Alpha Exponent

Ben Thompson on why we might run out of capital before we run out of compute: "I'm worried about the timing mismatch in terms of the actual return on investment producing enough revenue to fuel investment. We're working our way down the capital curve. We started with free cash flow. The speed with which the tech companies blew through the debt markets is kind of incredible. It took like a year, and now Google's issuing equity. Nvidia's putting together this $500 billion thing to tap into pension funds and insurance floats and things like that. What's after that? Where does the money come after that? Ideally we actually flip back to free cash flow funding this, but if there's a gap there, if we don't get there soon enough, then we could have a big blowup. The railroads had a real duration mismatch. To build a railroad and make money off it was a decade or multiple decades long endeavor, whereas you had to issue money to pay for it in the short term. And then they ran out of money. That's what happened in the 1870s. We don't have enough compute because there was insufficient investment made in 2023 and 2024. So today, when you say there's not enough compute, all the money companies are putting in today doesn't equal compute tomorrow. It all goes into compute in 2029. I believe in AI. I think it's a real thing. I think the economic impact is going to be astronomical. You can believe all that and be worried about, are we going to make the bridge to this actually generating the level of returns necessary to continue to fuel this going forward?"