Gavin Baker: crunch spread should be revenue per GPU minus rental cost, not token price spread
GavinSBaker · x · 2026-10-24
Investor Gavin Baker corrected the 'crunch spread' formula: it's not Token Price − GPU rental price, but (Token Price × Token Volume) − GPU rental price, i.e. revenue per GPU minus GPU rental cost.
Key points:
- Continuous throughput improvements mean volume growth can more than offset token price declines for the same model.
- He cites Kimi K3 token throughput per GPU improving at a 37% annualized rate, driven by inference engine optimizations.
- GPU prices stay firm partly because mix is shifting from high-margin frontier tokens (e.g. $10 of Claude revenue needs $1 of inference compute) to lower-margin open-weight tokens ($10 of revenue needs $3–7 of compute due to provider competition) — which is actually positive for AI infrastructure.
Related event: Debate Over 'Crunch Spread' Formula Challenges AI Bubble Narratives(3 posts)→
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