In August, Kupperman, the founder of the Praetorian Capital Harris, wrote an essay on absurd finances for AI data centers. Although the technology industry equated data centers – more precisely, expensive semiconductor chips that feed them – as the Golden Rust “shovels”, Kupperman napkin mathematics found that AI data centers have an impossible short runway to achieve profitability.
In short, this is because the components of the data center are rapidly aging, outdated quickly in advanced technology, or to break down over many years of continuous, high power use.
After releasing their original conclusions, Morningstar Reports that Kupperman received anxiety from the alarming data centers industrial professionals. Thanks to those conversations, the investment manager realized that he made a fundamental mistake – and that is why his gloomy forecasting may not have been cynical enough.
“I clearly reached the nerve in the industry by deciding on the number of people who turned to the interview,” he wrote in a surveillance blog post. “In total, I talked to more than twenty rather older people in the Datacenter Universe, and our conversations were interesting and most important to our conversations; No one understands how financial mathematics should work. They are as perplexed as me, and they do it for a living. ”
The original Kupperman skepticism was created to speculate that the average components of the AI data center would take ten years to overthrow and require expensive changes. It was bad enough: “I don’t see how there could ever be any return on investment, taking into account current mathematics,” he wrote at the time.
However, he realizes that ten years are too generous.
“In the past, I thought the 10-year-old depreciation curve, which I now see as a rather unrealistic, based on the speed of AI data center technology,” Kupperman wrote. “According to my conversations in the last month, physical data centers take between three and ten years.”
In the previous analysis, Kupperman thought the technology industry would require $ 160 billion revenue to break even the data center costs alone in 2025. And this is assumed that an incredibly generous 25 percent gross margin is that, not to mention that the actual industrial income is closer to $ 20 billion a year, as noted by the investment manager on his previous blog.
“In fact, the industry probably needs an income range closer to $ 320 billion to $ 480 billion to just break even Capex, which will be missed this year,” Kupperman in his updated essay. “No surprise that my new contacts in the industry are heavy They know the truth. “