OpenAI applies the same strategy, but they’re using their equity to buy compute that is critical to improving their core technology. It’s circular, but more like a flywheel and less like a merry-go-round. I have some faith it could go another way.
But we know that growth in the models is not exponential, its much closer to logarithmic. So they spend =equity to get >results.
The ad spend was a merry go round, this is a flywheel where the turning grinds its gears until its a smooth burr. The math of the rising stock prices only begins to make sense if there is a possible breakthrough that changes the flywheel into a rocket, but as it stands its running a lemonade stand where you reinvest profits into lemons that give out less juice
Even if the model training part becomes less worthwhile, you can still use the data centers for serving API calls from customers.
The models are already useful for many applications, and they are being integrated into more business and consumer products every day.
Adoption is what will turn the flywheel into a rocket.
Power companies are even constructing or recommissioning power plants specifically to meet the needs of these data centers.
All of these investments have significant benefits over a long period of time. You can keep on upgrading GPUs as needed once you have the data center built.
They are clearly quite profitable as well, even if the chips inside are quickly depreciating assets. AWS and Azure make massive profits for Amazon and Microsoft.