Incredible breakdown of the silicon moat dynamics here. The margin stacking analysis really crystallizes why vertical integration matters so much in AI infrasturcture and that 4x cluster cost ratio is staggering to think about. Your point about Google weponizing token subsidies while still maintaining profitability is exactly the kind of nuance that gets missed in most AI investment discussions.
Thanks. Maybe this has been written about elsewhere but I hadnt seen any numbers put to it. Its been on my mind to try and breakdown but I really didn't expect the difference to be that large when I started the research. It makes me question even more OpenAI's "try and be everything to everyone" AI strategy - consumer, enterprise, scientific research, government. I feel they're still welded onto the "we are AI" thinking that was probably reasonable back in 2023 and 2024 but now needs a serious re-think.
If I was an investor in OpenAI I would be quite concerned on the back of this advantage Google has built as it has implications for OpenAI's eventual ability to reach profitability. The whole AI investment thesis now rides on the back of the success of OpenAI raising $100bn that they are currently chasing with Middle Eastern sovereigns. If they achieve it, the market wide AI investment thesis gets pushed out another 1-2 years. If they undershoot significantly, then everyone will get hurt.
Incredible breakdown of the silicon moat dynamics here. The margin stacking analysis really crystallizes why vertical integration matters so much in AI infrasturcture and that 4x cluster cost ratio is staggering to think about. Your point about Google weponizing token subsidies while still maintaining profitability is exactly the kind of nuance that gets missed in most AI investment discussions.
Thanks. Maybe this has been written about elsewhere but I hadnt seen any numbers put to it. Its been on my mind to try and breakdown but I really didn't expect the difference to be that large when I started the research. It makes me question even more OpenAI's "try and be everything to everyone" AI strategy - consumer, enterprise, scientific research, government. I feel they're still welded onto the "we are AI" thinking that was probably reasonable back in 2023 and 2024 but now needs a serious re-think.
If I was an investor in OpenAI I would be quite concerned on the back of this advantage Google has built as it has implications for OpenAI's eventual ability to reach profitability. The whole AI investment thesis now rides on the back of the success of OpenAI raising $100bn that they are currently chasing with Middle Eastern sovereigns. If they achieve it, the market wide AI investment thesis gets pushed out another 1-2 years. If they undershoot significantly, then everyone will get hurt.