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Stanford MS&E435 Economics of the AI Supercycle | Spring 2026 | Building AI Factories
- Crusoe aims to establish a vertically integrated "infrastructure of intelligence" by relocating data to low-cost energy sources rather than the other way around, with plans to expand the Abilene, Texas campus for Microsoft and operate it as a single coherent cluster interconnected via a high-performance network.
- The company forecasts total capital expenditures of approximately $60 million per megawatt, broken down into $40 million for IT (including $30 million for GPUs, $4 million for networking, $3 million for CPUs/storage, and $3 million for turnaround/operations), with ongoing operational expenses around $1 million per megawatt and projected revenues of $15 million per megawatt.
- Investment payback periods are expected to be four years for pure infrastructure rental, improving to two years when adding managed services and model hosting endpoints, which are predicted to increase margins by $5 million to $15 million per megawatt.
- Crusoe predicts H100 and next-generation Blackwell chip prices will continue to rise due to agentic demand, exceeding debut levels, while silicon margins are expected to eventually stabilize around 60% due to competition, though new hardware currently commands a premium.
- The company expects to generate power via a "energy first" strategy at the Quad, Texas site using wind, solar, batteries, and gas to firm up supply and sell excess energy, while the Abilene site aims to eventually employ more staff than the local population of 120,000.
- Significant cost inflation is anticipated for gas turbines, which have risen from $1 million to $3 million per megawatt, and labor shortages for skilled trades are expected to drive up costs and necessitate reinventing infrastructure deployment methods.
- The Crusoe Spark modular design is projected to save 30% to 50% on infrastructure costs compared to traditional builds, with air-cooled units at 500 kilowatts and liquid-cooled units at 2 megawatts, while water usage per building is expected to match that of a single-family home after initial filling.
- Regarding data center evolution, space-based infrastructure is deemed not material for the next 5 to 10 years contingent on SpaceX achieving a two-order-of-magnitude reduction in payload costs, whereas open-source models are expected to gain market share over closed-source players.
- The operational lifecycle of compute assets is expected to extend beyond the standard five-to-six-year depreciation cycle, with useful life determined by market value rather than a fixed calendar, while the core bottleneck for AI infrastructure is currently identified as the availability of energized power.
- Labor challenges, including shortages in electricians and construction workers, are viewed as critical constraints that may delay projects, alongside expectations that power electronics will undergo dramatic innovation to avoid jeopardizing current major players like Eaton and Schneider.