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AI Companies Are Trying to Hide a Staggering Amount of Debt

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

#201

Post by rightbyte »

eagerpace wrote: post #33
Xalutiono wrote: post #25

And? Its not my debt. If they continue investing in compute, memory, memory bandwidth, network infrastructure, etc. it makes a relevant contribution of progress in all of these fields which I will leverage. A small form factor PC with 100gb fast memory and being able to run something like sonnet or opus level LLM would be massive. I have so many things i want to do and still sitting it out due to cost.

Exactly, this is how capitalism works. Let them shoot for the moon and let them fail. Worst case their over-valued assets are liquidated and continued on with at a more reasonable valuation. Just make sure they play by the rules and don't make new rules in the name of national security, ie boxing out open source.

Some dollars are more equal than others you know.

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

#202

Post by baron816 »

d5lt5 wrote: post #193
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…

> As long as this debt does not make it into life insurance and pension funds, we are fine. Already happened: https://finance.yahoo.com/markets/stocks/articles/michael-bu...

Yes of course life insurance and pension funds are going to buy this debt. This is the highest quality debt that's out there. If you don't want life insurance and pension funds to buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general.

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

#203

Post by jraph »

logicallee wrote: post #187

They're obviously not taking on enough debt because I'm paying $200 per month for one AI, $100 per month for a second, a $20 "donation" to Gemini[1] paying for a service I never use just to fund its development, and yet here I am doing my own laundry, making my own damn breakfast, lunch, and dinner and manually tracking my Calories and macros, I'm putting my own damn dishes away, racking and unracking my own damn wei…

You are donating money to Google, one of the richest companies in the world?

It really doesn't need your help, and it's already way too powerful. If you have money to spare, can't you give to good causes instead?

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

#204

Post by kipchak »

Marsymars wrote: post #189
intrasight wrote: post #163

Earlier quoted context omitted.

My homeowners insurance isn't "cost-effective" either but I still do it. I think the reason that investors don't is because they are greedy or irrational or both. That was the message that I got from a financial podcast I listened to a couple weeks ago anyway.

I'd content that homeowners' insurance is quite cost-effective, because there isn't a cheaper alternative to hedge your risk. I'm saying that for the cost of buying puts to hedge against equity downside in a retirement portfolio, for any given level of risk, you'd probably be better off just selling some of the equities and buying bonds instead. e.g. try and find any equity-focused ETF with downside protection that g…

I think the risk for increasing your bond exposure as compensation would be if instead of a low growth/low inflation scenario (Bonds do well) there's a low growth+high inflation scenario (1940s, 1970s, 2022) and the negative correlation between stocks and bonds doesn't hold.

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

#205

Post by hvb2 »

baron816 wrote: post #202
d5lt5 wrote: post #193

Earlier quoted context omitted.

> As long as this debt does not make it into life insurance and pension funds, we are fine. Already happened: https://finance.yahoo.com/markets/stocks/articles/michael-bu...

Yes of course life insurance and pension funds are going to buy this debt. This is the highest quality debt that's out there. If you don't want life insurance and pension funds to buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general.

> buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general

Uh, no? Ignoring the rating, I think there are plenty of other bonds to be found that are less risky.

Dutch government bonds just to name one? The yield wont be the same but that's probably a good indicator?

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

#206

Post by m4rtink »

pingou wrote: post #4
elmer2 wrote: post #2

It won't pay off if LLMs efficiency gets good enough to make those data centers obsolete. It's a huge gamble.

Wouldn't improving LLM efficiency make them even more useful across the board, then they can enjoy the nice economies of scale? The plan is to have LLM working completely autonomously, in that case, the more resources you have, the better. Perhaps people will use local LLM to ask questions, or coders use them for their personal projects, but that's not where the real money is.

If it's efficient enough you just run it all locally & screw all the rent seekers who want to tell you how you can't use their model & who will sell and misuse all your data they capture.

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

#208

Post by AnimalMuppet »

baron816 wrote: post #202
d5lt5 wrote: post #193

Earlier quoted context omitted.

> As long as this debt does not make it into life insurance and pension funds, we are fine. Already happened: https://finance.yahoo.com/markets/stocks/articles/michael-bu...

Yes of course life insurance and pension funds are going to buy this debt. This is the highest quality debt that's out there. If you don't want life insurance and pension funds to buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general.

OK, wait a minute. Elsewhere in this discussion, people are saying that only a few of these AI companies are going to survive. For stocks, that can still be a reasonable investment - low odds, but still a positive expectation value - but for bonds, it's terrible. You're paying me single-digit interest when there's only a 20% chance that you live long enough to give me my principle back? Get outta here. Literally nobody should be investing in such bonds.

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

#209

Post by [deleted] »

postalcoder wrote: post #101
lumost wrote: post #64

Earlier quoted context omitted.

These companies have valuations reflecting a debt light business. At a minimum, 420 billion in debt is enough to change the stock price by 10-20%. If the company plans to add another 400 billion in debt you need to give it the side eye. If 50 billion in revenue is from other companies debt spending… then You have a problem.

> These companies have valuations reflecting a debt light business. Sorry, but this doesn’t make sense. The valuations of these companies reflect their growth. In finance there’s nothing inherently virtuous about a “debt-light business”. It’s all an allocation decision based on how you expect to grow relative the cost of that growth. Try and reframe it: are cash-heavy businesses given a premium?

[deleted]

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

#210

Post by bigfishrunning »

ck2 wrote: post #24

with US Government owning huge chunks now "too big to fail" bailout incoming will make subprime crash seem like child's play sure you won't be able to ever afford a home but we'll have tons of cheap super-hardware barely used

The housing market, which is backed mostly by the mortgage interest rate, will crash right along with the stock market. Houses will become much more affordable!
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