the computing Microsoft was renting became less useful because it no longer fit the company’s specifications, said the people, who requested anonymity to discuss a private matter. The Oracle hardware used older-generation Nvidia Corp. chips, the people said." Click here for more details: ht...

The Michael Burry view is that companies are depreciating their GPUs over 5 year periods despite technological obsolescence in 18 months or less. This means negative profits and rates of return despite corporate claims to the contrary.  But heat stress also depreciates GPUs. AI Chips run marathon sessions during model estimation (training) often exceeding a month and GPUs often fail due to heat stress: "Imagine you had a 10,000 or even a 20,000 GPU data center. You should expect on the statistics a chip to fail about every 3 or 4 hours. So long before I get to the point where I’m rapidly turning these over because there’s a new generation of chips, I’m turning over a vast chunk of my chips just because they’re failing under thermal stress." Source: https://paulkrugman.substack.com/p/talking-with-paul-kedrosky. GPUs used to estimate large language models are like ultra-marathon (50, 100, and 166 kilometers) runners on a 38 degree day.  It took Facebook 54 days to estimate the ...