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Financing the AI boom: from cash flows to debt [pdf]

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Re: Financing the AI boom: from cash flows to debt [pdf]

#61

Post by yndoendo »

nativeit wrote: post #25
senectus1 wrote: post #15

Earlier quoted context omitted.

pre-echos of "too big to fail"

I’m not sure I understand these references. The banks were too big to fail specifically because they were banks involved with the finances of every major industry and government, not simply because their (arguably specious) valuations, or even market caps, had a ton of zeroes on them. What’s the argument for OpenAI being so inherently critical and interweaved with the rest of the economy that it can’t be allowed to f…

Too big to fail is an oxymorononic statement. Bailing out bad businesses retains those that poorly managed them. Those organizations should of been sold off to remove the bad actors.

AI is currently a sunk cost to the US stock industry that is repeating the bad actor scenario. Not a single AI company is profitable and none of them produce deterministic nor cost effective solutions

Microsoft's statment of using AI to find the most resource intensive applications being ran highlights this. Task Manager does the same thing and does not need a server farm for training. It also uses MB of RAM vs GB.

If manufacturing had the same error rate in production as AI, those plants would of went out of business.

Both industries heavy use legal bribes, donations. Politicians will gladly bail them out to take ℅ of the cut in bribes.

Too big to fails are false claims to retain the bad actors that fund politicians. Bad actors need to fail so the good ones can properly operate.

Too big to fail is also allowing large corporations to skirt copyright laws. You or I seeding TB of copyright content would be thrown in jail.

Too big to fail is rebranding of legalizing corruption.

Re: Financing the AI boom: from cash flows to debt [pdf]

#62

Post by eric_khun »

MichaelMoser123 wrote: post #59

Speaking of financing: how is the Anthropic IPO going, what is the timeline? They filed over a month ago, no news since. (I would have expected some spectacular news headlines that would be designed to fuel public interest in the impending IPO, but can't detect anything of substance)

they're probably waiting to see how market reacts to fable5 and gpt 5.6

Re: Financing the AI boom: from cash flows to debt [pdf]

#63

Post by treis »

oblio wrote: post #55
fragmede wrote: post #52

Earlier quoted context omitted.

Where have you looked? OpenRouter? Your own experiments? From running various models locally on my MacBook, and paying for the laptop and the electricity to power it, but not the training run, as all I did was install some software that downloaded models from Hugging Face, yes it's cheap. Well, the hardware was several thousand dollars, so not cheap on a personal level, but not unaffordable either.

> OpenRouter Do we have the balance sheet for OpenRouter & co? Especially in this age where if you put AI in your company's mission statement you're drowned in money. Let's hold off on calling something "cheap" until the external financing money runs out and the actual numbers are revealed AND audited. > yes it's cheap. When running toy models that do basically 0 of what regular people expect from state of the art LL…

Except for movie pass startups are marginally profitable on whatever they sell.

Re: Financing the AI boom: from cash flows to debt [pdf]

#64

Post by ambicapter »

ironSkillet wrote: post #54
amazingamazing wrote: post #20

Usefulness aside, I see little evidence AI is making money (profit, not revenue) for any firm whose profit doesn't come from the AI itself or the infrastructure, including supply chain. I'd love to hear a counterexample. One such example would be of a hypothetical company that does translations for payment, and with AI they now are making more profit because they use AI to do the translation rather than pay a transla…

I'm not an MBA over here, but this math seems wrong. If they are spending $240 in increased costs, then they only have to make about $247 in additional revenue from that spend to preserve a 3% margin. That seems much more reasonable if it increases the probability that customers find the product they are looking for and have a good experience.

I agree here. OP is taking a retail company's entire profit margin, which includes a lot of operating costs, and estimating that the AI subscription will have the same margin. The AI subscription is software though, it probably has the operating costs and profit margins of software.

Re: Financing the AI boom: from cash flows to debt [pdf]

#66

Post by paulhebert »

arjie wrote: post #48
edoceo wrote: post #45

Earlier quoted context omitted.

Or every teacher gets classroom supplies for five years. Or treatment programs for addicts. There are a lot of economic benefits to helping folks on the lower side of the income spectrum.

Yeah but taxing 50% of all earnings below $100k could also do that. What money can be spent on is fine but I think we’ve got a good system where people can have reward for economic output and they can use that to allocate money where they want. There are places with central planning and I don’t like them. Personally, I’d rather the money be spent on datacenters. And as it goes, the guys with the money also would pref…

You would rather build data centers than buy school supplies or implement a nationwide high speed commuter rail network?

Re: Financing the AI boom: from cash flows to debt [pdf]

#67

Post by andsoitis »

yndoendo wrote: post #61
nativeit wrote: post #25

Earlier quoted context omitted.

I’m not sure I understand these references. The banks were too big to fail specifically because they were banks involved with the finances of every major industry and government, not simply because their (arguably specious) valuations, or even market caps, had a ton of zeroes on them. What’s the argument for OpenAI being so inherently critical and interweaved with the rest of the economy that it can’t be allowed to f…

Too big to fail is an oxymorononic statement. Bailing out bad businesses retains those that poorly managed them. Those organizations should of been sold off to remove the bad actors. AI is currently a sunk cost to the US stock industry that is repeating the bad actor scenario. Not a single AI company is profitable and none of them produce deterministic nor cost effective solutions Microsoft's statment of using AI to…

> Both industries heavy use legal bribes, donations. Politicians will gladly bail them out to take ℅ of the cut in bribes.

Are you saying that it is likely that at some point in the not too distant future, OpenAI and Anthropic will need bailout-size cash infusions from the US Government to continue existence and that the US government will do it and not face severe political consequences?

I just don't think that chain of events is likely. The current administration pays very close attention voter sentiment.

Re: Financing the AI boom: from cash flows to debt [pdf]

#68

Post by keeda »

amazingamazing wrote: post #20

Usefulness aside, I see little evidence AI is making money (profit, not revenue) for any firm whose profit doesn't come from the AI itself or the infrastructure, including supply chain. I'd love to hear a counterexample. One such example would be of a hypothetical company that does translations for payment, and with AI they now are making more profit because they use AI to do the translation rather than pay a transla…

This study finds increased sales and value per customer from GenAI integration at a large Chinese online retailer (all the way back in 2023-24!) The customer Q&A scenario is one of those covered, except the customer talks directly to the LLM rather than an employee with a subscription:

https://arxiv.org/abs/2510.12049

> We quantify the short-term impact of Generative Artificial Intelligence (GenAI) on sales performance through a series of large-scale randomized field experiments involving millions of users and products at a leading cross-border online retail platform. Over 2023-2024, the platform integrated GenAI into seven business workflows spanning customer service, consumer-product matching, advertising, and seller services. We find that GenAI adoption increases sales in most workflows, with effects ranging from no detectable impact to 16.3%, depending on GenAI's marginal contribution relative to baseline firm practices. Across the four GenAI applications with positive sales effects, the implied annual incremental value is roughly $5 per consumer−an economically meaningful impact given the retailer's scale and the early stage of GenAI adoption. The gains operate primarily through higher conversion rates rather than larger cart values, consistent with GenAI improving the shopping experience by reducing search, information, communication, and personalization frictions. Importantly, these effects are not associated with worse post-purchase outcomes, as product return rates and customer ratings do not deteriorate. Finally, we document substantial demand-side heterogeneity, with larger gains for less experienced consumers. Our findings provide novel, large-scale causal evidence on how GenAI shapes sales productivity in online retail, highlighting both its immediate value and broader potential.

Impact on profitability itself is hard to determine due to caveats listed in the paper (which are important to read!) but offhand I would guess that incemental $5 margin per customer is much more than what their prompts cost.

Re: Financing the AI boom: from cash flows to debt [pdf]

#69

Post by andsoitis »

iambenm wrote: post #42
jordanb wrote: post #36

Earlier quoted context omitted.

Moreover what would a bailout even look like? The banks got loan guarantees from the government essentially. But like what happens if the government guarantees open ai's loans if the company is structurally unprofitable? Does the government create an operating subsidy?

Modeled on Chrysler, perhaps?

> Modeled on Chrysler, perhaps?

The government intervened to prevent massive job losses, protect the domestic auto industry, and, in the 1979 case, preserve critical national security manufacturing, as Chrysler produced the M-1 Abrams tank.

Now, I suppose it is possible to imagine that the US government might bail out either or both of OpenAI or Anthropic (whether or not there's an ROI like there was with the Bank Bailout of the 2008 crisis) if the govt. deemed the technology critical to keep a fast pace on (I think we can say without doubt that requirement is satisfied) but, crucially, the government's calculus is that it is better to have these companies compete rather than bring the knowhow in-house.

Is that what you're thinking?

Re: Financing the AI boom: from cash flows to debt [pdf]

#70

Post by SpicyLemonZest »

doctorwho42 wrote: post #24
mrcwinn wrote: post #16

[flagged]

We don't have to spend it on hardware with such short use-life to spend down those dragon hoards... The amount of money we are talking about could have given the entire US high speed commuter rail.

Could it, though? California estimates the cost of SF to LA at $126 billion (and >20 years of construction time!); at that rate you'd have to spend $1T just to get a single cross-coast track. It is not obvious to me that the US's lack of high speed rail can be solved by money.
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