I've just drafted a new blogpost
"GPU demand is (~1Mx) distorted by efficiency problems which are being solved"
Mid-2024, Andrej Karpathy trained GPT-2 for $20. Six months later, Andreessen Horowitz reported LLM costs falling 10x annually. Two months after that, DeepSeek shocked markets with radical reductions in training and inference requirements.
For AI researchers, this is all good news. For executives, policymakers, and investors forecasting GPU demand... less so. Many were caught off guard.
The problem isn’t that executives / policymakers / investors lacked access to information per se… it’s that the technical/non-technical divide prevents them from seeing the difference between waste-based GPU demand and fundamental GPU demand.
Meanwhile, tech experts like Karpathy, a16z, and DeepSeek understand fundamental principles which are easy to overlook if you’re not implementing the algorithms yourself. But in presenting their results as merely “AI progress”, they buried the lede…
The Lede: If version X of an algorithm achieves the same result as version X-1 at 1/10th the compute cost, what exactly were we paying for in version X-1?
The answer has profound implications for anyone forecasting future GPU demand: version X-1 was roughly 90% waste. And a16z’s report, Karpathy’s achievement, and DeepSeek’s breakthrough indicate this isn’t a single 12-month event… it’s a multi-year pattern. Version X-1 was 90% waste. Version X-2 was 99% waste. Version X-3...
Wait… Leading AI labs allow waste?
The obvious question: if this waste exists at such scale, wouldn’t the labs building these systems have eliminated it already?
They are eliminating it. That’s what the 10x annual cost reduction represents. While hardware cost reduction accounts for some of the annual efficiency gain, software updates from AI labs constitute the vast majority… an ~86% efficiency gain annually. The puzzle isn’t whether labs are optimising… clearly they are. The puzzle is why so much waste existed to eliminate in the first place... and how much remains.
... (link on profile page)