Platformonomics TGIF #52: May 31, 2024

From CAPEX Obsessives to Cynics

That brief window when we were all CAPEX obsessives and cheerleaders has, sadly, already given way to cynicism. The media pedants miss the bigger picture (as they have in the past). For a start, the current AI infrastructure build-out has arisen from the ashes of the crypto bubble. It might be bubbles, not turtles, all the way down.

Who’s Getting the GPUs?

From NVIDIA’s 10-Q:

Concentration of Revenue

Revenue by geographic region is designated based on the billing location even if the revenue may be attributable to end customers, such as enterprises and gamers in a different location. Revenue from sales to customers outside of the United States accounted for 48% and 67% of total revenue for the first quarter of fiscal years 2025 and 2024, respectively.

We refer to customers who purchase products directly from NVIDIA as direct customers, such as original equipment manufacturers, or OEMs, original device manufacturers, or ODMs, system integrators, add-in board manufacturers, and distributors. We also have indirect customers, who purchase products through our direct customers; indirect customers include public cloud providers, consumer internet companies, enterprises, startups, and public sector entities.

Sales to one direct customer, Customer A, represented 13% of total revenue and sales to a second direct customer, Customer B, represented 11% of total revenue for the first quarter of fiscal year 2025, both of which were attributable to the Compute & Networking segment.

There was no direct customer that represented 10% or more of total revenue for the first quarter of fiscal year 2024.

Two indirect customers each represented 10% or more of total revenue for the first quarter of fiscal year 2025; one of these indirect customers purchased our products primarily through direct Customer B. Both were attributable to the Compute & Networking segment.

We’ll speculate on this next week (along with others).

Existential Corner: What is OpenAI?

In a world where “we do have demand that exceeds our supply by a bit“, adding Apple to the demand side of the OpenAI equation seems like a legitimate concern.

The bigger question is what trajectory does OpenAI think it is on? Maybe it is content to focus on building the best frontier model, but their ambitions (and valuation) seem bigger. They need a focus. The window to be a developer or enterprise company already seems to have closed.

Consumer is still an opportunity (and the recent Her-inspired emphatically not Her-inspired demo suggests this may be OpenAI’s bet, even if by elimination), but there is no shortage of consumer aspirants.

Given CEO Sam Altman is a deal-maker and not seemingly a long-term builder, maybe teeing up a bidding war between Apple and Microsoft (with anyone else is welcome to join!) is the company’s strategy?

Apple to Choose Choice?

As we await WWDC and Apple’s bid for AI relevance, it is already pretty clear Apple will pursue a pluggable LLM strategy, probably both on-device and in the cloud. They have to for their China business, and it would give them opportunity to switch to their own technology in the future.

Competitive Strategy: AI Safety Edition

Sending your AI safety people to a competitor seems like a great move.

Private Equity in Action: PluralSight

Debt is a killer. Especially in the hands of financiers who don’t know much about actually running a software business (despite having listened to multiple podcasts on the topic). Hence our mantra: when private equity comes amalgamating, it is time to start migrating.

Not That Kind of Nuclear Cloud

An advanced civilization requires abundant energy. Lets do it!