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How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

nytimes.com

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Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#51

Post by jpollock »

crazygringo wrote: post #39

This is such a strange article -- there's nothing particularly unusual going on here. The first example basically stands in for all of them -- Microsoft invests $13B in OpenAI, and OpenAI spends $13B on Azure. This is literally just OpenAI purchasing Microsoft cloud usage with OpenAI's stock rather than its cash . There is nothing unusual, illicit, or deceptive about this. This is entirely normal. You can finance you…

The last time this hit the news, it was the dotcom bubble, and Nortel was in a similar position with startups, taking equity for equipment.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#52

Post by [deleted] »

SubiculumCode wrote: post #29

Given that AI is a national security matter now, I'd expect the U.S.A to step in and rescue certain companies in the event of a crash. However, I'd give higher chances to NVIDIA than OpenAI. Weights are easily transferrable and the expertise is in the engineers, but ability to continue making advanced chips is not as easily transferred.

[deleted]

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#53

Post by tonyarkles »

embedding-shape wrote: post #34
SubiculumCode wrote: post #29

Given that AI is a national security matter now, I'd expect the U.S.A to step in and rescue certain companies in the event of a crash. However, I'd give higher chances to NVIDIA than OpenAI. Weights are easily transferrable and the expertise is in the engineers, but ability to continue making advanced chips is not as easily transferred.

Why is ML knowledge "in the engineers" while chip manufacturing apparently sits in the company/hardware/something else than the engineers/humans?

First-order: because of the capex and lead times. If you grab a bunch of world-class ML folks and put them in a room together, they're going to be able to start producing world-class work together. If you grab a bunch of world-class chip designers in the same scenario but don't have world-class fabs for them to use, they're not going to be able to ship competitive designs.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#54

Post by Eisenstein »

vmg12 wrote: post #37

Here is a charitable perspective on what's happening: - Nvidia has too much cash because of massive profits and has nowhere to reinvest them internally. - Nvidia instead invests in other companies that use their gpus by providing them deals that must be spent on nvidia products. - This accelerates the growth of these companies, drives further lock in to nvidia's platform, and gives nvidia an equity stake in these com…

Your conclusion about training being the cost factor that will eventually align with profitability in the inference phases relies on training new models not being an endless arms race.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#55

Post by bob1029 »

embedding-shape wrote: post #34
SubiculumCode wrote: post #29

Given that AI is a national security matter now, I'd expect the U.S.A to step in and rescue certain companies in the event of a crash. However, I'd give higher chances to NVIDIA than OpenAI. Weights are easily transferrable and the expertise is in the engineers, but ability to continue making advanced chips is not as easily transferred.

Why is ML knowledge "in the engineers" while chip manufacturing apparently sits in the company/hardware/something else than the engineers/humans?

One person can implement a transformer model from scratch in a weekend. Hardware is not the valuable part of machine learning. Data and how it is used are.

The "magic of AI" doesn't live inside an Nvidia GPU. There are billions of dollars of marketing being deployed to convince you it does. As soon as the market realizes that nvidia != magic AI box, the music should stop pretty quickly.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#56

Post by klustregrif »

TZubiri wrote: post #32
throwaway106382 wrote: post #26

Isn't paying a company to dig a hole who then pays you the same amount to fill said hole illegal?

Seems like a net loss due to transactional costs.

The increase in value of the companies outweighs the transactional costs and then you borrow against the value of the company and make new circular deals. It works really well for a very long time and then at some point it doesn’t. The trick of the game is to get big corps involved and key decision makers so that the government bails out everyone in the end.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#57

Post by crazygringo »

philipwhiuk wrote: post #46
crazygringo wrote: post #39

This is such a strange article -- there's nothing particularly unusual going on here. The first example basically stands in for all of them -- Microsoft invests $13B in OpenAI, and OpenAI spends $13B on Azure. This is literally just OpenAI purchasing Microsoft cloud usage with OpenAI's stock rather than its cash . There is nothing unusual, illicit, or deceptive about this. This is entirely normal. You can finance you…

> Microsoft invests $13B in OpenAI, and OpenAI spends $13B on Azure. This isn't deceiving any investors. It's Microsoft increasing its revenue by selling its stock.

Microsoft isn't selling any stock. It's using its cash.

And an increase in revenue isn't the point. Microsoft isn't doing this to try to bump its short-term stock price or anything -- investors know where revenue is coming from. Microsoft is doing it because it thinks OpenAI is a good investment and wants to make money with that investment and have greater control.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#58

Post by belter »

vmg12 wrote: post #37

Here is a charitable perspective on what's happening: - Nvidia has too much cash because of massive profits and has nowhere to reinvest them internally. - Nvidia instead invests in other companies that use their gpus by providing them deals that must be spent on nvidia products. - This accelerates the growth of these companies, drives further lock in to nvidia's platform, and gives nvidia an equity stake in these com…

> Everything seems to indicate that once the models are trained, they are extremely profitable

Some data would reinforce your case. Do you have it?

Here is my data point: "You Have No Idea How Screwed OpenAI Actually Is" - https://wlockett.medium.com/you-have-no-idea-how-screwed-ope...

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#59

Post by jeffwask »

embedding-shape wrote: post #34
SubiculumCode wrote: post #29

Given that AI is a national security matter now, I'd expect the U.S.A to step in and rescue certain companies in the event of a crash. However, I'd give higher chances to NVIDIA than OpenAI. Weights are easily transferrable and the expertise is in the engineers, but ability to continue making advanced chips is not as easily transferred.

Why is ML knowledge "in the engineers" while chip manufacturing apparently sits in the company/hardware/something else than the engineers/humans?

The start-up costs of creating a new chip manufacture are significantly higher (you can't just SAAS your way into factories) and the chips themselves more subject to IP and patents owned by that company.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#60

Post by Eisenstein »

crazygringo wrote: post #39

This is such a strange article -- there's nothing particularly unusual going on here. The first example basically stands in for all of them -- Microsoft invests $13B in OpenAI, and OpenAI spends $13B on Azure. This is literally just OpenAI purchasing Microsoft cloud usage with OpenAI's stock rather than its cash . There is nothing unusual, illicit, or deceptive about this. This is entirely normal. You can finance you…

The bubble part is that nvidia is getting revenue from people investing money in their hardware in order to sell something that has not yet been shown to be profitable. If it turns out no one can make enough money selling AI generated data to justify the costs spent on the compute needed to generate it at the current rate, then what nvidia are selling becomes much less valuable, and the whole thing collapses. We haven't figured out yet whether or not that will be the case.
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