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2024-06-06 07:00 by Karl Denninger
in Technology , 318 references Ignore this thread
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Even the mighty Elon Musk falls prey to it.

But emails written by Nvidia senior staff and widely shared inside the company suggest that Musk presented an exaggerated picture of Tesla’s procurement to shareholders. Correspondence from Nvidia staffers also indicates that Musk diverted a sizable shipment of AI processors that had been reserved for Tesla to his social media company X, formerly known as Twitter.

This sounds like a problem you'd love to have -- shift demand from one company you control to another that can use it right now, etc.

Except.... it isn't.

Why not?

Because while Moore's Law might in fact be at or near the limit the reality of technology pricing is unlikely to ever change.  It certainly hasn't in the consumer graphics card space, although there were times in the last four years that distortions got in the way -- and if you absolutely needed them then you had to buck up and pay.

But here's the basic problem with buying ahead of actual need: The price always goes down for a given capability over time; absent temporary distortions caused by various oddball things (like a pandemic and the supply chain disruptions that came with it) this is a story has never changed in over three decades.

And that makes things quite-dangerous for those who buy ahead because the person who buys after you, when the need is actually evident, winds up with the better, faster and often cheaper next generation -- and God help you if in addition (as is frequently the case) that also comes with lower power consumption which of course is a recurring, entire life cycle cost.

I had to deal with this in the 1990s with MCSNet and it was a serious concern with anything that I had to try to plan deliveries forward on.  Generally-speaking every one of those was a potential self-immolation event for the company because if you had a committed PO outstanding to some supplier and then the dislocation in price or new product came you were stuck with a higher cost of service than the other guy.

There are plenty of people who got it in the shorts with "Bitcoin mining setups" this way and for the same reason, but that was mostly a niche.  The AI craze is basically everywhere and thus the pratfalls are everywhere too., and those who clamor to be first but can't immediately deploy and make back the invested cost rapidly, certainly within a year or so of acquisition of the hardware are probably going to have happen to them what happened to people in the 1990s when Pentium 90s turned into Pentium 200s for less money and if you had a room full of the former while the other guy had the latter you got tattooed as his cost of operation on a space and dollar basis was half of yours.

(It has been even more-brutal in storage over the last 30 years.....)

I will be watching with quite some bemusement as this story continues to unfold.  While First Mover advantage is real that only works if you can immediately monetize the thing you are first with; if the "first" is a cost center but you can't recognize revenue from it until after the next iteration shows up you're at severe risk of being buried by the second guy who is a bit more-patient.

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