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AI's debt binge can't last, hidden borrowing reaches $1.65T

fortune.com

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Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#121

Post by abetusk »

echelon wrote: post #38
scarlehoff wrote: post #22

Earlier quoted context omitted.

Internet didn't disappear after the dotcom crash, but a lot of money did. This is what could happen here I think.

The internet remains the biggest singular development of my entire life. The most valuable companies in the world are internet companies. Journalists have been eager to call AI "over" since 2022, and yet: - Models just got good at writing code this year - Models just got good at editing images last year - Models just got good at cinematic video this year This hasn't even played out. It hasn't even started. Why on ear…

You've talked past the point. Both can be true.

It took 10-15 years before the stock market got back to the level it did pre dot-com crash [0].

[0] https://en.wikipedia.org/wiki/Dot-com_bubble

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#122

Post by batperson »

analognoise wrote: post #110
WarmWash wrote: post #42

Raise your hand if you wouldn't pay $60/mo for SOTA LLM access/couldn't get $60 of value out of it monthly.

I'd buy and run an open Chinese model before I ever paid for monthly access to any of these AI assholes.

Buy what? Hardware for inference? Pretty sure you'd still be giving money to "AI assholes", just somewhat different flavor. And you'd likely have to pay so much that the $60/mo would seem like peanuts, and in the end you'd still have a subpar experience/performance compared to SOTA.

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#123

Post by [deleted] »

missedthecue wrote: post #5

As a bystander directly immune to the fortunes of AI going up or down, it does feel like there are a lot more people thinking this is inning 9 of the LLM story than there are people thinking it's inning 3. Which makes it tempting to believe it's probably closer to inning 3.

[deleted]

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#124

Post by sroussey »

mrec wrote: post #90
sroussey wrote: post #65

Earlier quoted context omitted.

But the incentive to produce that intelligence is so high, that many opportunities become practical to explore. And many of them show doing AI inference workloads at 1000x cheaper and with 1000x less power, and sometimes 1000x faster. If any one of these happens, or two, or all three, then the loans for trillions will become worthless while the use of AI can explode. The relationship between cost and ai intelligence…

This is an interesting angle, and one I hadn't considered before. Would it be overly cynically to draw a line between it and the recent willingness [1] of many on the frontier to support some sort of coordinated pause or slowdown? I think that proposal has genuine value on its own merits, but it might also give a lot of overly-optimistic financing a chance to pay off before cheaper inference crashes the market. [1] h…

Yes, but to walk in to the market late, and not have all that debt, it will be too much of an opportunity for an aspiring company.

Google was not the first search engine. But in a way, it was the last.

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#125

Post by DeluluDon »

runarberg wrote: post #79
rybosworld wrote: post #37

Earlier quoted context omitted.

You have any examples? Because all of the biggest and most famous crashes were events that only a very small minority of people ever saw coming. Tulips, 1929, Dotcom, Great Recession, 2010's Flash Crash - none of these were in the public discussion before they happened.

I was there for the Great Recession, and they were indeed in the public discussion. I remember the year 2007, as a 20 year old anti-capitalist, I was counting days until the economic crash. As predicted by plenty of left-wing economists at the time. The only people who didn’t see it coming were the capitalists who were invested in the inflated market, and had bought into pseudo-scientific economic theories that serve…

Yeah me too, now I invest in dividend stocks.

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#126

Post by rybosworld »

runarberg wrote: post #111
rybosworld wrote: post #107

Earlier quoted context omitted.

I was too - and to be frank: it's dishonestly revisionist to say this was a topic in the public eye. There's a very good reason a book (and movie) like The Big Short was such a big hit. It's because it was about the handful of people who actually saw the crash coming and were confident enough to put their money and reputation on the line.

The entire left wing of the political spectrum saw this coming (except social democrats; whom I don’t consider left wing). And if you were shorting stocks to make money of off this, you probably were not left wing. Additionally, left wing economists get plenty of ridicule from main stream capitalists no matter what they say, so there really is no reputation to either earn nor to keep.

> The entire left wing of the political spectrum saw this coming

Feel free to cite at least one reputable source.

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#127

Post by KennyBlanken »

afry1 wrote: post #73
mapping365 wrote: post #70

The people who made money on fiber and railroads were the inheritors after the timeline mismatch bankrupted the original players who did the investment. Even if AI turns out to be everything it promises, you can mistime the investment and lose everything.

Fiber and railroads don't depreciate after 3 years of use like AI chips. Fiber and railroads don't need tens of billions of dollars in continuing yearly maintenance expenses to keep them from going stale.

> Fiber and railroads don't need tens of billions of dollars in continuing yearly maintenance expenses to keep them from going stale.

Congrats, you're as qualified as all the private equity companies that have been piling into railroads!

That's precisely the sort of attitude that got us East Palestine (and others.)

BNSF (for example) spends billions of dollars a year on maintenance. When trains go over rails enough it can mess with the ballast and they have to come through with machines that lift the rail and jiggle the ballast and place the rail back at the correct height. And non-concrete ties have to be replaced every so often. Signals need maintenance. Switches need maintenance. Sensor/scanner shacks need maintenance. Etc.

Railroads have been dramatically cutting back because of pressure from PE, so the estimate is probably low.

>Fiber and railroads don't depreciate after 3 years of use like AI chips.

Are you seriously arguing that infrastructure doesn't depreciate? Tell me you've never done anything other than push bits, without telling me. Fiber gets eaten by backhoes trying to show off to potential mates in the spring, washed out, run over, knocked down by drunk drivers (if on telephone poles, not all of it is buried), has to be relocated because of other works, suffers water intrusion, amplifiers fail, you name it.

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#128

Post by runarberg »

rybosworld wrote: post #126
runarberg wrote: post #111

Earlier quoted context omitted.

The entire left wing of the political spectrum saw this coming (except social democrats; whom I don’t consider left wing). And if you were shorting stocks to make money of off this, you probably were not left wing. Additionally, left wing economists get plenty of ridicule from main stream capitalists no matter what they say, so there really is no reputation to either earn nor to keep.

> The entire left wing of the political spectrum saw this coming Feel free to cite at least one reputable source.

https://en.wikipedia.org/wiki/Nouriel_Roubini

https://en.wikipedia.org/wiki/Richard_Portes

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#129

Post by vaindil »

bobanrocky wrote: post #15

Hopefully the general public doesn’t get stuck with the ‘too big to fail’ bill .. again :(

Is there any evidence to suggest that we won't be? I'd argue that's been the status quo for decades now, so I wouldn't expect anything else (as much I hate the current state of affairs).

Re: AI's debt binge can't last, hidden borrowing reaches $1.65T

#130

Post by keeda »

Genuine question: these companies had double-digit billions of free cash flow per quarter, about $0.3T a year aggregate, before the AI boom started and they began splurging on CapEx; is the $1.65T number that bad in that context?

Let's assume the extreme worst case scenario where the bubble pops so comprehensively that the entire AI business is written off, without any change to the debt owed, and these companies return to whatever they were doing before i.e. their previous levels of free cash flow. Naively, they could still repay the $1.65T, with interest, in ~6 - 8 years.

They will, of course, not do that, and will instead try to protect their plummeting stocks and get into a series of lawsuits as they try to claw out of their commitments (hey, maybe the circular investments even cancel out... it's a feature, not a bug!) and a lot of smaller companies go under, and some may angle for bailouts. But even then, the damage to the broader economy seems limited, and this debt doesn't seem that extreme?

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