Comment by maxglute

It's not just about node advancement, which is coupe de grace condition. Even if hardware advancement freezes, its about IC premium that fed current tranch of AI buildout. Current players paid $10 for a $2 hammer due to premium, a better future hammer might cost $3 but does twice the work of $2 hammer. That is like ball park the premiums we are talking about - from gpu to memory to other components getting inflated due to exuberate AI demand.

The economic logic is if current spend vs revenue gap is not sustainable... hardware prices / margins will revert towards mean. That $10 hammer will be compared against a $2 identical hammer (margin reversion/compression)... or worse, a $3 future hammer that does $4 / past $20 of work. The future player who only paid $2 can charge much less... i.e. simply paying $10 limits ability to price competitively. The future player who pays $3 has 50% more compute than incumbent who paid $10. The important DC TOC consideration, is in world where DC cost regress towards mean, opex > capex... so merely continuing to use that old $10 hammer is losing MORE than buying a $3 better hammer, i.e. the asset is economically stranded, it is COSTING MORE to run old hardware than simply buying new hardware. It's MORE than economically useless and $10 past purchase price not just sunk cost but dragging down balance sheet as amortized liability aka it is full write down / loss.