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The AI trade now runs on borrowed money, and the lenders are repricing it

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Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#81

Post by rgmerk »

gpt5 wrote: post #57
okzgn wrote: post #37

Key reports to understand the root problem (no ROI): - Gen AI: Too Much Spend, Too Little Benefit?: https://www.goldmansachs.com/insights/top-of-mind/gen-ai-too... (Goldman Sachs) - AI’s $600 Billion Question: https://sequoiacap.com/article/ais-600b-question/ (Sequoia Capital) - The Simple Macroeconomics of AI: https://www.nber.org/system/files/working_papers/w32487/w324... (MIT / Daron Acemoglu)

How can people in Hacker News still doubt AI's benefit when they are seeing in front of their eyes every technical profession getting disrupted to oblivion in the last year. Just ask basically any software engineer how much their profession has changed over the last 12 months Obviously there is risk, but can't we really extrapolate the AI gains forward and just see how big it's ahead to become?

The Internet was hugely disruptive. The dot-com bubble burst and tech stocks flatlined for years afterward.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#82

Post by mapping365 »

refurb wrote: post #70
mapping365 wrote: post #38

Earlier quoted context omitted.

I mean that's so far, it continues to grow exponentially larger with each quarter. The debt issuance for the first half looks to be crowding out US treasuries in the bond market - https://www.bloomberg.com/news/newsletters/2026-07-23/ai-deb... - that's an extremely large amount of debt. And it's still getting larger and larger each quarter.

I would question the idea that highly industry consolidated debt is competing with risk free debt issued by the US government. Those are two very different products. And while the quarter by quarter growth may seem astonishing it very different saying “debt levels today are alarming” versus “if this trend continues debt levels will be alarming”

So the disclosed balance sheet debt is 1.35 trillion and then the off-balance sheet debt is 1.65 trillion for a total of 3 trillion in AI debt for the 5 tech giants so far. It's multiplying every quarter and they've set investors expectations to be that this is never ending basically. But the tech giants aren't the only people spending themselves into massive debt, think of the CoreWeaves and the Nebius and the hundreds of other smaller companies. And the expectation is that there will be a near term return on all this with a healthy profit. Those five tech giants are just the tip of the iceberg in terms of the amount of debt.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#83

Post by spaceman_2020 »

misterderpie wrote: post #66
gpt5 wrote: post #57

Earlier quoted context omitted.

How can people in Hacker News still doubt AI's benefit when they are seeing in front of their eyes every technical profession getting disrupted to oblivion in the last year. Just ask basically any software engineer how much their profession has changed over the last 12 months Obviously there is risk, but can't we really extrapolate the AI gains forward and just see how big it's ahead to become?

> every technical profession getting disrupted to oblivion Where is this disruption? The longer we go, the more people report that the supposed net-gain of easily 100s of percents is not visible. I do strongly believe "It's just a tool" - A powerful one, but not one like the invention of the steam machine.

All I see is a flattening of the technical curve. Which is great, but the number of people who want to download an app is still the same. So all you have is 100,000 apps with no users instead of 10,000 apps with no users

You increased the amount of code written by 10x but unless there’s a 10x increase in demand, its worth nothing

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#84

Post by jaggederest »

mapping365 wrote: post #38
refurb wrote: post #33

Earlier quoted context omitted.

By that measure it doesn’t sound like that much. You’re talking about about an amount that is a 13% of the total US government spending, of which is 20% of the entire US GDP. I’m not saying it’s insignificant but it’s only a few percent of the US GDP and it represents spending over several years.

I mean that's so far, it continues to grow exponentially larger with each quarter. The debt issuance for the first half looks to be crowding out US treasuries in the bond market - https://www.bloomberg.com/news/newsletters/2026-07-23/ai-deb... - that's an extremely large amount of debt. And it's still getting larger and larger each quarter.

Yeah this is going to be north of 10 trillion by the end, I would wild-ass-guess. Inflation adjusted it's larger than the manhattan project, apollo program, works progress administration, hell, it's on par with the cold war era military buildout, or a baby world war.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#86

Post by oersted »

aurareturn wrote: post #61
anukin wrote: post #17

Earlier quoted context omitted.

That’s because they were reinvesting the profits. I think they had given a profitable quarter just to show that they could do it.

And I'm sure Anthropic would be immensely profitable if they stopped investing their inference profits into training newer models.

And then everyone would stop using their inference as soon as a better model for a reasonable price came out.

The R&D expenditure is a critical requirement for the inference profits, to the point where we should probably lump their financials together, at which point is definitely not profitable.

What will it look like when R&D plateaus (and yes it definitely will, but it could take a while), investment falls, and a few main competitors remain in the music chairs?

It's very difficult to predict. The inference profits we are seeing the profits of a company that is temporarily ahead, but the revenue will level-out in a more stable market, depending on how many survived. It's also hard to tell where the costs will be at the end of the game, with constant efficiency optimisation mixed with cost increases for higher intelligence.

I think it will be quite similar to the semiconductor industry, where, yes there are some key monopolies, but they are not the initial big players, and none of it is actually very profitable; while the real profits are reaped by those that make popular consumer products based on the foundational tech. I guess the main difference is that OpenAI and specially Anthropic have been quite effective at directly tapping into the consumer market rather than remaining technology providers.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#87

Post by stnikolauswagne »

sssilver wrote: post #48
ragebol wrote: post #16

Earlier quoted context omitted.

Yes, they have assets: GPUs sitting in datacenters, and data. Question is: is that worth enough to cover the debt after the market crashed?

Don’t they all have mostly the same data, with a small / negligible delta between each other?

I'd argue that data in this case is more like the actual models they use, their codebase and their engineering talent. Not deep enough in the sauce to say one way or another how big the realistic delta between companies is though.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#88

Post by rapind »

eru wrote: post #76
rapind wrote: post #71

Earlier quoted context omitted.

Yeah I couldn't figure that out with Questrade (Canada). It's a pretty new feature, but I think it's great, so I hope they expand their baseline indexes. I was considering writing a tool that simply follows any index you choose with a .toml of simple config options, like which stocks to exclude, potential fixed locks for specific stocks (or maybe upper and lower percentage of portfolio settings), a hard per stock cap…

I'm in Singapore. My money is in VWRA (without bothering to remove AI companies). Your idea for the tool sounds interesting. I suspect even just copy-and-pasting the paragraph you wrote here into your favourite AI programming agent would get you pretty close to a prototype you can play around with. At least in terms of 'spit out buy / sell orders' and leaving out the API integration.

Yes, it's a very simple concept IMO. Without API access or at least CSV import / export integration w/ a brokerage for automation I don't think I'd use it. I could have an agent use the Web UI on my behalf, but honestly, that feels like lighting tokens / gas on fire.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#89

Post by riffraff »

mrloopex wrote: post #5
klodolph wrote: post #4

A while ago I was thinking, “Gee, AI is so complicated, how can I keep up with the landscape?” After reading these articles go by so often, it feels like what I actually can’t keep up with is the bond market. To paraphrase Trotsky, you may not be interested in the bond market, but the bond market is interested in you. I want to be able to read the signals at the bottom of this article, and divine some kind of predict…

Don’t forget there is a constant pressure for everyone to have an opinion on how this is going to end while hoping it ends tomorrow so they can be vindicated. The dotcom bust took a decade to grow and collapse. I think it is too early to make predictions with AI. I mean the sentiment here is either it will dry up the world and kill us all or transcend humanity, there’s no gray area. I don’t want to fall into the emot…

> The dotcom bust took a decade to grow and collapse

I'm inclined to think the collapse has already started but nobody wants to see it yet.

In the last few weeks SP500 is down, kospi is down, nikkei is down, US inflation is still high and growth is softer than expected. Hyper inflated stocks (Tesla, Nvidia, SpaceX) are deflating. US bonds are at a 20 year high.

Interesting times ahead.

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