a16z's Moses Sternstein and Alex Danco on the "rack spread," the gap between rising GPU prices and falling token prices: "The core observation in the rack spread is as follows: roughly since the summer, GPU pricing has gone up, token pricing has gone down. Why that is: a combination of open competition, the labs themselves cutting prices." "We start with a bunch of GPUs and a bunch of electricity and a bunch of cooling, and on the other side out comes tokens, right? And the thing that achieves that is the model." "In an oil refinery, you have a bunch of inputs... It goes into a refinery, which is like the model, and then out come refined products that you can actually use, like jet fuel or diesel or lubricant or any number of specialized things." "There is this term called the crack spread... It's not a net margin that anybody is actually making... But it is useful because if you look at any given refinery, just like you might look at any given model, you want to ask this basic question which is, 'Is this making any money?'" @MosesSternstein @alex_danco