Platformonomics TGIF is a weekly roll-up of links, comments on those links, and perhaps a little too much tugging on my favorite threads.
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Optimism abounds about getting a (disproportionate) piece of the AI pie!
News
CAPEX Clues: The Music is Still Playing, For Now…
I’ve been skeptical about all the financial entities piling into data centers. There just aren’t that many customers beyond the hyperCAPEX companies, who prefer to own their data centers. But fear not, Wall Street’s brightest minds are hard at work looking for “other investors” (aka “greater fools“, specifically “insurance and retirement funds”) to take these investments off their hands before the music stops playing:
Goldman Sachs has floated one alternative: that they sell off their stakes to other investors once long-term tenants are locked in and buildings are “stabilized.”
“There’s a ton of capital invested in this and people are quite excited about the returns. But we need to build the off ramp,” he said. “That’s where the smartest people in the industry are focused right now.”
There’s an important hitch, of course. To attract insurance and retirement funds, the industry would need to introduce more certainty and less risk into data center lease contracts. That includes nixing early termination clauses for tenants and extending leases to 17 to 20 years, from 10 to 15 years, according to the white paper. Whether those stricter terms become market standards remains to be seen.
Meanwhile, the New York Times had a nice piece on Amazon’s build-out in Indiana that gives a sense of what the financial entities (and their customers) are up against in terms of scale, vertical integration, and know-how. And, by NYT standards, the story is light on the pious degrowth ideology they peddle (“How dare anyone use energy! We should return to the golden age characterized by printing presses and delivery trucks!”).
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CAPEX Clues: The B Word, And You Thought Softbank Was the Dumb Money, CAPEX Clues: Microsoft’s “Couple Hundred Megawatts”, Follow the CAPEX: Cloud Table Stakes 2024 Retrospective, Stargate: So Many Mouths to Feed, CAPEX Clues: Softbank Needs More Cash, Stargate: $5 Trillion and Counting, Stargate: A New Hope?, Existential Corner: What is the New York Times? Living in a Glass House: The New York Times On Tech, Living in a Glass House: What is the New York Times?, Aspiring Technology Company Neither Interested in Technology Nor Understands Technology
Words are Cheap, CAPEX is Expensive: Oracle Edition
Database vampire and incessant stock promoter Oracle wants you to know they’ve signed their deal with OpenAI, and it could bring in $30 billion in revenue in FY28. They said nothing about how much infrastructure they have to deploy to book that revenue. Given Oracle’s struggles to deploy CAPEX even at modest scale, that forecast seems optimistic. This warrants a post of its own about how much CAPEX this deal might require, how likely are they to find 4.5 gigawatts in the next two years, and the financial consequences for a company that already has negative free cash flow.
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Why Can’t Oracle Build Data Centers? FY25 Q4 Edition, Most Bestest Cloud So Much Unbreakable, Why Can’t Oracle Build Data Centers? (Or Subcontract Them?), ClownWatch™: Oracle FY25 Q3, Follow the CAPEX: Cloud Table Stakes 2024 Retrospective, Why Can’t Oracle Build Data Centers?, Oracle Still Can’t Build Data Centers, Oracle’s Data Center Difficulties, Oracle’s Data Center Difficulties: FY25 Q1, Oracle’s Data Center Difficulties: FY25 Q2, Follow the CAPEX: The Clown Car Race Checkered Flag, ClownWatch™, Stargate: So Many Mouths to Feed, CAPEX Clues: Softbank Needs More Cash, Stargate: $5 Trillion and Counting, Stargate: A New Hope?
Big Bad Bankruptcy Bill Blame
Data centers already get cast as the boogeyman for their electricity consumption (somehow EVs and heat pumps escape such scrutiny). Big Tech’s data centers are an easy target for degrowthers and Luddites, but if Trump’s OBBB materially impairs the growth of power generation as many expect, the political imperative for Trumpistas to divert blame will create yet another group of data center critics.
We should expect the electrical utilities to borrow the telco playbook and try to get Big Tech to pay twice, because “they have the money”. Why should utilities be held responsible for their failure to keep up with energy demand?
As a periodic reminder, energy-scarcity is incompatible with living in an advanced civilization. Yet here we are.
Never Take a Dependency on Elon Musk: xAI MechaHitler Edition
Thin-skinned fractional CEO (and former public sector volunteer) Elon Musk knows that frontier models are a scale game and he needs to maximize enterprise, ISV, and API consumption of Grok. There are a lot of ways to attack the enterprise market. Elon’s strategy seems to be making the key Nazi vertical his enterprise beachhead.
Previous:
Never Take a Dependency on Elon Musk: Where to Even Start?, Never Take a Dependency on Elon Musk: Chapter 150, Never Take a Dependency on Elon Musk: Grok API Edition, Do Not Take a Dependency on Elon Musk: Chapter 147, Do Not Take a Dependency on Elon Musk: Chapter 148, Do Not Take a Dependency on Elon Musk: Chapter 149, What is Elon’s Tesla Strategy?
Is This Founder Mode? Meta AI Edition
“I have yet to meet someone in Meta-GenAI that truly enjoys being there. Someone that feels like they want to stay in Meta for a long time because it’s such a great place,” wrote Blankevoort, referring to the nearly 2,000-person group that develops Meta’s flagship AI model, Llama. “You’ll be hard pressed to find someone that really believes in our AI mission. To most, it’s not even clear what our mission is.”
Not Available in Europe: Working Through the Not Available in Europe Backlog Edition
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Not Available in Europe: WhatsApp Edition, Not Available in Europe: ChatGPT Memory Edition, Not Available in Europe: Bird Flies, Not Available in Europe: Open AI Deep Research, Not Available in Europe: A Bubbly Economy, Not Available in Europe: Better Late Than Never Apple Edition, Not Available in Europe: Apple’s Math, Not Available in Europe: This Week’s Edition, Not Available in Europe: Coming Soon to a Continent Near You, Not Available in Europe: Don’t Say You Weren’t Warned (by Meta), Not Available in Europe: A Tipping Point?, Not Available in Europe: Stratechery Edition, Not Available in Europe: Apple Edition, Not Available in Europe: Meta Edition
Software Migration Alerts: Olo, itel
When Thoma Bravo shows up, that software you rely on is washed up.
Market research: would you considering investing in a Platformonomics ETF that invests in software companies with private equity-owned competitors?
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