Edward Conard

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  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
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Self-Driving Cars Could Be Decades Away, No Matter What Elon Musk Said

Christopher Mims Wall Street Journal
Date Posted:
June 7, 2021
Is Database:
Database

$80bn invested in autonomous driving tech, yet fully self-driving cars remain decades away due to significant AI challenges.

$80bn invested in autonomous driving tech, yet fully self-driving cars remain decades away due to significant AI challenges.
Despite over $80bn invested in autonomous driving technology, fully self-driving cars remain decades away due to significant AI challenges. Experts highlight that current machine-learning systems excel at pattern-matching but struggle with knowledge-based reasoning, crucial for navigating complex, real-world scenarios. Attempts to compensate with ultra-detailed maps are insufficient, as they aren't updated frequently enough to handle unexpected situations like unmapped construction sites. While small, low-speed shuttles in well-mapped areas may reduce uncertainty to acceptable levels, achieving widespread autonomy requires breakthroughs in AI or a complete redesign of urban infrastructure. Consequently, the promise of steering-wheel-free cars remains elusive, with current offerings limited to enhanced driver-assist systems. This underscores the gap between investment expectations and technological reality, suggesting that the path to full autonomy may involve integrating AI with other technologies and systems engineering approaches.

State of play of autonomous driving technology"...In contrast to investors and CEOs, academics who study artificial intelligence, systems engineering and autonomous technologies have long said that creating a fully self-driving automobile would take many years, perhaps decades. Now some are going further, saying thatdespite investments already topping $80 billion, we may never get the self-driving cars we were promised. At least not without major breakthroughs in AI, which almost no one is predicting will arrive anytime soon—or a complete redesign of our cities. A recently published paper called “Why AI is Harder Than We Think” sums up the situation nicely. In it, Melanie Mitchell, a computer scientist and professor of complexity at the Santa Fe Institute, notes that as deadlines for the arrival of autonomous vehicles have slipped, people within the industry are redefining the term. To gauge today’s machine-learning systems, she developed a four-level scale of AI sophistication. The simplest kind of thinking starts with skill-based “bottom-up” reasoning. Today’s AIs are quite good at things like teaching themselves to stay within lines on a highway. The next step up is rule-based learning and reasoning (i.e., what to do at a stop sign). After that, there’s knowledge-based reasoning. (Is it still a stop sign if half of it is covered by a tree branch?) And at the top is expert reasoning: the uniquely human skill of being dropped into a completely novel scenario and applying our knowledge, experience and skills to get out in one piece. Problems with driverless cars really materialize at that third level. Today’s deep-learning algorithms, the elite of the machine-learning variety, aren’t able to achieve knowledge-based representation of the world, says Dr. Cummings. And human engineers’ attempts to make up for this shortcoming—such as creating ultra-detailed maps to fill in blanks in sensor data—tend not to be updated frequently enough to guide a vehicle in every possible situation, such as encountering an unmapped construction site. Machine-learning systems, which are excellent at pattern-matching, are terrible at extrapolation—transferring what they have learned from one domain into another. For example, they can identify a snowman on the side of the road as a potential pedestrian, but can’t tell that it’s actually an inanimate object that’s highly unlikely to cross the road. Small, low-speed shuttles working in well-mapped areas, bristling with sensors such as lidar, could allow engineers to get the amount of uncertainty down to a level that regulators and the public would find acceptable. (Picture shuttles to and from the airport, driving along specially constructed lanes, for example.)

Christopher Mims, "Self-Driving Cars Could Be Decades Away, No Matter What Elon Musk Said,"Wall Street Journal, June 5, 2021, https://www.wsj.com/articles/self-driving-cars-could-be-decades-away-no-matter-what-elon-musk-said-11622865615

Self-Driving Cars Could Be Decades Away, No Matter What Elon Musk Said

In 2015, Elon Musk said self-driving cars that could drive “anywhere” would be here within two or three years.

In 2016, Lyft CEO John Zimmer predicted they would “all but end” car ownership by 2025.

In 2018, Waymo CEO John Krafcik warned autonomous robocars would take longer than expected.

In 2021, some experts aren’t sure when, if ever, individuals will be able to purchase steering-wheel-free cars that drive themselves off the lot.

In contrast to investors and CEOs, academics who study artificial intelligence, systems engineering and autonomous technologies have long said that creating a fully self-driving automobile would takemany years, perhaps decades. Now some are going further, saying that despiteinvestments already topping $80 billion, we may never get the self-driving cars we were promised. At least not without major breakthroughs in AI, which almost no one is predicting will arrive anytime soon—or a complete redesign of our cities.

Even those who have hyped this technology most—in 2019 Mr. Musk doubled down on previous predictions, and said that autonomous Tesla robotaxiswould debut by 2020—are beginning to admit publicly that naysaying experts may have a point.

“A major part of real-world AI has to be solved to make unsupervised, generalized full self-driving work,” Mr. Musk himselfrecently tweeted. Translation: For a car to drive like a human, researchers have to create AI on par with one. Researchers and academics in the field will tell you that’s something we haven’t got a clue how to do. Mr. Musk, on the other hand, seems to believe that’s exactly what Tesla will accomplish. Hecontinually hypesthe next generation of the company’s “Full Self Driving” technology—actually a driver-assist system with a misleading name—which is currently in beta testing.

A recently published paper called “Why AI is Harder Than We Think” sums up the situation nicely. In it, Melanie Mitchell, a computer scientist and professor of complexity at the Santa Fe Institute, notes that as deadlines for the arrival of autonomous vehicles have slipped, people within the industry are redefining the term. Since these vehicles require a geographically constrained test area and ideal weather conditions—not to mention safety drivers or at least remote monitors—makers and supporters of these vehicles have incorporated all of those caveats into their definition of autonomy.

Even with all those asterisks, Dr. Mitchell writes, “none of these predictions has come true.”

In vehicles you can actually buy, autonomous driving has failed to manifest as anything more than enhanced cruise control, like GM’s Super Cruise or the optimistically named Tesla Autopilot. In San Francisco, GM subsidiary Cruise is testing autonomous vehicles with no driver behind the wheel but a human monitoring the vehicle’s performance from the back seat. And there’s only one commercial robotaxi service operating in the U.S. with no human drivers at all, a small-scale operation limited to low-density parts of the Phoenix metro area, from Alphabet subsidiary Waymo.

Even so, Waymo vehicles have been involved in minor accidents in which they were rear-ended, and their confusing (to humans) behavior was cited as a possible cause. Recently, one was confused by traffic cones at a construction site.

“I am not aware we are struck or rear-ended any more than a human driver,” says Nathaniel Fairfield, a software engineer and head of the “behavior” team at Waymo. The company’s self-driving vehicles have been programmed to be cautious—“the opposite of the canonical teenage driver,” he adds.

Chris Urmson is head of autonomous trucking startup Aurora, which recently acquired Uber’s self-driving division. (Uber also invested $400 million in Aurora.) “We’re going to see self-driving vehicles on the road doing useful things in the next couple of years, but for it to become ubiquitous will take time,” he says.

Key to Aurora’s initial rollout will be that it will only operate on highways where the company has already created a high-resolution, three-dimensional map, says Mr. Urmson. Aurora’s eventual goal is for both trucks and cars using its systems to travel farther from the highways where it will at first be rolled out, but Mr. Urmson declined to say when that might happen.

The slow rollout of limited andconstantly human-monitored“autonomous” vehicles was predictable, andeven predicted, years ago. But some CEOs and engineers argued that new self-driving capabilities would emerge if these systems could just log enough miles on roads. Now, some are taking the position that all the test data in the world can’t make up for AI’s fundamental shortcomings.

Decades of breakthroughs in the part of artificial intelligence known as machine learning have yielded only the most primitive forms of “intelligence,” says Mary Cummings, a professor of computer science and director of the Humans and Autonomy Lab at Duke University, who has advised the Department of Defense on AI.

To gauge today’s machine-learning systems, she developed afour-level scaleof AI sophistication. The simplest kind of thinking starts with skill-based “bottom-up” reasoning. Today’s AIs are quite good at things like teaching themselves to stay within lines on a highway. The next step up is rule-based learning and reasoning (i.e., what to do at a stop sign). After that, there’s knowledge-based reasoning. (Is it still a stop sign if half of it is covered by a tree branch?) And at the top is expert reasoning: the uniquely human skill of being dropped into a completely novel scenario and applying our knowledge, experience and skills to get out in one piece.

Problems with driverless cars really materialize at that third level. Today’s deep-learning algorithms, the elite of the machine-learning variety, aren’t able to achieveknowledge-based representationof the world, says Dr. Cummings. And human engineers’ attempts to make up for this shortcoming—such as creatingultra-detailed mapsto fill in blanks in sensor data—tend not to be updated frequently enough to guide a vehicle in every possible situation, such as encountering an unmapped construction site.

Machine-learning systems, which are excellent at pattern-matching, areterrible at extrapolation—transferring what they have learned from one domain into another. For example, they can identify a snowman on the side of the road as a potential pedestrian, but can’t tell that it’s actually an inanimate object that’shighly unlikely to cross the road.

“When you’re a toddler, you’re taught the hot stove is hot,” says Dr. Cummings. But AI isn’t great at transferring the knowledge of one stove to another stove, she adds. “You have to teach that for every single stove that’s in existence.”

Some researchers at MIT are trying to fill this gap by going back to basics. They have launched ahuge effortto understand how babies learn, in engineering terms, in order to translate that back to future AI systems.

“Billions of dollars have been spent in the self-driving industry and they are not going to get what they thought they were going to get,” says Dr. Cummings. This doesn’t mean we won’t eventually get some form of “self-driving” car, she says. It just “won’t be what everybody promised.”

But, she adds, small, low-speed shuttlesworking in well-mapped areas, bristling with sensors such as lidar, could allow engineers to get the amount of uncertainty down to a level that regulators and the public would find acceptable. (Picture shuttles to and from the airport, driving along specially constructed lanes, for example.)

Mr. Fairfield of Waymo says his team sees no fundamental technological barriers to making self-driving robotaxi services like his company’s widespread. “If you’re overly conservative and you ignore reality, you say it’s going to take 30 years—but it’s just not,” he adds.

A growing number of experts suggest that the path to full autonomy isn’t primarily AI-based after all. Engineers have solved countless other complicated problems—including landing spacecraft on Mars—by dividing the problem into small chunks, so that clever humans can craft systems to handle each part. Raj Rajkumar, a professor of engineering at Carnegie Mellon University with a long history of working on self-driving cars, is optimistic about this path. “It’s not going to happen overnight, but I can see the light at the end of the tunnel,” he says.

This is the primary strategy Waymo has pursued to get its autonomous shuttles on the road, and as a result, “we don’t think that you need full AI to solve the driving problem,” says Mr. Fairfield.

Mr. Urmson of Aurora says that his company combines AI with other technologies to come up with systems that can apply general rules to novel situations, as a human would.

Getting to autonomous vehicles the old-fashioned way, withtried-and-true“systems engineering,” would still mean spending huge sums outfitting our roads with transponders and sensors to guide and correct the robot cars, says Dr. Mitchell. And they would remain limited to certain areas, and certain weather conditions—with human teleoperators on standby should things go wrong, she adds.

This Disney animatronic version of our self-driving future would be a far cry from creating artificial intelligence that could simply be dropped into any vehicle, immediately replacing a human driver. It could meansafer human-driven cars, and fully autonomous vehicles in a handful of carefully monitored areas. But it would not be the end of car ownership—not anytime soon.

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Previous articleJune 4, 2021A Goldilocks Theory of Fiscal PolicyThe US can sustain a maximum government debt to GDP ratio of 220% within a “Goldilocks zone” where interest rates remain below growth rates, allowing for fiscal sustainability.Next articleJune 7, 2021Why is Productivity slowing down?Capital deepening accounts for 44% of the slowdown in labor productivity, while TFP slowdown explains the residual.
Showing 484 database articles primarily about either Productivity, Cronyism, Incentives/Risk-Taking, Innovation/Research, Institutional Capabilities, Intangibles, Investment, Startups, or Workforce Reorganization

The College Wage Premium in the Generative AI Era

AI Summary. S. 575 between 2022 and 2026, the first sustained decline in relative demand for college-educated labor in four decades. AI exposure in white-collar occupations accounts for roughly 28% of that drop, as wage growth slowed disproportionately in high-AI-exposure jobs where college graduates are concentrated.

José Azar, Mireia Gine and Javier Sanz-Espín Social Science Research Network
Date Posted:
September 4, 2026
Is Database:
Database

The college wage premium flattened in the mid-2010s and has fallen ~8% since 2022. The authors argue that this compression reflects a broad decline in the returns to formal schooling, rather than a decline in the upper tail.

Is the college degree losing its economic value to artificial intelligence?

Core argument: The U.S. college wage premium fell from 0.626 to 0.575 between 2022 and 2026—the first sustained decline in relative demand for college labor after four decades of uninterrupted expansion.

After expanding for four decades, the U.S. college wage premium [dropped] sharply from 0.626 in 2022 to 0.575 in 2026. Current Population Survey data through 2026 implies an unprecedented drop in relative demand for college labor—the first sustained negative relative demand growth. Post-2022 wage growth slowed disproportionately in high-exposure occupations, which employ a disproportionate share of college graduates. By 2026, going from zero occupational AI exposure to full exposure had a negative effect on wages of−0.086. Combined with the college–non-college exposure gap, this mechanism accounts for roughly 28% of the total drop in the college wage premium from 2022 to 2026. While non-causal, these patterns indicate that task displacement in AI-exposed white-collar occupations plays a quantitatively meaningful role in the recent compression of the aggregate skill premium.

Takeaways by Macro Roundup® AI

  1. The U.S. college wage premium fell from 0.626 to 0.575 between 2022 and 2026—the first sustained decline in relative demand for college labor after four decades of uninterrupted expansion.
  2. Moving from zero to full occupational AI exposure reduced wages by 0.086 log points by 2026.
  3. the college–non-college AI-exposure gap accounts for roughly 28% of the total premium compression over that period.

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Gross and Net US Investment

AI Summary. Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment merely replaces depreciating assets. The shift toward faster-depreciating information technology assets requires larger gross investment increases to achieve any given gain in productive capital per worker.

Timothy Taylor Conversable Economist
Date Posted:
September 4, 2026
Is Database:
Database

U.S. real net private domestic investment—which adds to the American capital stock—is now only ~25% as large as gross investment, down from ~40% in the 1970s. Taylor suggests the widening gap between gross and net investment reflects the relatively rapid depreciation of IT-related capital.

Does faster asset depreciation explain slowing productivity growth?

Core argument: Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment now merely replaces depreciating capital rather than expanding the productive stock.

The figure divides net investment by gross investment. Back in the 1970s, net investment was often around 40% of gross investment, but the share has been slumping over time. For the last decade or so, net investment has been about 25% of the gross–that is, about three-quarters of gross investment is just making up for depreciation of the pre-existing capital stock. The likely reason for the growing gap between gross and net investment is that modern investment is more likely to be related to information technology [which] depreciates more rapidly and thus needs to be replaced and updated more often. If we want the average US worker to be using a greater amount of capital on the job–which was one of the key drivers of rising labor productivity in the past–it now takes a bigger rise in gross investment to lead to a given rise in net investment.

Takeaways by Macro Roundup® AI

  1. Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment now merely replaces depreciating capital rather than expanding the productive stock.
  2. The shift toward information technology — which depreciates faster than physical machinery — is the primary driver of the widening gap between gross and net investment.
  3. Raising capital per worker, a historic engine of labor productivity growth, now requires a substantially larger increase in gross investment than it did several decades ago.

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The AI Re-Acceleration That Wasn’t

AI Summary. 615). Claims of re-acceleration result from cherry-picking frontier observations, selecting a breakpoint, ignoring variance collapse, and fitting separate lines on either side.

Paul Kedrosky Applied Complexity
Date Posted:
September 3, 2026
Is Database:
Database

Kedrosky argues AI capabilities continue to improve, but “the full composite data shows flattening relative gains, not acceleration…rolling relative model gains have fallen from their 2024 peak, while model dispersion has narrowed sharply.”

Are AI performance gains accelerating or just appearing to through selective measurement?

Core argument: Epoch’s Capabilities Index shows no statistically significant AI performance acceleration when controlling for developer and model family, with a breakpoint test returning p = 0.615 and a slope-change confidence interval of -8.4 to +23.4 pts per year.

Using all Epoch’s Capabilities Index observations, and controlling for developer and model family, there is no statistically significant breakpoint. A piecewise model—which splits the series into intervals and applies a sub-function to each segment—does not improve on a purely linear trend: p = 0.615, The estimated change in slope has a confidence interval of -8.4 to +23.4 points per year. In short, the maths shows there is no model acceleration, contrary to claims, and as expected. The result comes from selecting frontier observations only, choosing a breakpoint, ignoring variance collapse, and fitting separate lines on either side.

Takeaways by Macro Roundup® AI

  1. Epoch’s Capabilities Index shows no statistically significant AI performance acceleration when controlling for developer and model family, with a breakpoint test returning p = 0.615 and a slope-change confidence interval of -8.4 to +23.4 pts per year.
  2. Claims of AI re-acceleration rest on a methodological artifact: selecting only frontier model observations, pre-choosing a breakpoint, ignoring variance collapse, and fitting separate trend lines on each side of that breakpoint.

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  • Why .400 Hitters Disappeared — and What It Means for AI — As AI model performance converges toward a ceiling, relative gains per improvement cycle shrink, transforming frontier capability from a pricing moat into a commodity where price becomes the primary differentiator and margin pressure intensifies across leading providers.
  • Chart of the Day: Small Models are Closing the Gap to Frontier AI — Small AI models are closing the gap with large ones, achieving the same reasoning benchmarks with 142x fewer parameters than required two years ago. This makes on-device AI viable without data centers, compressing the economic case for cloud-based, per-query AI services.
  • Anthropic’s Best AI Model Struggles To Attract Users As Cheaper Tools Thrive — Spending on the most expensive AI model from a leading provider has plateaued at 11% of total outlay, as cheaper, older models prove capable of handling most business tasks.
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Understanding AI and Productivity

AI Summary. U.S. productivity growth has accelerated to ~2.2% annually since mid-2022, above the 2010s baseline, though pandemic-era labor market and business formation dynamics likely contributed alongside AI. Historical general-purpose technology booms sustained labor productivity growth above 2.5% for a decade or more, making the current acceleration substantial but not unprecedented.

Chad Syverson Economic Innovation Group
Date Posted:
August 28, 2026
Is Database:
Database

Syverson is skeptical that AI initiated the rise in productivity growth that began in 2023. The acceleration began while AI investment was small, and pandemic-era labor market churn and business dynamism match the acceleration’s start.

Is AI-driven productivity growth sustainable at historical technology boom levels?

Core argument: U.S. labor productivity has grown at roughly 2.2% annually since mid-2022, a pace exceeding the 2010s trend and, if sustained, implying GDP per capita roughly 7% higher within a decade than the prior trajectory.

Productivity from mid-2022 on has maintained a faster-than-2010s trajectory involving annual growth of about 2.2%. Could this acceleration be due to AI? Perhaps. The timing leans against AI being the sole initial cause. Additionally, there were well-documented increases in economic dynamism (labor market churn and business formation) during the pandemic emergence whose timing matches the acceleration’s start. Regardless of AI’s current effect, the longer the aggregate productivity acceleration continues, the more plausible it is that AI is an important driver. As for the magnitude, a sustained increase from 1.5 to 2.2% annual productivity growth would be substantial (after a decade, GDP per capita would be 7% higher than otherwise), but hardly unprecedented. The 1995–2004 productivity boom saw annual productivity growth of nearly 3% per year, and other past general-purpose-technology-related productivity boosts saw labor productivity growth in excess of 2.5% for a decade or longer.

Takeaways by Macro Roundup® AI

  1. U.S. labor productivity has grown at roughly 2.2% annually since mid-2022, a pace exceeding the 2010s trend and, if sustained, implying GDP per capita roughly 7% higher within a decade than the prior trajectory.
  2. The 1995–2004 productivity boom averaged nearly 3.0% annual growth, establishing that a durable AI-driven acceleration to 2.2% would be meaningful but well within historical precedent for general-purpose-technology cycles.
  3. Pandemic-era surges in labor market churn and business formation align more precisely with the productivity acceleration’s start date than AI adoption does, complicating AI-as-sole-cause narratives.

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US Widens AI-Driven Investment Gap With Europe

AI Summary. US corporate investment in equipment and facilities is projected to grow 40% in real terms by the end of next year, versus 12% in the euro area, widening a productivity gap where output per hour worked rose $14 in the US compared with $2 in Europe since 2018.

Sam Fleming, Amy Borrett and Olaf Storbeck Financial Times
Date Posted:
August 24, 2026
Is Database:
Database

Oxford Economics projects US real business investment will rise 40% over 2021–2027, ~3x the euro area’s 12%. US investment growth since 2024 has been largely information processing and software, but high US growth in GDP/hour is not “merely digital.”

Is artificial intelligence investment widening the transatlantic productivity divide?

Core argument: U.S. corporate investment in equipment and facilities is projected to rise 40% in real terms between 2021 and end-2026, versus 12% in the euro area and near-zero growth in Germany, sharply widening the transatlantic capital-spending gap.

Corporate spending on new equipment and facilities in the US is projected to increase 40% in real terms between 2021 and the end of next year, according to forecasts from Oxford Economics. The US surge compared with a real-terms increase of just 12% in the euro area, while German business investment is expected to have all but stagnated over the same period. Europe also faces a large and growing productivity gap with the US. “The United States has recently pulled further ahead of Europe,” Bart van Ark, a professor at the University of Manchester, told policymakers at the ECB Forum in Sintra. GDP per hour worked increased $14 in the US between 2018 and 2025, compared with just $2 in Europe. “The gap is not only a digital sector story,” added van Ark, stressing that the US outperformance extended to other sectors, including wholesale and retail as well as professional services.

Takeaways by Macro Roundup® AI

  1. U.S. corporate investment in equipment and facilities is projected to rise 40% in real terms between 2021 and end-2026, versus 12% in the euro area and near-zero growth in Germany, sharply widening the transatlantic capital-spending gap.
  2. U.S. labor productivity rose $14 per hour worked between 2018 and 2025, versus $2 in Europe, with outperformance spanning wholesale, retail, and professional services—not solely the digital sector.

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Why Big Tech’s AI Spending Is $3 Trillion Higher Than It Seems

AI Summary. Nine major technology companies carry ~$3tn in off-balance-sheet AI commitments — 5x their ~$600bn in reported capital spending — obligations that are growing faster than traditional investment and triple their combined lease and debt liabilities.

Peter Rudegeair and Peter Santilli Wall Street Journal
Date Posted:
August 17, 2026
Is Database:
Database

A WSJ analysis finds 9 firms involved in the data center buildout have ~$3T in off-balance-sheet commitments largely tied to AI infrastructure. The growth in such obligations has outpaced the firms’ capex growth over the last year.

Are technology companies hiding the true cost of artificial intelligence?

Nine top tech companies had some $3 trillion of off-balance-sheet commitments mostly related to AI, according to a Wall Street Journal analysis of footnotes in their most recent securities filings. Those obligations are growing faster than traditional “capex,” which totaled about $600 billion over the past year they reported, and were about triple what the companies owe under their outstanding leases and long-term borrowings.

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  • The Market Is Asking Questions — AI infrastructure debt spreads are widening as markets question whether returns on massive, front-loaded capital spending will outpace financing costs before assets depreciate. If compute demand plateaus from efficiency gains or slow adoption, the industry faces a glut of expensive, rapidly depreciating capacity.
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