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Financing the AI boom: from cash flows to debt [pdf]

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Re: Financing the AI boom: from cash flows to debt [pdf]

#81

Post by grey-area »

jmalicki wrote: post #40
amazingamazing wrote: post #20

Usefulness aside, I see little evidence AI is making money (profit, not revenue) for any firm whose profit doesn't come from the AI itself or the infrastructure, including supply chain. I'd love to hear a counterexample. One such example would be of a hypothetical company that does translations for payment, and with AI they now are making more profit because they use AI to do the translation rather than pay a transla…

AI has been making a ton for advertisers for decades. Think Facebook ads, Google search ads, etc. That's a different and older kind of AI than chatbots, but it's not fundamentally different, but AI is the engine that makes their ad targeting so effective, and why they're some of the most profitable large companies on the planet.

You’re talking about machine learning, that’s not what all this money has been ploughed into, and not what people mean when they say ‘AI’ today but you’re right that it’s much more clearly effective and profitable than LLMs.

Re: Financing the AI boom: from cash flows to debt [pdf]

#82

Post by redbluered »

willis936 wrote: post #49
anvuong wrote: post #10

Earlier quoted context omitted.

Essentially yes? The stock market operates entirely on the assumption that the lines will keep going up. As soon as they flatten the whole thing collapses onto itself.

Flatten would mean there is a profitable business model. It's been years since people have been too tired of repeatedly asking "where will the profit come from?" with no answer. This shit has exactly one direction it will end and it's not flat or up.

Flatten plus debt is bad.

Debt presumes future growth.

Re: Financing the AI boom: from cash flows to debt [pdf]

#83

Post by redbluered »

edoceo wrote: post #43
oh_my_goodness wrote: post #22

Earlier quoted context omitted.

How are the earnings different this time? Can you add any color to that?

In the dot-com situation earnings "didn't matter" as long as there was growth. We[1] all believed profit would come eventually. The lesson learned from that experience was that earning do sort of matter. It turns out there is a limit to selling dollars for dimes. Since then revenue, profit and unit-economics ("fundamentals") have gotten almost as much attention as they deserve. [1] a broad and poorly defined group of…

That's not quite the lesson.

Earnings did come, and the outcome of the internet include Google, Amazon, and others -- several of the ten biggest companies in the world.

In 2000, there was no sane way to predict who the success stories versus failures would be, timeliness, or otherwise.

AI will be a big change. We don't know how big, when, or who the losers and winners will be yet. Everything could be grossly overvalued or undervalued. We'll only know in hindsight.

Re: Financing the AI boom: from cash flows to debt [pdf]

#84

Post by kingleopold »

redwood wrote: post #11

I've seen other reports that suggest the level of investment for eclipses the internet buid out in 2000 and the railroad boom more than a century earlier. I wonder if they use different ways of landing on these wildly different assessments

this time its free printed fiat debt tho, not fully comparable. If market crashes, they will print even few times more again

Re: Financing the AI boom: from cash flows to debt [pdf]

#85

Post by davidpapermill »

webnrrd2k wrote: post #78
redwood wrote: post #11

I've seen other reports that suggest the level of investment for eclipses the internet buid out in 2000 and the railroad boom more than a century earlier. I wonder if they use different ways of landing on these wildly different assessments

Manhattan Project: $36B, 5 years ▫ Apollo Program: $257B, 14 years ▫ Interstate Highway System: $620B, 37 years ▫ AI data centers: $930B, 6 years and still accelerating From: https://substack.com/@rubendominguez/note/c-244929068

That AI number is a gross underestimate. It’s nearly that for this year alone. Wildly off.

Re: Financing the AI boom: from cash flows to debt [pdf]

#86

Post by 1vuio0pswjnm7 »

datadrivenangel wrote: post #3

BIS released a larger report in June that identified AI financing/sustainability as one of the biggest risks for the global economy: https://www.bis.org/publ/arpdf/ar2026e.htm

Thread: https://news.ycombinator.com/item?id=48912577

Re: Financing the AI boom: from cash flows to debt [pdf]

#87

Post by grey-area »

SpicyLemonZest wrote: post #60
MichaelMoser123 wrote: post #59

Speaking of financing: how is the Anthropic IPO going, what is the timeline? They filed over a month ago, no news since. (I would have expected some spectacular news headlines that would be designed to fuel public interest in the impending IPO, but can't detect anything of substance)

AFAICT, the last we heard of any AI company IPO was that OpenAI got spooked by the market response to SpaceX and is considering punting to 2027 ( https://www.the-independent.com/tech/openai-ipo-date-valuati... ). My money is on Anthropic similarly punting, especially if SpaceX manages to cross the very very short distance remaining to drop below the IPO price.

They think things will be better for them in 2027?

This is the pattern I’d expect for their IPOs too, give their current fantasy valuations.

Re: Financing the AI boom: from cash flows to debt [pdf]

#88

Post by ifwinterco »

amazingamazing wrote: post #20

Usefulness aside, I see little evidence AI is making money (profit, not revenue) for any firm whose profit doesn't come from the AI itself or the infrastructure, including supply chain. I'd love to hear a counterexample. One such example would be of a hypothetical company that does translations for payment, and with AI they now are making more profit because they use AI to do the translation rather than pay a transla…

The issue is Duolingo is rubbish, what the app does isn’t that hard to replicate and there are already competitors that have a better product.

So if AI is real then that‘s the cherry on top: people can now make an alternative to your ineffective messy app even easier.

For those kind of SaaS products with no moat LLMs could actually be a problem and definitely aren’t a good thing

Re: Financing the AI boom: from cash flows to debt [pdf]

#89

Post by fragmede »

oblio wrote: post #55
fragmede wrote: post #52

Earlier quoted context omitted.

Where have you looked? OpenRouter? Your own experiments? From running various models locally on my MacBook, and paying for the laptop and the electricity to power it, but not the training run, as all I did was install some software that downloaded models from Hugging Face, yes it's cheap. Well, the hardware was several thousand dollars, so not cheap on a personal level, but not unaffordable either.

> OpenRouter Do we have the balance sheet for OpenRouter & co? Especially in this age where if you put AI in your company's mission statement you're drowned in money. Let's hold off on calling something "cheap" until the external financing money runs out and the actual numbers are revealed AND audited. > yes it's cheap. When running toy models that do basically 0 of what regular people expect from state of the art LL…

OpenRouter is the router. We don't care about their financials, the point is that you can buy inference via them for $x/token on a variety of models for a variety of providers. Those are businesses not propped up by SV VC dreams, just hosting plus compute and their costs.

Running a local LLM isn't a mainstream normal thing to do, sure but saying it's "basically 0 of what regular people expect from state of the art LLMs" is lazily dismissing evidence because it contradicts your beliefs. It does work, and it works at a level somewhere above "basically zero" for nerds who are willing and able to set it up for themselves today. The comparison isn't Apache, it's ElasticSearch. It's not Apache cheap and simple, but it's also not Google Spanner expensive.

Re: Financing the AI boom: from cash flows to debt [pdf]

#90

Post by lelanthran »

rogerrogerr wrote: post #21
blobbers wrote: post #19

At least if the datacenters usage crashes, we'll have cheap power from all the infra that got built.

No, we won't - there's significant capex on all that infra that will have to be paid down, and we won't have datacenters to help pay for it.

> No, we won't - there's significant capex on all that infra that will have to be paid down, and we won't have datacenters to help pay for it.

AIUI, OP is saying that, with all these DCs with no load, we'll have excess electricity generation capacity that was built to support these DCs. That's the "cheap power" he is talking about, not necessarily "cheap computational power".

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