The Teaser Period: Why the AI Boom Is Hitting a Reset Wall

wow excellent piece. Gary Marcus had a long post about this article on his substack.

scary stuff

"And look at what this implies about OpenAI’s valuation as it moves toward an IPO:

OpenAI’s equity - valued north of $850 billion - is functionally the junior tranche of a capital structure whose senior claims, the take-or-pay compute obligations, exceed any revenue path management itself has articulated.

On those numbers, the equity is effectively underwater, and the market has not priced it that way because it still treats those obligations as service agreements rather than what they are economically: debt.

Even if OpenAI can meet those obligations, OpenAI’s unaudited financial statements - as of March 31, 2026 - disclose $665 billion in non-cancellable compute commitments (management’s more recent plan runs to $750 billion). These commitments are take-or-pay in structure - which, as established above, is debt.

Carry the net present value of those obligations as senior debt - roughly $450–500 billion, the same methodology rating agencies have used for decades to capitalize take-or-pay contracts as debt - and a company the market prices as debt-free carries a senior claim worth more than half its entire equity value."

and the 2008 analog

"Millions of subprime borrowers were, at that moment, paying the low introductory rate on a two-year adjustable rate mortgage - the 2/28 ARM. A low fixed-rate for two years, then the rate reset to a payment 30% to 50% higher. During those first two years the loan performed beautifully: the borrower paid, the servicer collected, and the bond paid its coupon. Nothing looked wrong because the whole complex - housing, mortgages, securitization - was sitting inside the teaser period.

The AI boom has rebuilt this exact structure, and the market is once again underwriting the teaser.

It has a reset wall of its own - a schedule of dated, contractual, non-negotiable payment shocks - hiding inside the trillions of dollars of compute contracts signed by OpenAI and other frontier labs since 2024."

Sloppity slop.

That was the impression I got too, so I just skimmed it

I get the structural comparison they are trying to make.

But mortgages are not a frontier AI lab.

They try to draw a comparison to the valuation of the real estate and the valuation of the hyper scalers in the markets.

I would argue that the demand and valuation of a house is less elastic than AI. While a house’s value may continue to appreciate in the market there is an upper bound for the price of a house set by people’s income. We don’t know yet what the value of AI is. The underlying product, the model keeps improving and therefore increases its value. A house is still fundamentally a house a year later and doesn’t intrinsically appreciate in value.

From gpt-3 to gpt-5.5 there’s been a massive change in the underlying value of the product and company in a way that simply doesn’t happen with a house. That’s where the analogy breaks down.

> Every ARM reset was known, dated, and contractually inevitable from the moment of origination. Aggregate those reset schedules and you get the most damning exhibit of the era: the reset wall.

One of my distinct memories from this era is watching CNBC where a guest said exactly the same thing.

As the interview went on, he became more animated and used stronger language to the point of:

"You don't get it, THEY ARE GOING TO BE PICKING PEOPLE OFF THE FLOOR when these ARM rates reset"

I would guess this was right about 2006 which lines up with the article.