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The AI trade now runs on borrowed money, and the lenders are repricing it

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Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#91

Post by anal_reactor »

mapping365 wrote: post #14
klodolph wrote: post #10

Earlier quoted context omitted.

What’s your reasoning for saying that the spending level requires that level of justification?

I think these large numbers are casually thrown about, but the real meaning is mind boggling. 1 trillion dollars is the entire US defense budget - aircraft carriers, nuclear submarines, health care, salaries, stealth fighters ect. The hidden AI debt alone is more than that https://asia.nikkei.com/business/technology/five-us-tech-gia... just for five tech giants (not to mention all the other smaller players like neocl…

Good that you made the comparison with defense budget because it's becoming evident that AI is the new "nuclear bomb". First, if you have more advanced AI than your opponent, you just hack them and the war is over before it began. I'm simplifying obviously, but the point that AI is essential to modern warfare stands. Second, even during peacetime, you can use AI to directly influence what people think, what they do, etc. in the most literal sense of this expression. We already know that people outsource thinking, relationships, and cultural expression to LLMs, and even if that wasn't the case, you can use AI to deliver to each single person hand-crafted propaganda, not to mention the previously unimaginable opportunities to spy on people.

It would be strange if the race to wield this power wouldn't result in AI getting pumped to the moon, way beyond anything that seems reasonable.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#93

Post by worik »

eru wrote: post #49
klodolph wrote: post #4

A while ago I was thinking, “Gee, AI is so complicated, how can I keep up with the landscape?” After reading these articles go by so often, it feels like what I actually can’t keep up with is the bond market. To paraphrase Trotsky, you may not be interested in the bond market, but the bond market is interested in you. I want to be able to read the signals at the bottom of this article, and divine some kind of predict…

As a retail investor, you should buy an index fund and then forget about it. By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. To be more precise: buy the lowest cost most diversified index fund you can buy and then hold it. If you want to spend some smarts to get a better return: look at how to minimise taxes an…

> As a retail investor, you should buy an index fund and then forget about it.

That definitely was true.

I am unsure it is still true. Index funds have taken so much of the trade volume the are becoming momentum strategies

So long as you are happy following the market wherever it goes, and if the recent past is a guide then up is the direction, then yes.

But given the nepotism and corruption in the highest reaches of USAnian society (e.g. Trump's crypto currency scams and the blatant inside dealing and rule ignoring of the Space X float) the future looks much less certain than the past

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#94

Post by mapping365 »

anal_reactor wrote: post #91
mapping365 wrote: post #14

Earlier quoted context omitted.

I think these large numbers are casually thrown about, but the real meaning is mind boggling. 1 trillion dollars is the entire US defense budget - aircraft carriers, nuclear submarines, health care, salaries, stealth fighters ect. The hidden AI debt alone is more than that https://asia.nikkei.com/business/technology/five-us-tech-gia... just for five tech giants (not to mention all the other smaller players like neocl…

Good that you made the comparison with defense budget because it's becoming evident that AI is the new "nuclear bomb". First, if you have more advanced AI than your opponent, you just hack them and the war is over before it began. I'm simplifying obviously, but the point that AI is essential to modern warfare stands. Second, even during peacetime, you can use AI to directly influence what people think, what they do,…

That could all be true, but the problem is however powerful it is, it still needs to make money for the people who invested in it who are expecting a return. The stock valuations, the bonds yields - they don't care about the power of a nuclear bomb. They want to get paid. They expect to get paid. And if they don't get what they are expecting, there will be hell to pay in the economy. There's a probably a good reason the power of nuclear weapons isn't an ETF I could buy into.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#95

Post by AlexCoventry »

ragebol wrote: post #16
fsckboy wrote: post #7

you won't get debt if you don't have assets that can be repossessed, so having debt means these AI companies have assets: that's a strong thing, not a weak thing. interest rates are what they are, and they go up and down for reasons exogenous to your industry; debt regardless of interest is always "cheaper" than equity, and the shareholders expect to make their money from equity, paying interest on debt as a type of…

Yes, they have assets: GPUs sitting in datacenters, and data. Question is: is that worth enough to cover the debt after the market crashed?

I would be delighted to see a glut of compute. I'm not optimistic, though.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#97

Post by ilovecake1984 »

gpt5 wrote: post #57
okzgn wrote: post #37

Key reports to understand the root problem (no ROI): - Gen AI: Too Much Spend, Too Little Benefit?: https://www.goldmansachs.com/insights/top-of-mind/gen-ai-too... (Goldman Sachs) - AI’s $600 Billion Question: https://sequoiacap.com/article/ais-600b-question/ (Sequoia Capital) - The Simple Macroeconomics of AI: https://www.nber.org/system/files/working_papers/w32487/w324... (MIT / Daron Acemoglu)

How can people in Hacker News still doubt AI's benefit when they are seeing in front of their eyes every technical profession getting disrupted to oblivion in the last year. Just ask basically any software engineer how much their profession has changed over the last 12 months Obviously there is risk, but can't we really extrapolate the AI gains forward and just see how big it's ahead to become?

Stop projecting.

It’s just coding. It’s not every technical profession at all.

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#99

Post by worik »

defactor wrote: post #15

Warren Buffet way Revolutionary technology + massive adoption ≠ good investment Investors have poured money into a bottomless pit, attracted by the growth and glamour of the industry. The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. Commodity Product, no switching costs. Infinite competition

> The airline industry since its birth has had a collective net loss

True. But it has added enormous benefits to many other parts of the economy.

Airlines do not capture that value.

That is where the AI companies are. Adding value they cannot capture

Re: The AI trade now runs on borrowed money, and the lenders are repricing it

#100

Post by dgellow »

klodolph wrote: post #4

A while ago I was thinking, “Gee, AI is so complicated, how can I keep up with the landscape?” After reading these articles go by so often, it feels like what I actually can’t keep up with is the bond market. To paraphrase Trotsky, you may not be interested in the bond market, but the bond market is interested in you. I want to be able to read the signals at the bottom of this article, and divine some kind of predict…

> Gee, AI is so complicated, how can I keep up with the landscape?

The interesting thing is: you do not need to keep up. It’s actually way easier and cheaper to wait a bit for the chaos to stabilize, then learn to use the tools. You don’t need to have been someone who experienced the whole evolution, non stop at the edge. It’s ok to let the enthusiasts discover how things work and eventually learn from them. Just like any other technology. The whole „you will be left behind“ is nonsense. If AI is the future, then it will here to stay and you can let others map the domain first

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