Joseph Bland on The AI burn rate is making Washington nervous - 'Also, Mark, a gamble doesn’t actually pay off before a net profit is shown, so all these great EPS numbers being shown and ROI numbers being implied are not worth the paper they’re written on until then. Basically, it’s a shell game intended to pull the wool over investor’s eyes – and boy howdy, is it ever working!'
on The AI burn rate is making Washington nervous - 'All that Siri came up with for your prompt is: I can’t create an image of that. Try describing something different. While better, it hasn’t been very good for my usages.'
on The AI burn rate is making Washington nervous - 'Ovide writes: “But questions about that AI vision are now growing more urgent: When, if ever, will this payoff arrive?” The answer arrived quarters ago and its confirmation is available in new earnings reports. The accelerated computing data center business model is sound and the ROIC from its infrastructure build is impressive and already clearly underway. There will be failures because always there are failures along the change pathway. But for anyone who wants to evaluate objectively, there is ample evidence this shift in computing platform rapidly is demonstrating its economic viability. The quotes are Andrew Jassy’s. “Let me talk for a second about how we see this investment playing out. Earlier this year, we said we plan to invest approximately $200 billion in cash CapEx in 2026, the majority of which to support AI and AWS. At this level of spend and higher, we have clear line of sight to strong financial returns. I’ll explain why. There are 2 major parts of the investment, the data centers and the servers and networking equipment that go into them. These have different capital cycles. Data center capital is spent starting 2 years before we can put servers into them to start monetizing. Once a data center opens with servers plugged in, we start generating significant revenue right away and then get to monetize these data centers for 30-plus years without having to spend that start-up capital again. Servers and networking equipment operate on a shorter cycle. We typically purchase these a few months before putting them into service, so we have strong visibility into customer demand before we trigger the spend. If the demand isn’t there, we won’t spend the capital. For servers and networking equipment, on average, it takes a little less than 3 years to break even on that investment. The servers currently have a useful life of at least 5 to 6 years, and most of our AI capacity these days is being contracted for at least 5-year terms. That means that we’re driving significant free cash flow on the servers and networking equipment in the 2 to 3 years after we break even. It’s also worth noting that AWS has a strong track record of pulling forward break evens on server equipment where we’ve already made meaningful progress and finding ways to extend the useful life of this equipment without sacrificing customer experience. So for our data centers, which have 30-plus-year useful lives, we should get at least 5 to 6 generations of server economics, like I explained earlier, with subsequent generations after the first having even better overall economics because we don’t have to repeat that upfront data center investment I mentioned earlier. This means in the short term, when demand is necessitating so many data centers being built simultaneously in advance of when we can start monetizing them, we’ll spend a lot of CapEx and encounter free cash flow headwinds until these data centers come online, can be monetized and we get a few years into these servers being utilized. But as we get a few years out and the revenue growth outpaces the incremental CapEx growth, which will happen at some point, the resulting revenue, free cash flow and return on invested capital is very compelling. We’ve done this before in the first era of cloud computing, just over a longer time horizon, where demand built more gradually than it has in AI. But we see the margins and returns in AI tracking what we saw with core at the same point of evolution, actually, a little ahead.”'
on The AI burn rate is making Washington nervous - 'Am I right in believing that SOMEONE is providing the money for all that debt? Or is this a case of paper debt and paper profits?'
on NYT: The day Trump put Larry Ellison in charge of AI - 'Ellison should spend his time racing his yacht. Or watching it race.'
on The AI burn rate is making Washington nervous - 'Hyperscalers are also hiding an additional $1.x trillion of debt from their balance sheets. lycoristechnologies.com/blog/hyperscaler-off-balance-sheet-ai-debt/'
on The AI burn rate is making Washington nervous - 'This is tangentially related to AAPL and stock price outlook. I saw that TD Cowen today issued a buy rating and a $400 price target on AAPL. That’s optimistic I think. I guess we wait to see what Dan Ives has to say.'
on WSJ: Apple gave $25 million for Trump's ballroom - 'It’s impossible to reconcile Cook’s history with his willingness to play along with Trump. Just a few examples: In 2014, Cook told shareholders who didn’t agree with Apple’s position on climate change to “get out of the stock.” In 2017, Cook said Trump’s DACA stance was un-American. “This is unacceptable.This is not who we are as a country. I am personally shocked that there is even a discussion of this.” The Robert & Ethel Kennedy Human Rights Center may want its “Ripple of Hope” award back. The award “recognizes leaders who demonstrate a dedication to improving the world, reflecting Robert Kennedy’s values.” https://kennedyhumanrights.org/press/john-lewis-tim-cook-roger-altman-marianna-vardinoyannis-win-2015-ripple-of-hope-award/'
on Joanna Stern: Apple leasing explained (video) - 'I like this idea (leasing) very much! I’m apt to deploy it for Macs and iPhones. I use my iPads primarily as news readers and they last years. I’ll stay with what I have now. I’d prefer to own my Apple Watch. I have multiple Apple Watch(es) in use and have one on constantly. They last years and my use cases are complicated.'
on The AI burn rate is making Washington nervous - 'Here is a nice breakdown discussing how debt impacts much of the AI economy — the recent burst of the Situational Awareness AI fund, the circular funding, the impact of AI on our GDP and even the recent Fed decision — possibly leading to a market meltdown similar to 2008. For many of the same reasons most bubbles burst — margin calls and loan defaults. I may not always agree with Max, but I often do learn something new. He usually has some facts and graphs on topics I am not aware of. Situational Awareness: How a 25-Year-Old’s Hedge Fund Exposed the Entire AI Bubble'
on NYT: The day Trump put Larry Ellison in charge of AI - 'His immediate willingness to throw Elon Musk a billion or more $$$ to buy Twitter was part of all of the influence game required to do what he has been in AI in TrumpLand.'
on WSJ: Apple gave $25 million for Trump's ballroom - 'All they need is a TV with Fox News 24/7, a phone to post unhinged rants and call people to yell about fraud, Dems how he is the greatest _____ and has been wronged.'
on WSJ: Apple gave $25 million for Trump's ballroom - 'People have often been killed/tortured/imprisoned for standing up for their principles. Were those deaths wasted- because they could have stayed alive and fought behind the scenes? Or were they motivational enough to cause mass resistance and overthrow? The latter is romantic, but rarely true in reality. I think it’s usually better to do what you need to to stay alive, survive and work for something better.'
on WSJ: Apple gave $25 million for Trump's ballroom - 'The unpleasant question that we have to ask is: “To what extent do payments (of any kind) to Trump represent fiduciary responsibility to investors?” What sort of other costs would Apple incur if it did *not* play along with the slug in this brave new banana republic that we are living in?’ This may be a necessary lesser of evils from a fiduciary point of view, as much as it goes against my beliefs or the beliefs that I believe that Apple is built on.'
on WSJ: Apple gave $25 million for Trump's ballroom - 'And for that little bit of sick at the back of your throat, calculate what proportion of Apple that you own, then divide $25,000,000 by that number. That’s how much you contributed to that steaming pile of…'
on Apple's mixed Q3 2026: What the talking heads are saying - 'I’m going to say this once: in this Bloomberg video, Gurman gives a cogent and straightforward assessment of the raw numbers, the supply issues and headwinds that Apple is facing, and poses pertinent memory supply questions. He actually sounded like a professionally competent tech guy. No snark, no sensationalism, little criticism since Apple is having to deal with the same industry wide memory cost issues every one else is dealing with.'
on WSJ: Apple gave $25 million for Trump's ballroom - 'Bribery or extortion? A matter of perspective I guess.'
