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AI Companies Are Trying to Hide a Staggering Amount of Debt

futurism.com

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Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#71

Post by dzonga »

senshan wrote: post #56

As long as this debt does not make it into life insurance and pension funds, we are fine. The trouble is that private credit is taking control of some life insurance companies and off-loads this debt to these. When these fail, it will become everyone's problem. > Risks to financial stability may also stem from entities with particularly high exposure to private credit markets, such as insurers influenced by private e…

bingo - if the firms holding the debt keep holding the debt & the debt doesn't get passed to other entities - the system will be fine.

if say meta owes 720Bn, they wouldn't have trouble paying that back in 10 years.

this doesn't take away the fact that 'a.i' right now is a bubble.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#72

Post by lumost »

Ekaros wrote: post #18
roschdal wrote: post #14

Is it time to short AI companies?

Market can remain irrational longer than you can remain solvent... Simply choosing not to get involved might be most reasonable action.

We also may be at the wealth inequality level where prices become… weird.

If there is really only a few dozen people doing the buying and the selling at the top on a weighted basis, then the prices are whatever they convince themselves of.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#73

Post by tyleo »

skohan wrote: post #62
senshan wrote: post #56

As long as this debt does not make it into life insurance and pension funds, we are fine. The trouble is that private credit is taking control of some life insurance companies and off-loads this debt to these. When these fail, it will become everyone's problem. > Risks to financial stability may also stem from entities with particularly high exposure to private credit markets, such as insurers influenced by private e…

Couldn't it be a problem given the concentration of the S&P in these companies? At this point these companies make up a huge portion of 401k's for a huge chunk of Americans. How would it affect retirees if they dropped 40-50%, likely taking the market with them?

It’s an interesting thought. The growth is so extreme that if the S&P 500 fell 50% today it would reach levels last seen in 2022. Given that the timespan is so short, I’m honestly not sure it would be as bad for 401ks as people expect unless all of your investment was concentrated in the last 4 years.

I suppose it’s worse if your calculation is, “I’ll retire when my 401k hits $X absolute value,” but I think most people just retire at a certain age instead with risk spread across decades.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#74

Post by Anon1096 »

drob518 wrote: post #45
chasd00 wrote: post #23

Are they really "trying to hide" this debt? I think it's pretty common knowledge that a lot of these companies are using debt/bonds for funding. The debt not showing up where the author wants is a reporting formality not an attempt to hide it.

I think the point is that it’s not showing up on the standard financial filings. If you were to pull the annual reports for these companies, you wouldn’t see it. That doesn’t mean it’s impossible to find it. Obviously, it is otherwise the article wouldn’t have been written. But you’re going to have to go the extra mile. To be clear, none of this is illegal. It’s just covered in the advanced CFO accounting class.

It's not hidden at all. Financial blogs very accessible to laymen like Matt Levine's Money Stuff have talked about this structure months ago. If you are an investor and surprised by this news you weren't sufficiently prepared and shouldn't have been investing in the first place.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#75

Post by simonw »

Something doesn't quite smell right about this story. Here's a key paragraph from the Nikkei story that this Futurism story re-tells:

> Companies disclose such future debt not in their balance sheets, but in annotations to their quarterly financial statements. This is a legitimate practice under accounting rules, but may make it difficult for retail investors to recognize risks.

Does that justify a "tries to hide" headline?

This is also one of those cases where the headline is free but the details are behind a paywall.

I do think the story itself is notable, but I expect the discussion is going to lack some nuance.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#76

Post by timacles »

Xalutiono wrote: post #58
Luker88 wrote: post #43

Earlier quoted context omitted.

> And? Its not my debt. Your view seems very myopic. AFAIK they have heavily relaxed the rules for IPO. Pension funds are practically forced to buy from the top-100 companies, and these companies risk crashing much more than the others. SpaceX value is already lower than at launch. If this costs are externalized to the common public, this will be your debt. All these companies are too big to fail, in an environment w…

Thats a Elon Musk / Space-X issue thought not a Google and co issue. How much real impact is this really though?

If it crashes the global economy will crash and they will have to print money for a bail out which means another 30% increase to the price of everything

But minimal real impact

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#77

Post by swarnie »

skohan wrote: post #62
senshan wrote: post #56

As long as this debt does not make it into life insurance and pension funds, we are fine. The trouble is that private credit is taking control of some life insurance companies and off-loads this debt to these. When these fail, it will become everyone's problem. > Risks to financial stability may also stem from entities with particularly high exposure to private credit markets, such as insurers influenced by private e…

Couldn't it be a problem given the concentration of the S&P in these companies? At this point these companies make up a huge portion of 401k's for a huge chunk of Americans. How would it affect retirees if they dropped 40-50%, likely taking the market with them?

I'm not familiar with 401k rules but presumably they get a choice of markets and products?

If one is over concentrated its easily avoided.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#78

Post by serial_dev »

lardosaurusrex wrote: post #30

"No you guys it isn't actually an issue because it isn't." Why? "Because it isn't; okay?!" oh ok.

“You found it didn’t you?, then we weren’t actually hiding it, so please stop looking into our finances too much”

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#80

Post by Noaidi »

ch4s3 wrote: post #63
Noaidi wrote: post #61

Earlier quoted context omitted.

It is not just that they have the debt, it. is they are trying to hide the debt. Why would a legitimate company try to hide their debt?

> is they are trying to hide the debt. They aren't hiding it though. The contracts are recorded in regular filings.

Rope a doped with cope. Maybe you should buy some $ORCL?

https://asia.nikkei.com/business/technology/five-us-tech-gia...

"Companies disclose such future debt not in their balance sheets, but in annotations to their quarterly financial statements. This is a legitimate practice under accounting rules, but may make it difficult for retail investors to recognize risks."

"Today's AI industry is partly supported by demand generated by circular investment. Nvidia and tech giants invest in data center operators and AI companies, with that money then turning into GPU and cloud usage fees. Actual demand is difficult to see, increasing the likelihood of over investment in data centers."

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