They do degrade physically, but the bigger thing is they stop being competitive quickly. Each year or so we see doubling of GPU speeds for the same amount of power.

If you build a 100MW data center with GPU compute and three years laster a new data center opens with the same cost for GPUs and same electricity cost you do, but can do twice as much compute, you quickly lose business unless the market is just so constrained customers can't afford to be picky. But the moment there's slack in the market you'll see major migrations off of providers that have the same cost but half, or quarter of the same performance.

So when you see someone talking about GPUs fully deprecating in value in 1-3 years this is what they're talking about. Right now it's not a big deal because there's no slack in the market. But once there is, the bottom will drop out.