Will growth rates and margins remain strong enough to pay off their massive capex? We suggest a different target set.
Transcript
Chris Davis:
That's the $5 trillion question, and will they get a good return on that? I mean, the depreciation and amortization on these investments are realistically going to run close to a trillion dollars, and so I think the return on that capital is very unsure, and it really all comes down to whether there are switching costs or whether we end up with a locked-in ecosystem. We think it's a dangerous world to play in, unless you already have a hugely cash producing business that puts you in a position to be able to make the incremental investment and to have your current business become more profitable because of those investments. So that's been why Meta has been an area of focus for us. Their investments in AI make their existing business far more valuable, Google and so on. Danton, would you.
Danton Goei:
Yeah, I think those companies, Amazon, Microsoft in general are well positioned there. I worry more about the LLM companies more than the cloud companies, because there I think the business model is much less certain and they're unprofitable today. And we're all learning as users, the costs are quite high to actually use these products. So I think there the business model is still a lot more unclear. It's just very unclear.
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