So someone posted that whole thing about how Iran war means oil goes up which means energy gets expensive which means AI is dead. And like sure each step on its own isn't crazy but the whole thing is held together with vibes.
The part that got me was "opex balloons 3-4x on already razor thin margins." Razor thin?? MSFT cloud runs ~45% operating margin. NVDA is printing 60%+ net margins. In what world is that razor thin. You can be bearish on AI without just making numbers up.
And where does 3-4x even come from. Energy is like 10-15% of total data center costs. If electricity doubled tomorrow that's a 10-15% opex bump, not 300%. The rest is hardware, real estate, cooling. This is stuff you can just google.
Also most hyperscalers aren't buying power at spot like some guy mining crypto in his basement. They have multi-year contracts locked in. Microsoft signed a 20-year deal to restart Three Mile Island. Amazon bought a whole nuclear data center campus. Google's been on renewable PPAs since like 2010. Oil going up doesn't mean their electricity bill triples next quarter.
For this whole thesis to work you basically need Iran war prolonged, oil to spike AND stay high, that somehow hitting contracted data center rates, crushing margins that are currently enormous, the treasury market dying at the same time, and then China invading Taiwan on top of it. Every single domino has to fall perfectly. And he wants this by January.
Honestly if you wanna be bearish on AI there can be a real case, like whether these companies can actually monetize fast enough to justify the insane capex spend. but oil's not it.
Trimmed some in March, still long big tech.
The "AI is dead because oil" guy has clearly never read an income statement
byu/Promptfolio inwallstreetbets
Posted by Promptfolio
30 Comments
You think we read?
Also you don’t use oil for powering AI lmao.
If anything you use natural gas which might even drop in price because we get more solution gas wells from increased oil drilling
Listen, idk what u type and i aint reading all that. All i know is stonks only goes up
Oil has nothing to do with electricity anyhow. This sub is full of regards.
I have no idea what post you mean but it is pretty obvious that high oil prices lead to demand destruction and high inflation. High inflation leads to much less investments in AI companies. Demand destruction means companies wont be willing to pay for expensive AI subscriptions.
It has little to do with electricity prices but the impact on the valuation for AI is for sure there
Completely agree. Being bearish on the mags at these lows is just beyond silly. Even if AI completely fails they are going to be fine and in fact outperform because their free cash flow frees back up. Consolidation is only going to continue as time goes on and most mags are in a no-lose situation.
dude probably a gay bear trying to scare everyone. OR maybe a hedge fund dude with a big ass long position on tech/AI.
https://preview.redd.it/zzzqgbw2b9sg1.jpeg?width=551&format=pjpg&auto=webp&s=fbd0fc811e954915c9893ea11b53bd766cd7ccfa
Oil guy graduated and this is his certificate right here. I was in the class with him.
Ok. So. Calls?
Dude this is a lot of high context thinking for your new job in the Wendy’s Crew.
One note here. NVIDIA is a hardware supplier.
Now do the operating margins of copilot, chatGTP, grok, and Claude.
A lot of that funding is oil money.
Pretty much this. The AI infrastructure boom isn’t going anywhere. The CAPEX has already been announced and these data centers are getting built. I understand being bearish long term because it’s likely going to be somewhat cyclical, but “oil is going up so AI is dead now” is laughable.
Like ok guys, time to shut down all of the cloud servers. No more AWS or Azure. Oil is $100 a barrel! We can’t afford to run data centers anymore! 😂
I rarely use AI anymore tho. Lol.
My buddy who had an AI girlfriend in 2023 is now happily engaged to a real woman. They lost the gooners it’s over
to be fair, neither have I
Not worried about the helium for the chips?
He is retarded but so are you, NVDA is printing 60% net margin while trading at a 34 trailing p/e with 4T market cap. I’m a permabol but it’s pretty clear this is your first bear market, if it’s not then you’re obviously too retarded to realize the average tech stock already priced in years of gains in advance during the standard bull market. AI ain’t dead, but it’s still overvalued in a bear market. Overvalued stocks going up eternally only happens in a safe bull market with no volatility, which is not until that retard’s term ends or mid terms at least put a leash on his retarded plans. Now everyone is trimming and will keep trimming until all the situations resolves itself, or something new comes out to prop the market up.
Your notional bear thesis i do think will prove out
if you disagree with the market, now it’s time to buy the dip
Where is the « bag holder spotted » bot ?
Now would be a good Time
For that matter, MSFT committed to buying 3x their original power plant build out for the new center in Louisiana.
These hyperscalers are buying their own POWER PLANTS to run these things. You really think these oil price changes are gonna disrupt the entire industry?
Dude is delusional
What’s an income statement?
The only bearish correlation between rising oil and ai peaking could arguably be the reverse wealth effect, where upper tier income earnings slow their spending across all segments of the economy because their ai stocks are lower and they feel less rich. No identifiable causation tho between less barrels on ships and the end of the buildout.
The power doesn’t come from the oil, but the money comes from The Oil.
Ai is not making money though. Look at Open Ai and SORA.
Renewables will power AI. New battery tech will give better and cheaper storage and fix the intermittence issues, CATL and BYD are already making moves to enter the market full time. That’s my bet.
The fear mongering has gotten so out of hand with those people and I don’t think it will ever stop no matter what the economy is doing.
How about you look up what data centers run on and then you research how much cash they are burning while keeping those running and then you go full circle as to why oil prices impact AI.
I would be more concerned about the level of investment coming out of the gulf countries as this goes on.
100% bet that “AI is Dead” OP has like 2 years of market experience (if that).
Going all in on nuclear.