CAPEX spending helped us separate the clowns from the clouds. It is perhaps even more useful when it comes to generative AI, because GPUs ain’t cheap.
Platformonomics ClownWatch™ monitors companies for large disparities between flowery AI rhetoric and actual CAPEX spend. Marketing doesn’t multiply many matrices.
ClownWatch: AI Clowns
AI Clowns are companies whose marketing claims are not feasible given their CAPEX spend.
IBM
Updated: February 9, 2024
“IBM (no surprise) is the inaugural member of the Platformonomics ClownWatch™ list of AI poseurs. IBM is running the same playbook they used for cloud: chant the buzzwords, cut actual CAPEX spending, talk up irrelevant products, hope to book some consulting business from less discerning enterprise customers, and try not to go to jail for securities fraud.”
ClownWatch: Negative Watch
When a company is placed on Negative Watch, it indicates a growing disparity between their AI rhetoric and their actual CAPEX spending which may result in the company being designated a full-fledged AI Clown.
Amazon Web Services
Updated: February 9, 2024
“Amazon CEO Andy Jassy said “every single business” at Amazon had “multiple” generative AI initiatives. Except, it seems, the people who build out the AWS infrastructure. In the middle of the AI boom where GPUs are the most coveted items on Earth, AWS CAPEX investment was down 10% in 2023 (even as the business grew by 13%). The disconnect between Amazon’s incessant AI chatter and shrinking investment requires us to put AWS on negative watch for potential addition to the ClownWatch™ AI list.”
Tesla
Updated: April 26, 2024
“But if we turn the all-seeing-eye of CAPEX to Tesla, we find:
- The claimed spend of $1 billion in “AI infrastructure CAPEX” is a suspiciously round number. Almost IBM-esque.
- But it is also Dr Evil-esque relative to what others are spending on AI infrastructure. Even noted CAPEX clown Oracle spends more than that on CAPEX.
- Telsa spent $2.8 billion in total CAPEX in Q1 (and we’re under the impression they have manufacturing plants and stuff). The previous four quarters were all over $2 billion so the $1 billion claim looks more like marketing than a big leap in investment.
- Tesla has never spent more than $9 billion in CAPEX annually.
- Telsa’s CAPEX is less than 3% of revenue, which is about what Microsoft and Oracle used to spend when they were pure software companies. Google and Microsoft now spend double digits of revenue.
So I am delighted to announce Tesla has been placed on Negative Watch. Further disparities between their AI rhetoric and their cold, hard CAPEX spend may result in the company being designated a full-fledged AI Clown.”
ClownWatch: Monitoring
ClownWatch is also monitoring potential AI clowns across a number of categories:
Boutique AI Clouds – there are some new providers who rent GPUs (some are former crypto miners). NVIDIA has given some of these companies preferential GPU allocations in an effort to develop new competitors to the hyperclouds (who are doing their own AI silicon). They also are doing pioneering work in securitizing GPUs.
- CoreWeave
- Crusoe
- Iliad
- Lambda Labs
- Oracle
Data Center REITs – AI needs data centers. These companies have data centers. They say AI will be a huge tailwind for their business. Will it?
- Digital Realty Trust
- Equinix
Spreadsheet Mavens – can financial engineering compete with engineering engineering?
Sovereign AI Clouds – Jensen, not surprisingly, says every country needs to buy a boatload of GPUs. Politics meets industrial policy meets government IT — what could go wrong?
Elon Musk – monitoring his unrelenting stream of hyperbolic AI claims may be beyond our capabilities
- Tesla (see above)
- The Boring Company
- xAI
Got thoughts on ratings and other companies ClownWatch should be monitoring? Let us know.