The immediate catalyst, it seems, is an intensifying focus on capex, or capital expenditures. Microsoft revealed that its spending surged 66% to $37.5 billion in the latest quarter, even as growth in its Azure cloud business cooled slightly. Even more concerning to analysts, however, was a new disclosure that approximately 45% of the company’s $625 billion in remaining performance obligations (RPO)—a key measure of future cloud contracts—is tied directly to OpenAI, the company revealed after reporting earnings Wednesday afternoon. (Microsoft is both a major investor in and a provider of cloud-computing services to OpenAI.)
Please fucking crash I want to be able to buy basic computing hardware again
Doubt that’ll happen for a few mor years unfortunately. I can’t imagine most of the hardware made for AI datacenters is compatible with consumer stuff :/
Yep the good times are over for now.
And even if, it might turn into a black hole for an agonizingly long time.
So much money is tied up in AI, that when it crashes you’re likely to end up poor, or worse, homeless, than being able to afford anything.
I wonder how fast you could run Farcry on one of those AI GPU units.
Pretty sure MS will just seize the OpenAi data centers and repurpose them for Azure and rent out compute time or use it for XBox streaming. Non of the hardware will reach the open market.
Regardless of who owns it or what they do with it, those GPUs will get sold on the used market with plenty of life left. Older AI GPUs, networking equipment (eg 100GbE), SAS drives, etc have been easy to find on eBay and other sites for a long time, because data centers replace hardware long before it’s expected to fail.
Exactly. They have like an 8 year depreciation, but they supposedly become obsolete in a couple of years for whatever cutting edge AI is supposed to be.
Even things like HDDs that don’t become “obsolete” in 18-24 months get sold with plenty of life left (unplanned downtime is more expensive than new hardware), but obsolescence makes it happen even sooner.
“market reaction suggests that more capital isn’t going to be a viable substitute for a business model anymore.”
Time to find the next vague thing that investors can pour trillions into without really knowing what it is or does.
Robotics. It will be a pivot to robotics.
Challenge there being that seems to have proven elusive. It’s not too surprising, but trying to use machine learning for robotics is actually really hard.
Driving is much easier, training data with video, audio, and other sensor input complete with how the human manipulated steering and two pedals.
But direct human interaction with the environment is both much more complicated than three controls and is not instrumented. They are trying to build training data from remote operators, but it turns out we aren’t very good at controlling these things remotely anywhere close to acting directly. We are terrible teachers and there’s a fraction of the actionable data that other more successful models had to work with.
If an AI sees a video of someone doing something, it can make a similar video, but can’t model how that might map to what it would see as unrelated motor and hydraulic operation.
Indeed. It will be a shitshow with all sorts of attempts to juice the share price via obfuscation of the actual abilities, like musk has been doing already. It won’t have many tangible outputs, but they’re desperate for the next big growth idea, so here we are.
The real lesson here is that if you are a company that was founded on stupid imaginary bullshit your investors are comfortable with investing in stupid imaginary bullshit and it isn’t going to hurt your price.
When you are a legacy tech company whose investors expect you to actually make products that you sell for money, they don’t like to hear that blew every penny you had on fucking magic beans.
This would be like Big Oil investing in Enron, no?
I miss consistent weather.
The snow keeps melting
A company with a $3.2T market share. The game is made up and the points don’t matter.
3.2 trillion is a stupid amount of money, but it isn’t all liquid. A 440 billion dollar hit (nearly 14%) would be very, very bad for them.
With the memory and SSD fiasco going on right now, fewer people are buying new PCs, which impacts their sales. Combined with the Windows 11 fiasco, the massive gaming division investments going nowhere, and the AI bubble, they’re probably the most vulnerable they’ve been in decades.
OEM license revenue represents a tiny tiny bit of their financials these days. They could just charge nothing for it and business wise no one probably notice much of a difference.
It is foundational to a lot of what they do, but older devices are just as good for their subscription and tie in revenue. Hell I use my work subscription for office from Linux, complete with OneDrive filesystem synchronization. Microsoft gets all their money from my headcount even as I don’t even use Windows.
But that capex could bite them hard if revenue falls to follow from it. That’s pretty much the only exposure investors care about.
OEM licensing isn’t the important part. It’s everything that comes with it. Subscriptions, cloud storage, etc. In my city, a bunch of field workers are being moved from laptops to iPads and phones with the next hardware refresh due to the price jump in laptops. Microsoft won’t have integrated Onedrive and SharePoint and full Office Subscriptions for them.
We already use third-party web apps that aren’t Microsoft (and are mostly hosted by AWS) for a lot of their work, so the only Microsoft product they’ll have is an email address.
Us abandoning the Windows laptops costs Microsoft hundreds a year per employee.
When someone makes a better version of excel that’s cross platform and not solely web based will be the final nail in the Microsoft coffin.
Not going to happen unfortunately. There have been so many challengers that have failed to usurp. And the bundling and ecosystem with sharepoint is a) exceptionally useful amd b) anticompetitive. It will take a serious legal case to dislodge excel
I am honestly surprised it never happened. Ma Bell got broken up in 1984, 6 years later Microsoft office is released, like 5 years later it has a dominant stranglehold. So in like a decade all of our consumer anti-trust power went away? Crazy.
Oh no…
Anyway.
OpenAI has made about $1.4 trillion in commitments to procure both the energy and compute it needs to fuel its operations. But its revenue barely crossed $20 billion in 2025.
Investors are increasingly critical of what they describe as “circular” deals involving the industry’s biggest players. On Wednesday evening, The Information reported that OpenAI is seeking a fresh $60 billion in funding from heavyweights like Nvidia and Amazon. However, market reaction suggests that more capital isn’t going to be a viable substitute for a business model anymore. “Maybe Oracle stock got way ahead of fundamentals, and now the market’s saying, ‘All right, show me, I want to see it,’” Eric Diton, president of the Wealth Alliance, told**Yahoo Finance.
Thanks for sharing, really insightful.
In my personal opinion after being also responsible in AI for our company, I do not see how it will be profitable for them.
For example Microsoft Copilot license, costs 30$/month, but a lot of things I can do with it a free Chatbot can do too.
It definitely has it strengths and use cases and I am sure it will not go away. But it is not the way the market it as a full AI, it just generates answers with the highest probability. I cannot see it developing from there to the real AI.
I think this year will be really interesting to watch all the AI companies, especially Oracle as they have to refinance a lot. If one falls it will send them into to a spiral, the big companies will be fine, but I am sure they will cut their funding of OpenAI.
But who knows could be the other way around and OpenAI finds anything new to make them more profitable.
So it begins
Wait.
You mean that dedicating the majority of their business to buying things from themselves has not proven to be a sound strategy in the eyes of investors?
The AI ouroboros if finally consuming itself.
I hate AI…it never was AI. It was useless in all my tests.
Sucks to suck
Looks like that magic well of social permission is about to dry up.
owing to a slight miss on revenue
Nope, try again.
spending surged 66% to $37.5 billion in the latest quarter … approximately 45% of the company’s $625 billion in remaining performance obligations (RPO)—a key measure of future cloud contracts—is tied directly to OpenAI
Ding ding ding! That’s right, OpenAI, the company where being profitable is a physical and mathematical impossibility!
Off topic, but interesting username. Are you a fan? Wait, are you him?
Not him haha. Big fan indeed! He is an unclassifiable art man even within the super eclectic cinema landscape that are Korean movies.
You mean Japanese movies?
Oh yes indeed. Ultimately I watch more Korean movies than Japanese ones, I would say 2:1 so yes, typo. His Yakuza movies are masterpieces
