Patel states NVIDIA takes 5x markup on manufacturing cost, making power differences more significant for AMD deployments.
“If it's another deployment, if it's AMD, then that that that 20% power difference might translate to eight or 9% TCO difference when you when you talk about power cost and data center capacity cost.”
Patel says storage vendors Weka and Vast make high margins while drive vendors make no money.
“But then there's also, on the storage side, the drive vendors don't make any money. But Weka and Vast, I mean, look at their pricing models. They make crazy margin on storage.”
Patel says storage vendors Weka and Vast make high margins on multimodal AI requiring larger storage clusters.
“They make crazy margin on storage. And as you get to more multimodal models, image generative image and video robotics, you have much larger storage clusters.”
Patel quantifies 20% power efficiency translates to only 4% TCO difference when NVIDIA takes 5x manufacturing markup.
“if you have enough power, a 20% difference in performance per watt only ends up being a 4% difference in TCO. So, in most cases, don't on an NVIDIA deployment, right?”
Patel says inference providers sell public endpoints at flat or negative margins, compensating through private deployments.
“Most of the inference providers are selling at flat margins or even negative for their public endpoints. And they then make it up when people do private deployments.”
Patel says Weka and Vast make high margins on storage for multimodal AI workloads despite drive vendors making nothing.
“But then there's also, on the storage side, the drive vendors don't make any money. But Weka and Vast, I mean, look at their pricing models.”
Patel claims NVIDIA takes a 5x markup on manufacturing cost, making power efficiency less significant for TCO.
“So, in most cases, don't on an NVIDIA deployment, right? That's where NVIDIA takes 5x markup on their manufacturing cost, right?”
Patel explains hyperscalers are developing custom accelerators to reduce equipment costs since Jensen takes 75% margins.
“So what all the hyperscalers are trying to do is develop their own accelerator so that they can reduce this overwhelming cost for equipment to increase their margins.”
Patel states Oracle will grow from one-fifth Microsoft's size to larger by end of 2027 with 35% gross margins.
“like Oracle is going from like one fifth your size to bigger than you by end of twenty twenty seven.”
Patel states top neo clouds achieve 35-40% gross margins while many others are losing money.
“And this has enabled, you know, the top in the industry companies to have gross margins of 35, 40%. And now there's a ton of Neo Clouds that are losing money.”
Patel says NVIDIA must be 2x better than competitors to justify their 75% plus margins.
“NVIDIA recognizes they're they're the leader, they're the tent pole. Hey, in one respect, they can just run faster than everyone, but it's kind of hard to be two x better than Google or or OpenAI or whoever else's internal chip, right, to justify their, you know, 75% plus margins.”
Patel says NVIDIA must be 2-4x better than competitors to justify 75% margins and 4x pricing above costs.
“And then they have to be two x to four x better to justify four x better to justify their margins because that's what they're charging above cogs.”
Patel reports Anthropic achieved over 80% margins on Opus tokens and expects full profitability including stock compensation by Q3.
“That's how profitable they're getting, and their margins on an Opus token, at least Opus 4.8 token, is north of 80 for the API price.”
Patel reports Anthropic is Q2 profitable excluding SBC, expects Q3 profitability including SBC with 80% margins on Opus tokens.
“And I think by Q3 they may even be profitable, including stock based compensation. That's how profitable they're getting, and their margins on an Opus token, at least Opus 4.8 token, is north of 80”
Patel states Anthropic is profitable excluding stock compensation in Q2 with 80% margins on Opus tokens.
“Anthropic in Q2 is profitable, their net income profitable, excluding stock based compensation. And I think by Q3 they may even be profitable, including stock based compensation.”
Patel says OpenAI's gross margins rose from 30% to 55% overall, reaching 65% excluding free users.
“Now, total company gross margin is closer to 55%, and if you strip away the free users, they're at about 65%.”
Patel reports OpenAI gross margins rose from 30% to 55% overall, 50% to 65% excluding free users.
“You look at OpenAI late last year, their margins had were roughly 30% gross margin, but if you stripped away the free users, they were at 50%.”
Patel says OpenAI's total gross margin rose from 30% to 55% over the past year.
“OpenAI late last year, their margins had were roughly 30% gross margin, but if you stripped away the free users, they were at 50%. Now, total company gross margin is closer to 55%,”
Patel argues first-party ASICs have no residual value if OpenAI goes bankrupt, making them unfinanceable
“@TShirtnJeans2 @GavinSBaker @maxkan Why would someone finance a first party ASIC that has no residual value if OAI is bankrupt”