Short Thoughts July 8, 2026 - NVDA, Neos, Hyperscalers, Jevons Paradox, and Compression
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One of Cassandra Unchained’s subscribers received this missive in his email and asked me about it. I am not sure of the source.
Rentability is not my claim, never has been. Depreciation is not a bet on when a chip stops working. It is the recovery of capitalized sunk cost over a defined window of earnings at the frontier, set against the terminal value. A chip can rent and still depreciate very fast economically. I never said the A100s would stop functioning.
In early 2025, Amazon (AMZN) shortened a subset of server lives to 5 years from 6 years and explicitly cited the pace of development. This caused additional expense across 9 months of $677 million. During the same quarter, Meta (META) extended its useful server lives to 5.5 years, reducing the depreciation hit to net income by $2.9 billion. Same hardware but opposite conclusions by two of the biggest.
Depreciation cannot move two directions at once if it were a measurement of something. It is an economic lever, not a physical measurement.
Satya Nadella at Microsoft (MSFT) said in an interview on the Dwarkesh Patel podcast, “I didn’t want to get stuck with four or five years of depreciation on one generation.”
NVIDIA’s Jensen Huang at GTC said when Blackwell ships in volume, “you couldn’t give Hoppers away.”
The biggest buyer and the biggest seller of these chips both admitted, pointedly, that the frontier moves faster than the depreciation schedules used by the big hyperscalers and neo-clouds.
The missive forwarded by the subscriber treads alongside arguments Coreweave CEO and Nvidia Neo Pal Michael Intrator has sent my way over the last 6 months or so.
Across multiple CNBC and Jim Cramer appearances, Intrator told the same story - his contracts run five years, his A100s stay fully booked, that a batch of H100s coming off contract were leased right back at 95% of the original price. He told Jim Cramer his customers are willing to rent GPUs for six to seven years.
Intrator’s consistent message is that Nvidia’s chips get rented out on successive contracts so the idea depreciation schedules should be less than 5 or 6 years is ignorant.
Intrator also unknowingly argued against this point of his at the Fortune Brainstorm AI conference when he attempted to describe circular financing as really just good logistics securing a volatile supply chain given compute and power take years to build.