Compute has already lost value for me. Six months ago I thought you needed a 1T+ model to be useful coding. Now I am able to get by just fine with a 27b model.

I see two factors converging to cause a collapse of this house of cards:

1. People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model, a small but well tuned customer service model, a small but well tuned document explorer.

2. Specialized hardware - TPUs and NPUs - especially coming out of china. The latest GLM model was trained and runs on Huawei hardware. Nvidia is only worth so much because they are the biggest and best provider of the kind of compute needed to run llms, but the export bans mean china has a lot of incentive to topple that monopoly.

The amount of compute we need to do the things llms do is falling rapidly, the number of people who can provide that compute is rising.

> if OpenAI can’t use the compute, someone else can.

The problem with that is that OpenAI can only afford to pay for the compute because they are burning investor money (and so are most of OpenAI's biggest clients). They are losing billions. If they stop burning money, nobody else will be there to pay for that compute at OpenAI's cost.

Sure, somebody will probably be able to use these GPUs, they just won't be able to pay nearly as much for them as OpenAI does.

In reality, it's just nowhere near worth as much as OpenAI pays for it. Inflating the cost of compute is part of the problem caused by the circular financing, and if (or maybe when) OpenAI goes, the price of compute will go with them.

Devil's advocate: OpenAI not being able to use compute is highly correlated to many other AI companies not being able to find a meaningful use of this compute.

Failure to take into consideration those kind of correlations ("If my biggest client isn't able to buy it, I would be able to find someone else who will") is one of the principle causes why many risk models turned out to be garbage during the Great Financial Crisis.

The problem is that if OpenAI doesn't want the compute nobody does. All of these companies' demand for compute are correlated. It isn't likely that OpenAI will want less compute in isolation. Furthermore, the circular financing structure means that if OpenAI buys less chips it means that Nvidia has less money to give to say Anthropic to buy more chips and suddenly the exponential growth that circular financing has allowed to grow runs in reverse.

> they would have to become insolvent in a way that makes compute lose value

They would have to go insolvent in a way that hits Nvidia revenue. Those are related by distinct factors, a difference that may matter in a crisis.

Maybe I’m just old and cynical but that sounds like the kind of assumption of independence of events that led to the GFC .

If AI wasn’t a thing would Nvidia be worth 1/10th is current value?

Gaming is lucrative but not THAT lucrative…

Granted OpenAI going insolvent

All the "frontier" AI companies *are* currently insolvent. They have never been anything other than cash burning machines.

The only way they keep the lights on and the doors open is by borrowing money --- and epic amounts of it. If those operating the cash spigot decide to turn it off, all AI companies will likely be similarly affected --- and so will Nvidia.

OpenAI expects to burn through more cash between 2024 and 2029 than Uber, Tesla, Amazon and Spotify did - combined - before those companies started making money

https://www.morningstar.com/news/marketwatch/20251205243/thi...

> if OpenAI can’t use the compute, someone else can

This is the big point IMO since I have never given $1 to OpenAI but I subscribe to Vidu and Typecast, and have given money to Kling, Hailou, and even Gemini in the form of Google Workspace.

So these other guys have products and use cases, which OpenAI has never been able to crack beyond ChatGPT. And ChatGPT was never worth paying for, IMO.

If OpenAI dies, it's not because there is no market for the technology (which is all NVIDIA cares about), it's more that OpenAI doesn't know how to run a relevant technology company.

They were given everything, not just NVIDIA's billions of dollars and credit backing but all the first-mover advantage, all the respect and credibility early on, so it's really sad to see them unable to develop interesting products and turn a profit in a space they helped pioneer, while so many others are making money with the tech all around them.

NVIDIA is fine. The technology will continue to improve and NVIDIA will stay at the center. OpenAI is fucked - knew it when they retired Sora to focus on text-to-text and coding (a largely solved problem).

> if OpenAI can’t use the compute, someone else can

How? The hardware is in OpenAI's datacenters. Does Nvidia have a couple hundred semi trucks, contractors, and IT technicians, to repo the hardware and resell it to someone else before it's lost most of its value? These chips will be replaced approx every 3-4 years. So if OpenAI tanks, after Nvidia pays for and waits for the process to collect the hardware, they then have to sell it for pennies on the dollar. They lose almost all the investment.

Also consider that SpaceXAI already had datacenters full of gear that they basically weren't using because nobody wanted their product, so they now rent it to Anthropic. The demand for hardware isn't really there at the scale of OpenAI.

This is the fun part: the AI bubble bursts and the price of components keeps rising. Why? Because companies can just sell you a glorified thin client and force your average user to buy their compute, all subscription-like, from data centers.