It's not really "creating more compute" it's just a natural outcome of everyone desperately grabbing whatever becomes available. The dynamics make sense for all parties involved.

Firstly, it's very clear now that everyone is seriously crunched for capacity (like, each of the hyperscalers' backlogs -- i.e. capacity for which payment is committed, but as yet unsatisfied -- are in the double-digit billions.)

So as the compute providers bring more capacity online, everyone with demand wants to get a slice of that. Like, why would anyone NOT dive in and try to secure some capacity for themselves? Especially when the rate of capacity growth is constrained by the availability of GPUs and energy and data center buildouts, which is measured in years.

On the flip side, why would the compute providers NOT want multiple customers? It creates competition and drives prices up.

There are likely other forces at play too. For one, none of the parties - the model providers and the compute providers, with some of them like Google being both -- wants to get too dependent on any of the other parties, but they also want to secure a slice of each others' future growth, so they're all partnering with each other. Obviously, Google wants Gemini to win and Microsoft wants Copilot to win, but as a hedge, they'll be happy hosting their competitors' products and taking a cut.

This is partly the origin of the "circular investments" concerns. The scale at which this industry is growing, all these players have enormous mountains of money that they must invest to secure their future, but they are also the only players that can operate at this scale, and so the only place they can invest that money in is each other.