No. of Recommendations: 7
The computer business, by definition, is a fast-changing business and always has been. Leaders are leapfrogged by new technologies. I remember using a Wang computer. Jeff could probably regale us for hours about the left-behinds.
Software can be easily superseded but at least it doesn't require massive capital investments. But companies that rely on hardware invest billions of dollars in manufacturing plants and data centers.
wsj.com - It really is possible to spend too much on AI
It Really Is Possible to Spend Too Much on AI
Tech giants are betting they won’t end up like Intel by overinvesting in computing infrastructure
By Asa Fitch, The Wall Street Journal
It has become a tech-industry truism: Spending too little on chips and other computing infrastructure for artificial intelligence is riskier than spending too much....
But investors have begun questioning this logic, fretting that the spending spree might be inflating a bubble that will inevitably pop. Indeed, spending too much can be very bad. Just ask Intel....
Overinvesting may have been the correct move for Intel in its circumstances then [2021]. But technological missteps and changed circumstances in the chip market undercut the effort within a couple of years.
The result has been nothing short of a disaster. Manufacturing projects have been put on hold or canceled. The company has been bleeding cash with free cash flow in negative territory in all but three of its last 14 quarters....
Large financial commitments to AI data-center projects might no longer make sense, becoming a burden for tech companies for years to come. If assumptions about the value of AI-related assets and contracts change, write-downs are also inevitable. A lot of startups could fail....[end quote]
This is yet another warning about the dangers of the AI bubble.
Wendy
