The host asks what everyone gets wrong about buying chips and how fast they lose value. Lochmiller says early financing demanded very quick payback, and that people underestimate how inventive developers are at turning compute capacity into something valuable.
Well, the way we depreciate the assets today is we use a six-year depreciation cycle. That's sort of like the standard across the industry. Now, one of our philosophies as a business is like, look, we are going to be long infrastructure. We're going to be long data centers. We're going to be long energy. We're going to be long chips. And so the more ways we have of turning those long investments into money, the better off our shareholders are going to be and the better off our business is going to be. And so that's actually what caused us to investing in this suite of managed AI services. And when you look at that business, where it abstracts away the actual underlying chip, the underlying compute from the service that people are receiving, it opens up new monetization engines that can persist for a much longer period of time. And there's always going to be demand for the frontier of silicon. There's always going to be demand for the frontier of model capability. But there's also going to be demand for much cheaper alternatives. And being able to provide intelligence at a lower cost with a older generation of chip that may be slower is still going to have value. And so abstracting away some of the difficulties by actually having a suite of services that can monetize these chips for longer will ultimately, we believe, extend the depreciation cycle beyond six years. What
do you think everyone? Gets wrong about chip buying, chip depreciation that they should know.
I think when we started to make really substantial purchases with hoppers, and this was in 2023, the feedback we got was like, well, we don't even know if this is going to be valuable after year three, right? Here we are three years later, and the prices being charged for utilizing hoppers is higher than the rates that were being charged three years ago when they were brand new. So early financings was, you know, you had to get payback very, very quickly and you had to have like a lot of debt service coverage. So I think people underestimate the ingenuity of applications and application developers of turning compute capacity into value and into valuable services for the economy.
I spoke to Lee Jacobs before and he was talking to me about the risk mindset that you had
to ordering millions of dollars of GPUs
from NVIDIA well before it was cool, as he put it. My question to you is: how on earth do you think about