191–200 of 390 posts
they're just printing money for each other at this point
The good part is that the next financial crisis when OpenAI sinks probably won’t be a systemic one, it will definitely drag others down and the stock market will readjust, but hopefully the US economy will remain afloat
OpenAI now has an option to buy 10% of AMD for $0.01 per share, subject to certain milestones. Basically, AMD is giving up equity to buy its way into the AI market. It's fantastic news , because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips. We all want an alternative to Nvidia and cuda. This partnership could deliver it in the not too distant future.
> It's fantastic news, because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips. Too fast to jump to conclusion. I'd say they will work together to develop software specifically designed for OpenAI products. It is a giant question mark whether we'll get libraries for general purpose computing out of this.
Ask yourself: What would first-class PyTorch/Triton and Jax support for AMD hardware do to Nvidia's dominance and pricing power?
Earlier quoted context omitted.
This method of financing is not novel. But anytime you see an unnecessarily complex deal like this, one should think very carefully about why they didn't opt for a simpler method, e.g. simply selling stock in the open market. The reasoning behind such a deal are usually not a good sign for the underlying health of the companies involved.
I'm assuming this is what you mean by 'simply selling stock in the open market' so correct me if I'm wrong but Why would Open AI go public when they can raise so much private money they're valued at 500B ? It certainly wouldn't be for fear of a lack of investment. AMD is up 30% from this announcement alone.
Earlier quoted context omitted.
> But Lisa Su can’t bring herself to compete. Which is very strange because she brutally competed with and destroyed Intel. Maybe making cutting-edge GPUs is actually quite an engineering challenge, and not entirely down to the competitive will of the CEO?
AMD already make GPUs that are competitive with Nvidia at every tier except the very top end. It’s the positioning and pricing that isn’t competitive.
The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around. In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share. I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the…
AMD is giving OpenAI warrants (cf options) to buy AMD shares at 1c/share, but these only vest if OpenAI goes thru with AMD purchases as intended. It seems to basically give OpenAI an incentive to go thru with the deal.
You can see this play out in the history of OpenAI. NVIDIA supported them from an early stage and in exchange received OpenAI equity to offset the risk. Now from a position of relative strength, OpenAI has become concerned about vendor lock-in and so is rationally exploring AMD. Yet, because any such deal will materially impact AMD’s stock price and there is risk both of losing time trying to train with new chips as well as of benefiting competitors if they work with AMD to improve their hardware offerings/APIs, it is reasonable to ask for equity upside. So, for the same reasons (increase in stock price and enterprise client who will help improve their product offering) only without risk, is it understandable why AMD would want to offer equity on such favorable terms.
TLDR; My sense is that the sudden skepticism towards this relatively common enterprise deal structure seems to derive from the understandable interest in identifying signs of an AI bubble. Such a bubble may (and indeed almost certainly does) exist, but I don’t think this is evidence thereof.
----
EDIT: I'm just clarifying something I saw in a lot of responses. My only point is that it is important to try and empirically tease out what represents: (1) a circular deal in which vendors facing the limits of growth are subsidizing vulnerable clients; versus (2) a risk-hedging deal in which a non-market leading vendor offers upside to a market leading client.
I believe the recent Oracle and NVIDIA deals are cases of (1) that provide evidence of an AI bubble, but that this AMD deal is most likely a case of (2) that provides no further evidence.
The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around. In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share. I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the…
> I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity. Yes, you are reading it wrong. The big winner here is AMD, not OpenAI. If there is any signal here, it's that AMD is still in the AI game. AMD stock is up 30% on this news.
Earlier quoted context omitted.
> Obviously, for the stock price to go up money needs to come from somewhere. Not convinced that’s true anymore in current climate. Bigger numbers announcements and AI Pixie dust works too apparently lol
I mean the potential value comes from the future either way. If you just print money and nothing else, it inflates and becomes worthless affecting all involved. If the money turns into technical progress or products then the entire economy grows.
In a strictly commercial sense yes but stock markets decoupled from that long ago. Whether it’s wallstreetbets up to shenanigans or a market crash it’s got little to do with actual future and more With sentiments. You’d hope it would revert to fundamentals eventually but markets sure seem happy to not do that
The terms of some of these deals now are so completely bonkers it would be funny if it wasn’t so scary. If someone was writing the script to “The Big Short 2” about the AI bubble they might struggle to come up with some of these things with a straight face. Finance folks are salivating at the once in a generation opportunities ahead when this whole thing crumbles. CNBC seems to have at least one segment a day on “Wha…
Earlier quoted context omitted.
Well, yeah, that's exactly my point. OpenAI is not issuing bonds because these transactions are way riskier than people are willing to admit.
Who is “people”? Investors and people familiar with finance are well aware of the deal and its risks, as they are public information.
It bears repeating my original question: if the risks are so minor, why is OpenAI simply not issuing bonds and buying AMD stock with the proceeds?