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OpenAI, Nvidia fuel $1T AI market with web of circular deals

bloomberg.com

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Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#151

Post by lucianbr »

churchill wrote: post #47

On the surface, the circular financing seems worrying but once you dig into it, it seems quite benign, tbh. NVIDIA is handing out GPUs into OpenAI, in return for stock/future revenue, whichever way you want to slice it. OpenAI has wonky unit economics, yes, but they're growing at ~100% YoY, so it all checks out, if you ask me.

> wonky unit economics, yes, but they're growing at ~100% YoY

Isn't this "losing money on each sale but making it up in volume"? Sounds like I heard that before and it did not turn out well.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#152

Post by lelanthran »

jrflowers wrote: post #61
credit_guy wrote: post #46

Earlier quoted context omitted.

This is how financing works. When you buy a house, you get a mortgage from a bank. It is unusual to get a mortgage from a seller. It would feel a bit circular, right? But that is exactly what happens most of the time when people buy a car. They get a loan from the same company that sells them the car. Is that circular? When you replace people with companies, the financing can become much more complex. The example you…

I don’t know what to tell you guy, but when people see money moving in a circle in a deal there is a good chance that “circular deal” might pop into their heads. Because it’s a deal that is shaped like a circle. > Is that circular? Doesn’t really seem so because at the end of the day the money goes from me to them. I don’t get my money back, I get a car in exchange for my money. Also this deal didn’t begin with the m…

> Your car manufacturer leases your car back from you? And you use that revenue to raise debt to buy more cars from them?

Honestly, if this was possible people would be doing it (not that they are not - fleet services and rental fleet services do some pretty funky accounting sometimes, so I wouldn't be surprised at all if this sort of thing happened).

If this was possible, I'd be doing it.

> What manufacturer are you doing this with?

Good question. The minute an answer gets posted I'm going to have a really good side-hustle.

> What do you end up driving?

I presume, at the point that this is being done, there is no actual car involved, so nobody involved will be driving because there is no car to drive.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#153

Post by xpuente »

This is going to end badly — and soon. It’s ironic that catastrophic forgetting (i.e., the inability to perform continuous learning) and hallucinations (i.e., the failure to recognize when a prediction is unfounded) won’t be the causes of the crash, but rather greed and stupidity.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#154

Post by thiago_fm »

hn_throwaway_99 wrote: post #101
themafia wrote: post #89

Earlier quoted context omitted.

That's not how Ponzi schemes work. Yahoo had a defacto _monopoly_ and the market had bad discovery leading to bad price information. There was no point at which the internet was /not/ worth investing in and everyone who had experience with it knew that. The real problem seemed to be that you can only put so much money into pets.com before it becomes stupid. You had more short term investment capital than could be _ef…

Why is it so popular to "akshually, Ponzi schemes are different!" these days? Words have meaning in context, and calling something a "Ponzi scheme" these days means any pyramid-like system that only works as long as new investors come to the table, because that new investor money is the sole source of gains for earlier investors. But once you run out of new investors, which is inevitable, the whole thing collapses. W…

Agree, people became extremely pedantic with words and it's incorrect to assume they only mean what is described in a dictionary, as if we are in a court.

Language is fluid, and many of words got their very known & popular meanings later, when people used for things that it didn't exactly mean what it was initially intended to, and it got popular.

People are ever less empathetic and sociable, this being the reason for such comments.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#155

Post by viewtransform »

mschuster91 wrote: post #144
athrowaway3z wrote: post #130

Earlier quoted context omitted.

It's worth noting Elisson is 2 years older than Trump. What's he going to do with all that money, and what does he care for the risk it's bad or shady? Worst case, he got to be #1 for a bit for a few dozen billion, best case he's hoping AGI will extend his life before he croaks.

> What's he going to do with all that money, and what does he care for the risk it's bad or shady? The thing that unites Ellison, Trump, Musk, Thiel and a fair few of the other politically active billionaires is the obsession with "legacy" - they want to leave their mark in the history books, figures which will likely be remembered and taught in schools in thousands of years similar to Roman emperors. Musk is the mos…

Obama was the fourth U.S. president to be awarded the Nobel Peace Prize, after Theodore Roosevelt (1906) and Woodrow Wilson (1919)—both of whom received the award during their terms—and Jimmy Carter (2002), who received the award 21 years after leaving office. - wikipedia

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#156

Post by re-thc »

returnInfinity wrote: post #107

This is fueled by the parabolic token usage. If token usage continues to grow parabolic, then these are the most genius deals made. If token usage declines because of high prices, look at what happened to SBF.

> look at what happened to SBF

SBF lacked funds to ride it out. If they survived for a bit longer, Bitcoin would have surged and they'd keep going. AMD, Nvidia etc all have income and funds to survive.

This is just about finances unless you're implying there's some crime here too.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#157

Post by lelanthran »

BobbyTables2 wrote: post #68
ctkhn wrote: post #12

Earlier quoted context omitted.

Stock buyback isn't a total scam as it seems, but it does mean "we can't figure out any productive use case for this cash in advancing R&D or scaling our business anymore" which is still pretty worrying

It’s more like, “the executives with lots of shares can’t see how to make the company grow, so they’ll just use profits to pump up the share price for their gain”. I deeply feel buybacks shouldn’t be illegal but treated shamefully. Instead of using profits to build up long term savings or fund R&D, they basically choose to do as little as possible. There is no vision.

> Instead of using profits to build up long term savings or fund R&D, they basically choose to do as little as possible.

Isn't buying stock a form of long term savings? After all, they can always sell that stock when they want to "withdraw".

Sure, they may not get the same return as simply stashing it into a bank account, but it's also a statement of confidence in their future: "We are sure that our stock will outperform every other option there is for storing our money, because our long-term plans include extracting more profit from the market."

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#158

Post by lmm »

MangoCoffee wrote: post #103
ra0x3 wrote: post #7

Upvote because can someone explain to someone as dense as me, whether or not this is likely to make some likely AI bubble worse? Is this just how industry allocates capital?

>AI bubble worse? Is it worse than the dot-com bubble? I remember everyone and their mom who knew HTML could get hired, and there were way more companies that went IPO during the dot-com bubble, like theglobe.com. AI is a bubble, but is it worse than the dot-com bubble or the real estate bubble in 2008?

> Is it worse than the dot-com bubble? I remember everyone and their mom who knew HTML could get hired, and there were way more companies that went IPO during the dot-com bubble, like theglobe.com.

IDK, the number of companies and employees might be smaller, but the valuations and comp packages are so much bigger that I suspect there's more money in the bubble this time around, just a bit less spread out.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#160

Post by lelanthran »

cluckindan wrote: post #108
usrxcghghj wrote: post #71

how long until this thing pops? my money is on 18 months

18 days

I sense a business opportunity here: betting on stocks! Maybe we can have a central market where people can exchange their money for bets. Maybe even sell their bet off before the due date.

We can call it a "stock market", or maybe even a "stock exchange". I expect I'll be able to get a patent on it if I prefix the name with "online", or suffix it with "on the internet".

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