From The Register, November 1:
Despite extending server lifespans, AI's power demands drive more datacenter builds
Amazon expects to spend $75 billion on capital expenditure in 2024 and even more in 2025 – mostly on its cloud computing business – due to rising demand for generative AI and as more customers ditch their on-premises workloads.
The web services arm of Amazon (AWS) reported calendar Q3 net sales of $27.45 billion, up 19 percent year-on-year, and operating expenses of $17 billion, up from $16.08 billion. Operating profit jumped almost 50 percent to $10.45 billion.
In a contradiction to the message delivered to the UK's Competition and Markets Authority in its probe into the health of the local cloud market, AWS told investors last night that its business just keeps on expanding.
"We see more enterprises growing their footprint in the cloud, evidenced in part by recent customer deals with the ANZ Banking Group, Booking.com, Capital One, Fast Retailing, Itau Unibanco, National Australia Bank, Sony, T-Mobile, and Toyota," said Amazon CEO Andy Jassy, who previously ran AWS when Jeff Bezos headed Amazon....
....MUCH MORE
What our four years of blather regarding advantage flywheels is all about.
In Nvidia's World, If You (and your company) Don't Have Money You Will Not Be Able To Compete (NVDA)
The advantage flywheels keep spinning and reinforcing each other to the point that the Pareto distribution of profits - 20% of companies reap 80% of the profits - is becoming Super-Pareto where 5% of the companies reap 95% of the profits and is approaching Hyper-Pareto at maybe 2% of companies reaping 98% of profits.
It all comes down to having the resources to keep up.
I watched Mr. Huang give the keynote and it's all a bit much to digest before firing out comments that would make any sense at all so here are some of today's headlines to give a taste of what the intro paragraph is based on.
These are Nvidia's press releases via GlobeNewswire....
This.
This is such an important concept to grasp. It's the advantage flywheels, the rich get richer, winner-take-all reality of business in 2024....
The Hyper-Pareto Distribution Of Profits Is Happening Right Now (plus an anniversary)
It's not some cutesy management* fad or pop insight like "Business secrets of Genghis Khan."To the rich go the profits and internalizing that fact makes the rest of this portfolio construction/fund management/investing stuff easier to conceptualize and execute.
And AI is accelerating the already extant dynamic....
*Although people had been observing and discussing "rich get richer" and "winner-take-all" dynamics for over a century, one of our favorite pointers toward the current situation did come out of a business school. We've been hammering on this for so long that I start to bore myself. Here's a recapitulation from last year, linking to an article that was published seven years ago today:
HBR—From Pareto To Hyper-Pareto: "AI Is Going to Change the 80/20 Rule"
A prescient article from the Harvard Business Review, February 28, 2017:....
*****
Why Do the Biggest Companies Keep Getting Bigger? It’s How They Spend on Tech"
...Much more important than the direct monetization of big data is the strategic advantage it can bestow over time.
In a winner-take-all economy, as in a horse race, small differences in superiority are rewarded all out of proportion to the actual advantage. A top thoroughbred may only be a couple fifths of a second faster than the field but those two lengths over the course of a season can mean triple the earnings for #1 vs. #2.
In commerce the results can be even more dramatic because rather than the 60%/20%/10% purse structure of the racetrack the winning vendor will often get 100% of a customer's business.....
Just to reiterate, every incremental advantage that a company can afford does not affect income production in isolation. They accrete in sometimes unforeseeable combinations:
A very handy conceptual framework first posted after the start of the U.S. lockdowns, April 2020. Schools were closed so it seemed natural to link to a superb mini-MBA module.Eat your heat out HBR....
AI: Tesla Installing Second Dojo Supercomputer In New York Gigafactory (TSLA; NVDA)
AI: "Inside Tesla’s Innovative And Homegrown 'Dojo' AI Supercomputer" (TSLA)
It really is a big deal that a company can afford to spend over a billion dollars to build their own supercomputer and it really is a big deal that the same company has all the training data from the billions of miles of real-world driving and it really is a great example of the concept of advantage flywheels and hyper-pareto distribution of rewards, i.e. the rich get richer.
Whether it is going to open-up the $10 trillion addressable market and add the $500 billion of market cap that Morgan Stanley foresees is still an open question....
....As artificial intelligence comes more and more to the fore, the advantages accruing to those companies that can afford to make use of their data and custom train the machines will act as advantage flywheels that shift the distribution of profits from the normal Pareto: 80% of the loot goes to the top 20% of businesses to perhaps as much as 95% of all the profits going to the top 5% of businesses.
I didn't really mean the "eat your heart out HBR" line.Here's the Harvard Business Review on this very point:
HBR—From Pareto To Hyper-Pareto: "AI Is Going to Change the 80/20 Rule"
And many more. If interested use the 'search blog' box, upper left.
