alt Hacker News> since everyone is assuming it's a winner take all market. That's probably close to correct.
why? I keep seeing this over and over again but I've not seen an explanation. I would really appreciate some insight into this line of thinking, since it's not obvious to me. What is the benefit of holding hundreds of billions of computer hardware when it's not proven that it's even needed.
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The idea is, innovation will concentrate where the necessary ingredients are.
When AI replaces human workers and researchers, the "frontier", with which you can earn money and gain an edge over your competition, resides in those data centers with the highest concentration of computational power.
If you own those data centers, you control the frontier of human knowledge, the edge where money and power is being carved out.
Lets say the total market for an arbitrary winner-take-all industry is $100 Billion/year in profits. Just so that we have a round number. And for another round number, lets assume the fair market PE ratio is 20x. This over-simplification would then have a fair market valuation of $2 Trillion total.
Just simple napkin math.
Now, lets say there are 5 companies competing to be the winner. Only one can be the winner, but all 5 are trying to be the winner. How much should each company individually spend?
Well... starting-bid is $2 Trillion, or ~$10 Trillion in the aggregate. Its basically the waste of competition. Because everyone is vying for monopoly power, the only fair for them to all invest over $2 Trillion in the hopes of being the dominant one at the end. Even if $8 Trillion is wasted, that's "other companies", your competitors, who lose out.
But wait: if one company spends $2.1 Trillion, that one company likely becomes the winner and the other 4 companies lose out. So then another company spends $2.2 Trillion, to get ahead of that war. Etc. etc.