Thread by @KobeissiLetter

This is BEYOND insane:

AI compute demand is now growing at over 2 TIMES the rate of Moore’s Law, creating a massive shortage.

Just to meet current demand, $500 billion must be invested in data centers PER YEAR until 2030.

What does this mean? Let us explain.

(a thread)

For decades, Moore’s Law was the gold standard measure of technological progress.

That is: the number of transistors on an integrated circuit doubles every 2 years.

AI has BROKEN this law.

AI’s compute demand has grown at DOUBLE the rate of Moore's Law over the last 10 years.

Compute is quickly becoming the world's most valuable commodity.

By 2028, global data center spend will hit $900 BILLION.

AI servers are growing at a +41% CAGR and the market overall is growing at a +23% CAGR.

This is UNPRECEDENTED growth for the industry.

And, here's what's even more interesting:

Amid the daily billion dollar AI deals, data centers are now facing an $800 BILLION revenue shortfall.

Just to fund data center construction through 2030, we need ~$2 TRILLION in revenue.

Data centers are the new oil.

This makes data centers incredibly valuable amid the AI Revolution.

Data center construction, just the cost of building the center itself, has increased to an annual rate of $43.0 billion.

This is up +322% higher than 4 years ago.

This cost does NOT include chips or servers!

As a result, we are witnessing a modern-day gold rush:

There are now $40 BILLION worth of US data centers under construction, up +400% since 2022.

For the first time, the value of US data centers under construction will soon EXCEED office buildings.

This is a historic shift.

The byproduct of this is a major energy shortage.

AI data centers are set to consume 1,600 terawatt-hours of power demand by 2035, equal to 4.4% of global electricity.

Power demand from AI data centers is set to QUADRUPLE over the next 10 years.

We need more electricity.

This brings 2 key questions to mind:

1. Where is all the money going to come from?
2. Where is all of the electricity going to come from?

It will require a mix of technological, economic, and regulatory solutions.

In our view, we are still very EARLY in the AI Revolution.

As a result, 2 forms of technology are gaining attention:

Nuclear power and quantum computing.

Unlike solar or wind, nuclear plants run 24/7, matching AI’s constant energy draw.

And, quantum exploits qubits to perform calculations exponentially faster than classical chips.

Amid the rapid growth, Forward P/E ratios are actually DECLINING.

This is a key difference between the AI boom and 2001 Dot-Com bubble.

The S&P 500's forward P/E ratio is nearly HALF of what it was at the 2000 peak.

Many companies are getting cheaper as they go up.

The AI Revolution is transforming just about ALL parts of financial markets.

The macroeconomy is shifting and stocks, commodities, bonds, and crypto are investable.

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In our view, the AI Revolution is a generational opportunity with historic investment.

AI now accounts for ~40% of S&P 500 CapEx spend.

Those who adapt will benefit the most amid the modern day gold rush.

Follow us @KobeissiLetter for real time analysis as this develops.