Hyperscalers have already outspent most famous US megaprojects

Posted by nowflux 1 hour ago

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Comment by timmg 1 hour ago

This tweet shows it as a percentage of US GDP:

https://x.com/paulg/status/2045120274551423142

Makes it a little less dramatic. But also shows what a big **'n deal the railroads were!

Comment by chromacity 59 minutes ago

But doesn't that overstate it in the other direction? Talking about investments in proportion to GDP back when any estimate of GDP probably wasn't a good measure of total economic output?

We're talking about the period before modern finance, before income taxes, back when most labor was agricultural... Did the average person shoulder the cost of railroads more than the average taxpayer today is shouldering the cost of F-35? (That's another line in Paul's post.)

Comment by bombcar 55 minutes ago

That's the problem with going too far using "money" or "GDP" - you can roughly compare the WWII 45% of GDP spent with today - https://www.davemanuel.com/us-defense-spending-history-milit... because even by WWII much was "financialized" in such a way that it appears on GDP (though things like victory gardens, barter, etc would explicitly NOT be included without effort - maybe they do this?).

As you get further and further into the past you have to start trying to measure it using human labor equivalents or similar. For example, what was the cost of a Great Pyramid? How does the cost change if you consider the theory that it was somewhat of a "make work" project to keep a mainly agricultural society employed during the "down months" and prevent starvation via centrally managed granaries?

Comment by helterskelter 22 minutes ago

You don't even need to go that far back to run into issues, when I read Pride and Prejudice, I think Mr. Darcy was one of the richest people in England at around £10,000/year, but if you to calculate his wealth in today's terms it wasn't some outrageous sum (Wikipedia is telling me ~£800,000/year). The thing is that the economy was totally different back then -- labor cost practically nothing, but goods like furniture for instance were really expensive and would be handed down for generations.

With £800K today, you may not even be able to afford the annual maintenance for his mansion and grounds. I knew somebody with a biggish yard in a small town and the garden was ~$40K/yr to maintain. Definitely not a Darcy estate either.

Thinking about it, an income of £800K is something like the interest on £10m.

Comment by chaos_emergent 54 minutes ago

I posted just that on the Twitter feed but then I realized that railroad started at the beginning of an industrial revolution where labor was a far larger portion of GDP compared to industrial production. So it kind of makes sense that the first enabling technology consumed far more GDP than current investments do, even on a marginal basis.

Comment by dghlsakjg 14 minutes ago

The railroads and the interstate are arguably the biggest and broadest impact, especially in 2nd order effects (everything West of the Mississippi would be vastly different economically without them).

I am not an ai-booster, but I would not be surprised at AI having a similar enabling effect over the long term. My caveat being that I am not sure the massive data center race going on right now will be what makes it happen.

Comment by j-bos 29 minutes ago

As sibling comments mentioned deceptive comparison as well. How about comparing in percentage of Gross Energy Output. https://www.sciencedirect.com/science/article/abs/pii/S09218...

Comment by losvedir 6 minutes ago

Does anyone know what's included in "datacenter capex"? In particular, does that include spending for associated power generation? Because whether or not the AI craze pans out, if we've built a whole bunch of power plants (and especially solar, wind, hydro, etc) that would be a big win.

Comment by measurablefunc 1 minute ago

You can't run a data center on solar or wind (even w/ batteries included). Everything they're building runs on gas & coal like what Musk got running for xAI.

Comment by lukeschlather 51 minutes ago

This seems like a total category error. The Railroads are the only example that actually seems comparable, in being an infrastructure build out that's mostly done by a variety of private companies. Examples of things that would be worth comparing to the datacenter boom are factory construction and utilities (electrification in the first half of the 20th century, running water, gas pipes.)

Comment by 0xbadcafebee 22 minutes ago

Fwiw, Railroads were the reason for some of the biggest bank collapses in history. Panic of 1873 was literally called "The Great Depression" (until a greater depression hit). 20 years later was the Panic of 1893. Both were due to over-investment and a bubble bursting, and they took out tons of banks and businesses.

We're seeing exactly the same thing with AI, as there is massive investment creating a bubble without a payoff. We know that the value will lower over time due to how software and hardware both gets more efficient and cheaper. And so far there's no evidence that all this investment has generated more profit for the users of AI. It's just a matter of time until people realize and the bubble bursts.

And when the bubble does burst, what's going to happen? Most of the investment is from private capital, not banks. We don't know where all that private capital is coming from, so we don't know what the externalities will be when it bursts. (As just one possibility: if it takes out the balance sheets of hyperscalers and tech unicorns, and they collapse, who's standing on top of them that collapses next? About half the S&P 500 - so 30% of US households' wealth - but also every business built on top of those mega-corps, and all the people they employ) Since it's not banks failing, they probably won't be bailed out, so the fallout will be immediate and uncushioned.

Comment by therobots927 36 minutes ago

The problem is that once built, railroads provided economic value right off the bat.

I would love to hear about the economic value being generated by these LLMs. I think a couple years is enough time for us to start putting some actual numbers to the value provided.

Comment by JumpCrisscross 5 minutes ago

> once built, railroads provided economic value right off the bat

If they were laid on a sensible route, completed on budget and time, and savvily operated. Many railroads went bust.

Comment by lukeschlather 20 minutes ago

Equating this buildout with LLMs is also a category error. Waymo (self-driving cars) depends on the same infrastructure, and there are a variety of other robotics programs which are actually functioning, you can see them in operation. They all require a lot of GPUs to train and run the models which operate the robotics.

Comment by therobots927 2 minutes ago

What % of GPUs are running self driving software or robotics?

And what is the ROI on either of those right now?

Comment by jeffbee 41 minutes ago

The other categorical error is that the American people paid the railroads a monumental subsidy to get the job done. We gave them almost 10% of the territory.

Comment by lenerdenator 30 minutes ago

Given the size of some of these data centers, the incentives packages that local governments often give their developers, and the impact on the electric grid that can, in some cases, raise costs for other ratepayers, I'd say the comparison could be similar.

The one Google's putting in KC North is 500 acres [0] and there were $10 billion in taxable revenue bonds put up by the Port Authority to help with the cost.

This for a company that could pay for that in cash right now.

[0] https://fox4kc.com/news/google-confirms-its-behind-new-data-...

Comment by jeffbee 12 minutes ago

That's the opposite of a subsidy. KC stakes nothing of value and gets a defined revenue for the next 25 years.

Comment by lenerdenator 7 minutes ago

Then why would Google mess with the bonds at all?

Again, they have the cash to buy that land and develop it without any further consideration beyond permits and planning.

Comment by stefan_ 47 minutes ago

"Infrastructure build out"? Everything put into these datacenters is worthless well before 10 years have gone by.

We aren't even getting infrastructure out of it, they are just powering it with gas turbines..

Comment by jeffbee 43 minutes ago

This isn't true and you can easily prove it to yourself by renting a Sandy Bridge CPU or a TPUv2 from Google today.

Comment by pier25 21 minutes ago

https://xcancel.com/finmoorhouse/status/2044933442236776794

Comment by kerblang 26 minutes ago

Adjusted for inflation?

edit - sorry, it is in fact adjusted, text is kinda hard to see

Comment by anigbrowl 21 minutes ago

It literally says 'Inflation-adjusted costs' on the right side of the graph, right under the main title, FFS.

Comment by therein 56 minutes ago

I really dislike the term hyperscaler. Comes off very insincere. They came up with it themselves, didn't they? What's the official definition supposed to be now? Companies that are setting up as many GPU/TPU server clusters as possible for a demand that's yet to exist?

Comment by coffeefirst 38 minutes ago

I have concluded the entire public discourse surrounding AI has no relationship to real stuff that you can go, test, and point at.

There’s a loop of everyone is saying stuff because everyone else is saying stuff that turns into a sort of reality inspired fan fiction.

It’s not just that it’s wrong or imprecise, that I expect, it’s that the folklore takes on a life of its own.

Comment by mikrl 4 minutes ago

Superscaler sounds too much like superscalar…

Comment by bombcar 54 minutes ago

It always makes me think of a hyperactive toddler running around in circles, which oddly fits most thought leaders who use the term.

Comment by lenerdenator 29 minutes ago

That's not fair to the toddlers; their crap tends to be safely contained in a diaper as opposed to their heads.

Comment by cidd 52 minutes ago

Nobody really uses the term in the Valley except probably C-level people talking to Wall street investors.

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Comment by SpicyLemonZest 24 minutes ago

Gentle reminder that the cost of producing well-formatted graphs is much, much lower than it used to be. We grew up in a world where the mere existence of this graph would prove that someone put a great deal of effort into making it, and now it does not. I have no specific reason to doubt the information, but if you want to have reliable epistemic practices, you can no longer treat random graphs you find on social media as presumptively true.

Comment by metalman 1 hour ago

we, the people, are the ultimate mega project, and it's showing