Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

greyswansignals.com

Post reply on HN
Print view View original

101–110 of 178 posts

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

#101

Post by awongh »

mapping365 wrote: post #14
klodolph wrote: post #10

Earlier quoted context omitted.

What’s your reasoning for saying that the spending level requires that level of justification?

I think these large numbers are casually thrown about, but the real meaning is mind boggling. 1 trillion dollars is the entire US defense budget - aircraft carriers, nuclear submarines, health care, salaries, stealth fighters ect. The hidden AI debt alone is more than that https://asia.nikkei.com/business/technology/five-us-tech-gia... just for five tech giants (not to mention all the other smaller players like neocl…

Most people mean this to say that 1 trillion is a lot of money, but it still comes back to what you believe AI is- in hindsight, does 1 trillion dollars to build the internet sound like a lot or a little? (That is, spending 1 year of USA's defense budget to get the entire internet)

It comes back to your perception of what AI is because to people who say AI is glorified auto-complete won't believe that the money is worth it.

The AGI-pilled true believers who say it will end all money and result in a post-scarcity world believe literally any amount is justifiable.

Most people, me included, land somewhere in the middle- it seems like AI is a humanity-level sea change in technology and how computers work and serve us. It seems plausible that a few trillion is a reasonable amount.

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

#102

Post by petesergeant »

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?

People are being a little unfair to you here, I think. I think there no chance of AI not being by far the biggest technological shift in our lifetimes. BUT that doesn’t mean any of the current companies leading the charge have sustainable business models, or that the current financing around it makes sense. Other commenters have pointed out both the railroads and dot-com boom as analogies, which holds up well. Generative AI is here to stay, but that in no way means that Anthropic and OpenAI are

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

#103

Post by blitzar »

gymbeaux wrote: post #19
fsckboy wrote: post #7

you won't get debt if you don't have assets that can be repossessed, so having debt means these AI companies have assets: that's a strong thing, not a weak thing. interest rates are what they are, and they go up and down for reasons exogenous to your industry; debt regardless of interest is always "cheaper" than equity, and the shareholders expect to make their money from equity, paying interest on debt as a type of…

I would imagine Anthropic et al. are largely leasing land/buildings, so as the other commenter said… must be the server racks that are acting as collateral (if anything). Generally enterprise hardware depreciates very harshly. I’m used to paying $10 for Intel Xeons that once retailed for over $5,000. I expect to pick up some NVIDIA Blackwell 6000s for $100 each someday.

We are in odd times however - I for one am sitting on paper profits on the consumer gpu I bought 2 years ago. If anyone goes down before the supply side is fixed - the first to fall will probably be able to liquidate their gpus at a profit.

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

#104

Post by worik »

mempko wrote: post #23

As a side note. All money is borrowed. That's how money gets created! Short explainer video by the great late David Graeber https://youtu.be/LxJW7hl8oqM?is=IjdyHwZchaiMHk4C

Totally depends on what you define money as.

If "money" is the some function of all outstanding credit, then yes, it is created (mostly) by bank lending

If you define money as a web of trust then it is mostly created by those that create the rules. The state

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

#105

Post by missedthecue »

sndgndgndgndy wrote: post #21
fsckboy wrote: post #7

you won't get debt if you don't have assets that can be repossessed, so having debt means these AI companies have assets: that's a strong thing, not a weak thing. interest rates are what they are, and they go up and down for reasons exogenous to your industry; debt regardless of interest is always "cheaper" than equity, and the shareholders expect to make their money from equity, paying interest on debt as a type of…

GPUs have a five year lifespan before they become obsolete and start experiencing reliability issues. We're already 1-2 years into that five year lifespan.

The payback time for a GPU running 24/7 inference is ridiculously short though. As little as 6 months according to some calculations. Most of that 5 year lifespan it will be earning well in excess of its replacement cost.

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

#106

Post by petesergeant »

carlsborg wrote: post #85

Make the most of your heavily subsidised $20 / $200 subscriptions while the credit spreads allow it.

I’m not sure that’s quite the right framing. If Anthropic goes bust, Fable persists as an asset that can be run by someone who didn’t have to pay to develop it, probably profitably, and probably in a way that gets cheaper over time. The debt pony show is paying for the next model.

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

#107

Post by collabs »

worik wrote: post #93
eru wrote: post #49

Earlier quoted context omitted.

As a retail investor, you should buy an index fund and then forget about it. By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. To be more precise: buy the lowest cost most diversified index fund you can buy and then hold it. If you want to spend some smarts to get a better return: look at how to minimise taxes an…

> As a retail investor, you should buy an index fund and then forget about it. That definitely was true. I am unsure it is still true. Index funds have taken so much of the trade volume the are becoming momentum strategies So long as you are happy following the market wherever it goes, and if the recent past is a guide then up is the direction, then yes. But given the nepotism and corruption in the highest reaches of…

The future always has risks but the question is that does an option better than index funds exist?

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

#108

Post by aurareturn »

oersted wrote: post #86
aurareturn wrote: post #61

Earlier quoted context omitted.

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…

  And then everyone would stop using their inference as soon as a better model for a reasonable price came out.
Exactly. It's competition now that is driving high training costs - not a business model problem. There will be winners and losers. The losers won't be able to keep up with the training costs forever. See my post here: https://news.ycombinator.com/item?id=49119265

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

#109

Post by dgellow »

eru wrote: post #49
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…

As a retail investor, you should buy an index fund and then forget about it. By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. To be more precise: buy the lowest cost most diversified index fund you can buy and then hold it. If you want to spend some smarts to get a better return: look at how to minimise taxes an…

> By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in.

I think you overestimate traders. What we call smart money is very often really, really dumb from a macro perspective. Professional traders believe hype and follow trends. There is still at least 2 thesis playing out at the moment for the AI trade, and you don’t need to be a professional trader to take part: one is the AI impact on saas (the market has been very bearish on SaaS companies, and still hasn’t corrected meaningfully), and the ai infrastructure (hardware companies + hyperscalers)

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

#110

Post by csomar »

eru wrote: post #49
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…

As a retail investor, you should buy an index fund and then forget about it. By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. To be more precise: buy the lowest cost most diversified index fund you can buy and then hold it. If you want to spend some smarts to get a better return: look at how to minimise taxes an…

I wonder with the spacex thing if this should be revised. “Smart money” have figured out what you are doing and they are at the gates.
Post reply on HN