Foreword
This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
As the ML/LLM capex boom expands ever larger, a useful exercise is to spend some time thinking about how large this can go, and when or what can potentially derail it. To that end, a post I came across recently puts a lot of things in perspective.
As usual, a reminder that I am not a financial professional by training — I am a software engineer by training. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.
If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.
Deep thoughts
This blog post, freely available, presents a framework for thinking about the capex spend. It is long and very nuanced, yet concisely written with very little fluff. The kind of article you should read and re-read, to be sure you understand the author’s every word. Certainly DO NOT try to summarize this using an LLM1.
Footnotes
- Honestly, you really shouldn’t use LLMs to summarize or analyze anything, lest you end up confidently arguing about “straight line capitalization”, which to be absolutely clear, is NOT a thing — it is entirely hallucinated. ↩︎
Janky Thoughts 