Big tech is headed for a crash, worse than the one that caused the dot-bomb a quarter century ago.
The reason is Nvidia, which has been leading the boom.
Nvidia AI chips are energy hogs. The Hopper H-100 takes 1,000 watts of power. That’s about as much as a high end microwave. But unlike the microwave, the load is continuous. Next year’s Blackwell B-200 will take 1,875 watts of power. Nvidia plans to make millions of them.
This is because Huang’s Law beats Moore’s Law by ignoring some of its limitations. I saw this 20 years ago when my son’s AMD gaming computer began overheating. Intel fought the problem by dividing the load of its chips into cores, and by running less power through them. Instead of doing any of this, Nvidia just makes bigger chips. The Hopper on its circuit board sticks out like an elephant on the veldt. The Blackwell will be more like a whale.
Beyond the difficulty in making such chips efficiently (manufacturing is prone to errors and becomes economic only as production ramps and errors are reduced), there remains the cost of powering them. It’s easy for the Cloud Czars to buy Hoppers because they have the cash flow for it. They’re squeezing out employees and have stopped adding new data centers to make it work, but they’re doing it.
Trouble is, they haven’t yet accounted for the ongoing cost of running Nvidia fueled data centers. Neither has anyone else. Even though it’s anything but a secret.
Paying the Price
We’ve already seen Bitcoin miners take up the energy use of a whole country to run their data clusters. This is going to be like that on steroids. Also, as I’ve noted, Nvidia chips let anyone build their own cloud data center on a few racks The Cloud Era is over once Nvidia supplies (and prices) let it happen.
But we’re still left with the energy cost. Bitcoin miners get theirs out because they’re creating fake money. A single Bitcoin is worth $67,000, so even if you’re just getting 3 Bitcoin for solving the puzzle, and the solution is costing you more compute each time you do it, you’re still making money.
How is AI going to do this? We’ve gotten our first hint from Microsoft. They’re charging companies $30 per user per month to use their Co-Pilot AI. Windows 365 by itself is under $10/month.
We’re seeing two classes of Internet users. This is before AI really gets going. Co-Pilot is advertising it can turn a deep tome into a presentation. That’s easy, its mostly generating forms, pictures, and summaries. What happens to the cost when AI becomes truly useful? What happens to Third World users when Google becomes useless as Alphabet chases the shiny object of AI? (It’s already happening.)
The Internet worked because it worked for everyone. Costs mean AI will only work for those who can pay the price for it. The energy costs of AI mean you won’t get much service from advertising. There aren’t that many folks out there who can afford to pay for the energy required to get value from AI.
A crash is coming.
