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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

#261

Post by bigyabai »

leothecool wrote: post #211
pingou wrote: post #4

Earlier quoted context omitted.

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 apple puts an inference SOC in their phone, the datacenters are all dead.

Truly, people have been saying this since 2017 and the Apple Neural Engine has proven them wrong time immemorial.

Apple's own desktops, with the fastest Apple Silicon GPUs and TDPs 20x higher than an iPhone still can't compete for real-world datacenter use even with RDNA clustering. Apple's GPGPU architecture is behind AMD at this point, there's a reason why Apple Intelligence is critically reliant on Nvidia and Google to provide inference backends.

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

#262

Post by throwaway85825 »

matwood wrote: post #170
riffraff wrote: post #90

Earlier quoted context omitted.

NVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retirement funds by itself. If you take an all world index, it's even less. Still, if NVidia lost 50% of their market share, we would probably see a big collapse of the stock market. EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration b…

An AI collapse would represent a generational buying opportunity for companies like Meta, Google, and MS. It would be bumpy for a bit while things unwind, but eventually all this FCF they have been dumping into AI would start dropping to the bottom line instead. It's like when Meta stopped dumping money in Reality Labs, but on a much larger scale.

For it to be a buying opportunity would require the mega corps to continue growing post bubble pop. This is questionable given how large they already are.

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

#263

Post by aphysically »

lacoolj wrote: post #249

This post should probably get removed by now See here https://news.ycombinator.com/item?id=49027426 Your lease agreement with your landlord isn't debt (though if you don't pay it, you will get a hit on your credit report)

The lease agreement does become a financial liability and corresponding asset when it commences. In this case the article is adding leases that haven’t started yet, so GAAP accounting rules prohibit it from being listed as a liability. As a result it’s disclosed in the notes. nb the typical US investor way to analyze it is to still not treat operating leases as debt, since the rent is already reducing the EBITDA (a proxy for cash flow before debt items are paid). The other way to do it is you add back the rent to your cash flow proxy and count the leases as debt. You end up in a similar place.

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

#264

Post by fecal_henge »

rightbyte wrote: post #246
HDThoreaun wrote: post #234

Earlier quoted context omitted.

Whether the datacenters will end up profitable is a different question than whether they are a real risk for the business. This whole thing could be a massive mistake and all the big tech companies will come out the other end just fine. I think the executives at these companies realize that, this whole build out is a massive case of FOMO. No one wants to be microsoft missing the boat on mobile and theyre willing to f…

Windows Mobile predated the iPhone by like 4 years or something. MS didn't miss the boat they steered a crappy boat.

They missed the port.

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

#265

Post by aphysically »

simonw wrote: post #75

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" he…

Purchase commitments aren’t even future debt, they’re a future asset

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

#266

Post by FabHK »

If you're talking about dodgy accounting at hyperscalers, a larger worry might be that they are overstating profits by depreciating their assets (such as datacenters and CPUs/GPUs) too slowly.

Estimates are that this could overstate profits by tens of percent. (However, this only allows earnings to be "pulled forward" - sooner or later the servers must be written off and the accounting catches up.)

See e.g. https://deepquarry.substack.com/p/depreciation-of-gpus-betwe...

https://www.ft.com/content/0dbfe94f-2136-432c-b075-4587092de...

Michael “The Big Short” Burry:

> Understating depreciation by extending useful life of assets artificially boosts earnings -one of the more common frauds of the modern era.

https://x.com/michaeljburry/status/1987918650104283372

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

#267

Post by rocho »

hualapais wrote: post #144
skohan wrote: post #62

Earlier quoted context omitted.

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 suggest looking into “EQL”, or better yet, just replicating its index by taking a position in the 11 XL* sector funds from SPDR, allocating equal weighting to each. One will end up with one’s equities equal weighted by sector and with plenty of large cap exposure, as opposed to the pronounced mid-cap tilt found in whole market equal-weight strategies. Personally, I drop the financial sector entirely (Thomistic proh…

Why do you consider bonds usury?

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

#268

Post by 6510 »

krashidov wrote: post #143
riffraff wrote: post #90

Earlier quoted context omitted.

NVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retirement funds by itself. If you take an all world index, it's even less. Still, if NVidia lost 50% of their market share, we would probably see a big collapse of the stock market. EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration b…

"This tree only makes up 0.0001% of the forest. If it is lit on fire, the forest will be fine"

I have this cheap B movie in my head with a primitive people living on an island. They compete in hunting, fishing, building boats, houses, cutting trees, growing crops etc they use sea shells as currency. Someone finds a spot with countless sea shells, 95% of the population spends their days digging up more and more. Almost everyone is insanely rich, everyone except from the dumb people still hunting, fishing, building boats, houses, cutting trees, growing crops etc

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

#270

Post by LearnYouALisp »

Marsymars wrote: post #159
kingjimmy wrote: post #155

Earlier quoted context omitted.

yes and no. With 82 billion in cash and 22billion profit per year, they can easily service it for a while even if AI consumption takes a downturn.

That's their quarterly profit.

Absolutely disgusting.jpg
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