Dylan Patel & Jon (Asianometry) – How the Semiconductor Industry Actually Works
Dwarkesh Podcast
Profit Amidst Decreasing Compute Costs
Profit margins in the computing industry remain healthy despite a decrease in selling prices, with the natural rate of profit hovering around $1.70. The ongoing decline in compute costs is likened to Moore's law, which predicts that computing power and efficiency will improve over time, thereby reducing expenses. This trend is evident in the rapidly decreasing cost of intelligence processing, where prices for token usage have plummeted from $120 to $10 per million tokens. Advances in compute efficiency and scaling strategies are likely to further drive down costs, fostering a competitive environment. However, significant investments are required for large computing clusters, exemplified by the $4-5 billion needed to deploy extensive GPU setups, which illustrates the scale challenge for smaller companies. Despite the lower cost of compute, achieving large-scale deployment remains a complex and costly endeavor.
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