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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

#371

Post by jcfrei »

derf_ wrote: post #131
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…

> When these fail, it will become everyone's problem. Debt is senior to equity. For private credit to start taking haircuts, the equity has to have already gone to zero. At that point, this will already have been everyone's problem for some time.

That's an overgeneralization and haircuts for debtors are common - even when a positive equity value remains.

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

#372

Post by mark_l_watson »

I am repeating myself: at least a partial solution is enforcing anti-dumping laws, that is, make money losing subscriptions illegal. If businesses and individuals pay actual token costs, then they will naturally only use tokens in ways that make business sense.

Usually I applaud optimism, but the current approach in the USA will probably adversely affect most non-rich people, and I would like to see more public well grounded in reality pessimism.

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

#373

Post by foxyv »

wongarsu wrote: post #53

Do they? Is a company with $200 billion annual revenue and earnings (EBITDA) of $100 billion having $420 billion of off-balance-sheet debt really staggering? In many other industries that would be a perfectly normal amount of debt to have. It's only unusual because we are used to tech companies having so much cash on hand they don't know where to put it

I think that a lot of the accounting, used mostly in factories and such, is having trouble with the new financial reality in the tech space. Running a factory, having a debt to asset ratio over 1.0 would be disastrous because the assets are unable to produce revenue fast enough to cover the interest.

With tech it's weird because something that is worth nothing on an accounting sheet could be worth a hundred billion dollars during a sale to Alphabet or Meta.

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

#374

Post by [deleted] »

linkregister wrote: post #175
turtlesdown11 wrote: post #150

Earlier quoted context omitted.

Enron also didn't violate GAAP so by your definition, no financial wrongdoings...

The essence of the Enron scandal was the perpetration of accounting fraud. It took down Arthur Andersen. We went from the "Big 5" accounting firms to the "Big 4" because of this. They very much violated GAAP. https://en.wikipedia.org/wiki/Enron_scandal

[deleted]

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

#375

Post by pixel_popping »

HDBaseT wrote: post #291
HDThoreaun wrote: post #231

Earlier quoted context omitted.

Meta makes $60 billion profit a year and is still crazy bloated. $420 billion in debt legitimately is not an issue for them. The only companies with actual problems are oracle and spacex

Meta making 60B a year doesn't make this any less scary. If Meta put every cent towards their debt, it would take at least 6 years, assuming 0 interest and 0 new debt. The interest alone in the next 5-10 years likely would push it close to 1T debt. How on earth are they meant to pay for this?

Meta will realistically live for decades, that's how they'll pay, don't forget that those companies got some of the best financial teams in the world, it's not even at a scale that regular people can comprehend.

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

#376

Post by cindyllm »

alex43578 wrote: post #305
HDBaseT wrote: post #287

Earlier quoted context omitted.

It is either that, or they have tons of debt. (Sometimes both!) The average person is struggling in modern America.

Because the average person also makes a litany of poor financial decisions. $100K student loan balances for an state school arts degree, forgoing health insurance but expecting to receive $200K in care for free, or buying that $80K F150 on a 12.5% loan and rolling in negative equity. The US is second in the world for median equivalised household disposable income, second only to Luxembourg and 10%+ above Norway. For…

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

#377

Post by ghtbircshotbe »

The article is light on details. Presumably the original Nikkei article has more details but it's behind a paywall.

Recently watched Enron: The Smartest Guys in the Room. I still don't know how Enron made money which remarkably seems like it was also true at the time.

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

#378

Post by geye1234 »

hualapais wrote: post #300
rocho wrote: post #267

Earlier quoted context omitted.

Why do you consider bonds usury?

Because bonds involve interest. Per Summa Theologica: > To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice. https://www.newadvent.org/summa/3078.htm …Aquinas expands the analysis but it is relatively straightforward: all interest is usury. Personally, I find it helpful to imagine two hypothetical persons re…

Greetings, fellow Thomist. You are correct that usury is any amount of interest, and attempts to pretend otherwise are sophistical, but I suggest you may want to look again at corporate bonds and other non-recourse loans -- that is, loan where collateral is limited to specified asset(s). Look at Zippy Catholic's writing on the subject -- he was a finance dude, and a very rich self-made man. A non-recourse loan is more like taking an ownership share in something, and then renting it back. It's unfortunate that we use the same words (loan, interest, debt) for both full-recourse and non-recourse contracts, because they're entirely different things.

I agree that charging interest on a full-recourse loan is a wicked and disgusting thing to do to one's fellow man, and I'd say it's in the same genus as slavery. Usury is to fraud what robbery is to larceny. It's also interesting that the markets where usury is most prevalent (housing, college fees) are the ones that have seen the most insane price increases.

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

#379

Post by anonymars »

bandrami wrote: post #329
HDThoreaun wrote: post #228

Earlier quoted context omitted.

This "debt" is almost solely rental style deals with datacenter constructors. If you make 200k and have a 400k mortgage youre doing just fine.

Your house (hopefully) goes up in value. The datacenter goes down.

Land tends to appreciate, but not so much the rotting box atop it

I bring this up not as a "well, ackshually" but because the datacenter analogy is more similar in that respect...except worse, because now it's a rotting box full of very expensive hardware that hasn't historically held a lot of value until this current shortage

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

#380

Post by budman1 »

hdgvhicv wrote: post #183
duzer65657 wrote: post #179

Earlier quoted context omitted.

most don't even have 3-5 years "spending money" (whatever that is) in total savings; if you're keeping that in cash you're getting 2-3% annually while the market has doubled.

People return with less than 4 years expenses in retirement funds Surely you need about 20 years?

Social Security, my friend. And there are still some pensions out there.
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