Non-cynically: the frontier providers have a projection for demand.

Cynically: it’s become an executive-level gpu measuring contest. If you’re not making huge commitments on data centers, you can’t be a serious player.

Realistically: It’s a mix of the two. The recent Claude caps for agentic usage suggest that demand exceeded their immediate compute supply. That they can alleviate it with additional capacity from the existing and small-ish xAI facility suggests that either demand may not be rising quite as fast as anticipated, that they’re okay in the short term until more capacity comes online, or a mix of both.

Open questions:

1. At what price point does demand fall, and are the frontier providers overall profitable before that price point?

2. At what price/performance point do on-prem local models make more sense than cloud models?