Hyperscaler

“And even companies that I thought would never be going back on prem are talking about going back on prem. Like some of the most innovative digital native companies in Silicon Valley are now thinking about moving their stack from, you know, one of the hyperscal…”

“I think a lot of the hyperscalers in Frontier Labs are going to be very relevant providers in the chip ecosystem.”

“Next year, supposedly, it's going to reach a trillion dollars collectively across the bay. [296] Raghu Raghuram: Hyperscamers this year, it's about 700 billion dollars, right?”

“All the hyperscalers have taken on much more debt than they ever have before”

“If there is a dislocation, no one is better prepared to survive it than hyperscalers. I mean, all the hyperscalers have enough ongoing business and they've been very consistent. That's why they're worth what they're worth. The magnificent seven is there becaus…”

“One of the hyperscalers told me they just did a nine figure Double Lindy reverse, where they went from doing a frontier model on 100 billion dollars in infrastructure, and they're like, bing, it's gonna be open source, not frontier.”

“Once investors look under the hood and see more and more of this, they'll be questioning, why are we spending so much on pre-training? Why are you doing billion dollar training runs anymore? If most of the gains and models are coming from post training and RLH…”

“And so people are realizing that they're in it even by holding an S&P 500 index fund because of the concentration of hyperscaler and AI related names, which is something like 40 odd percent now.”

“Some of these hyperscalers are, like, laser focused on, like, twenty-twenty-seven, twenty-twenty-eight, and, like, there's no world in which we're going to provide a gigawatt capacity that quickly at least using this kind of technology.”

“The hyperscalers and the, you know, the biggest the biggest AI labs are buying 95 plus percent of it, right? And then you kind of have the startups, like, fighting over the scraps.”

“If you look at the amount of gigawatts that are supposed to come on, and consensus estimates for hyperscalers, they're effectively modeled, and these are gigawatts of Blackwell and Rubin. Rubin being NVIDIA's next chip, Blackwell being the current chip. They a…”

“Operating cash flows go up, and you could fund this out of, most of this out of operating cash flows, maybe all of it. Like if it reprices at current rates, you could probably fund all of it for the next several years.”

“And my view is that it's real that I think there will be a return on all of this capex. I don't try to predict stocks or tell people when they should be buyers, but you look at the hyperscalers, they have invested pretty much all of their free cashflow. And th…”

“You had the hyperscalers and the big companies, they FOMO'd too. They FOMO'd just as hard as Leopold did, right? If not harder. So this isn't just him. It's the whole world collectively saying, fuck, I gotta go all in in AI. And it's, and who had the guts, you…”

“Definitely over the next like 36 to 48 months. My guess is bring your own capacity, right, which is sort of the umbrella term for everything I'm talking about is going to be a very, very, very quickly growing sector of this market, because when hyperscalers th…”

“So that's why you're investing two hundred billion dollars now, and in a year or two, we're gonna see insane amounts of free cash flow.”

“You're talking about volumes of, let's say, a thousand units a quarter. And now we're being asked by these hyperscalers to deploy in 1,000,010 of millions of units. So it's really changed the dynamic in our industry, not just for Lumentum, but I think every si…”

“When we think about the cost of the hyperscalers, right now energy is about budgeted to be about 10% of their cost... If you plug in all of this compute and it's gas powered, and we think gas could double or triple structurally, Even without weather, it could …”

“Everybody who are making decisions in this moment are using the forward curve for natural gas, which is flat, a little backward, a little contiguous, mostly flat out to the twenty-thirties, in the mid threes.”

“These hyperscalers, some of them, are running out of capacity, and they're running out of capacity, so this large customer in Texas, speaking to them, they have really good partnership with one of the hyperscalers. They wanted to move more workloads in cloud, …”

“Data centers are back. Nobody is now saying, hey especially in the Fortune 500, and most people get that wrong because everybody thought, hey, all the workloads are just going to move to this hyperscaler. So hyperscaler is running out of capacity and making su…”

“The other, you know, large telecommunications company in the United States was also similar. They had one particular hyperscaler, and they said this hyperscaler refused to give them additional regional capacity that they needed. So they signed with the second …”

“No, I think there is definitely a shortage of electricians, plumbers, all kinds of trades, you name it. So anything we can do to train more folks to be able to do those, there are very well-paying jobs that a lot of us, all of the hyperscalers, all of the labs…”

“We are spending in AI CapEx just among the hyperscalers Six hundred and eighty eight billion dollars this year. On the other hand, and that's how it takes to make AI. Think of that as all the money, I'm very simplistic, all the money going in to just make AI h…”

“Nvidia has run out of places to grow. They can't sell to any more countries. They can't sell to any more hyperscalers.”

“Generally speaking, I think it's fair to say that Google is the most sophisticated company. And on the energy side, they have sort of the biggest, you know, trading desks. They've choked some pretty big deals with utilities, as you probably know, for low flexi…”

“I think Google's energy team is probably a multiple of the size of the next hyperscaler. Just the number, the sheer number of people they have dedicated to it.”

“The type of contracts that have been signed so far are for the most part non-binding subject to milestones.”

“We are not going to be a hyperscaler, which was two of the four you mentioned, and we're not a foundation model provider.”

“I mean, one of the big tech companies that runs like a hyperscaler, let's call it has one of our direct competitors has 130 full-time employees that work at that company that have badges that show up to work every day that run their logistics for them. And we …”

“The next thing is look at, it's very important from day one, you'd have to target the first customer. And usually I like the customer is hyperscale. They have the scale. If they like what you have, they're willing to pay millions of dollars next few years. And…”

“I think it has been NVIDIA's strategy to try and create competitors for the traditional hyperscalers. They have funded and backstopped and over allocated to the neoclouds. They have created a dependence, which is probably not healthy.”

“All these companies are on fire because the hyperscalers and the model companies have decided to spend, you know, roughly three quarters to a trillion dollars a year building shit, and 50% of that goes to Nvidia, 10% of that goes to power, 10% of that goes to …”

“Samsung and Hynix together generate more cash flow than every hyperscaler.”

“I think, and I could be wrong, I think in the end the value will accrete mainly to the model providers and everyone down the stack that's selling to them, even though they're all making out like bandits today, starting with the memory guys all the way up to th…”

“The people who are, you know, the big hyperscalers are firms that are dominated by founding shareholders who are putting their own money where their mouth is. These aren't professional managers Making bets on the future with other people's money. This is their…”

“Who will this hurt? It will hurt Anthropic and OpenAI the most. Who will this benefit? It will benefit the hyperscalers, specifically Oracle, Amazon, Meta, Microsoft, and Google.”

“These companies will now get levered. They're going to get highly sophisticated around the financial engineering. They'll have more debt. They'll have all kinds of different vehicles and term loans and revolvers and all of this stuff. And so they're going to l…”

“The hyperscalers control 60% of all the compute.”

“We've been very fortunate to have a backlog of, Over 10 gigawatts at this point working with the leading hyperscalers.”

“Otherwise we're going to be left with tens or even, yeah, tens of gigawatts of Mac gas burners that are going to last for another 20 years, and they might be a quick fix now, but I think the hyperscalers know they're going to pay a price for this later, both i…”

“So I would say until 2030, there's no doubt that this is going to continue to scale at this rate. The question is like, what happens after 2030, and is it going to continue beyond that?”

“I think they're creating the tooling layer. That then a lot of us are now using to create real businesses on top of. So I kind of go back to the internet breakthrough and internet revolution and think about, okay, like the browsers, everybody was super excited…”

“I just don't believe the hyperscalers are going to buy these companies.”

“We're now doing it in data centers, building gigafactories on the on the back of long-term contracts with hyperscalers or sovereign offtakes.”

“I think moats are as shallow as they've ever been, right? Because how fast things are moving, the size of the numbers that are being thrown around now, right? It's hundreds of billions of dollars for each major hyperscaler. The size of the numbers are so large…”

“And over the next several years you know, that scales to trillions of dollars, right?”

“At some point in the next five to 10 years, they'll be generating enormous amounts of free cash flow. When that happens, I think that, ah, they're likely to insource the compute.”

“Over the next 10 years, I think the business, these hyperscalers, AWS, Azure, will grow fast. I think the margins, my guess, will be challenged, both because the businesses are getting a lot more capital intensive, because AI is capital intensive, more capital…”

“It seems like the labs will Turn into sort of new hyperscalers. There will be you know, increased competition, but still very, very good businesses a la cloud.”

“CapEx for this year that's expected just from the four leading hyperscalers is six hundred billion dollars just from four companies. That's a roughly two percent tailwind to GDP growth right there.”

“They didn't take investment from any of the hyperscalers. They had opportunities to do that, but they chose not to. So give the user and the enterprises a choice of any cloud. Rather than be tied to one cloud.”

“We don't need the government's help to finance AI, the AI CapEx. The hyperscalers have infinite money. The private markets have had infinite money. The public markets are pretty hot to trot. So all the money these guys need to play their game is going to be th…”

“Hyperscalers capex is going to be like five hundred billion dollars this year or something like this.”

“Hyperscalers are paying for transmission grid upgrades, which people will benefit from.”

“The gold standard is financing a box, a data center that is being used by a hyperscaler, being guaranteed by a hyperscaler that amortizes.”

“If instead you'd have gone in and said look, great. We, we're going to be good citizens. We're going to be big taxpayers here. Let's build more schools. We can build a school for you. It's a rounding error in the cost of this facility. We're going to make a bu…”

“It's very clear that it's not all that easy to make chips like NVIDIA. It is very clear that running operations as large as what the hyperscalers run for renting out compute, that's not that easy. It's very hard for a fourth, a fifth hyperscaler to come up.”

“If those ROIs don't come to pass, I don't think the whole system is going bankrupt, but that clearly will have a weighing effect on the markets. Certainly the biggest hyperscalers will be okay, but that cascades down to many, many players, some of whom have go…”

“Video is actually, It's still expensive enough that it's hard to actually come up with a, if you're not a hyperscaler, to come up with a viable business model. Arguably, it's not a business model even for them.”