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This $100bn deal didn't cost anything and isn't worth anything. Remember back two weeks ago when Nvidia gave OpenAI $100bn so they can keep buying Nvidia GPUs?

This $100bn deal didn't cost anything and isn't worth anything. Remember back two weeks ago when Nvidia gave OpenAI $100bn so they can keep buying Nvidia GPUs? This is AMD trying to do the same, but they don't have $100bn so they are offering OpenAI share options to buy GPUs. The share options will be worth at least $100bn too, if the conditions are met. But meeting the conditions will require buying huge numbers of GPUs from AMD. GPUs worth $100bn, and somewhere to put them. OpenAI can't afford that - not even close. So they need to raise financing. On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. You take the stock options as collateral. You lend the money, OpenAI buy the GPUs, the AMD stock goes up, the option conditions are met, and even if OpenAI didn't pay you back the options will let you recover your investment. However, this loan is far less safe than it first appears. The problem is that although lending the money allows openAI to buy GPUs, this doesn't necessarily cause AMD stock to rise. Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. And you'll be left with worthless collateral and a big loan to a company which can't afford to pay it back. So they haven't actually magically created financing at all. They just created the illusion of it. It's very clever. But it's fake. The real announcement will be when or if someone lends OpenAI cash.

lumost 1y ago
This depends significantly on the real cost of the gpu. The cost of enterprise ai GPUs is likely 2 orders of magnitude lower than the current list price. These deals avoid the need to markdown the price of the hardware to gain volume. If I understand the math correctly. Amd could offer the GPUs at around a 20x discount to OpenAI on a deal worth 10-20 billion and be profitable on both amortized R&D and Cost of Goods sold.
- wmf 1y ago
  It's probably closer to 5x (80% gross margin) than 20x.
wmf 1y ago
if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. Nah, nothing in the current market is based on fundamentals.
- blitzar 1y ago
  > stock price, and AMD's will go down stonks goes up
- phkahler 1y ago
  >> Nah, nothing in the current market is based on fundamentals. Sure it is. Stock prices are based on supply and demand. Oh, did you mean company fundamentals? Hmm. BTW that demand is all coming from 401k contributions. The powers that be are terrified of a downturn causing too many job losses tanking the whole thing.
  - specproc 1y ago
    It's gotta happen though, right? Pretty much guaranteed. What's the event that precipitates it?
    - yifanl 1y ago
      A disappointing release from NVidia would pretty much be unrecoverable I imagine.
coliveira 1y ago
It seems that these American companies have decided, with the government blessing, to form a cartel to split the imaginary money they assume will exist for AI technologies. This is an extremely disturbing notion that will only increase the combined power of these tech companies over our daily lives, but may also spell the doom of the economy in a not-so-distant future.
- joenot443 1y ago
  Fully anecdotal, but nearly every knowledge worker I know has Copilot or ChatGPT or some kind of corporate LLM subscription included in their job now. I don’t think the majority use it very well, but I know at least a handful who do. Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.
  - threecheese 1y ago
    I was told that - with the full complement of good tools for a scrum team- the cost approaches a 6th member of the team. The crap from MS/GH plus a decent agent like Claude/Bedrock. You can squeeze decent behavior from vscode agent if you know what you are doing, but anyone who knows what they are doing wishes they had something better.
    - trenchpilgrim 1y ago
      That isn't true for our team. It's more like the cost of coffee/tea/energy drinks for our team.
    - Incipient 1y ago
      ...I kinda like GH Copilot. Only does something when I ask, and leaves me in my traditional IDE. ...i just wish the code it generated was decent.
    - davidlstanton 1y ago
      One of the following is true: I really don’t know what a full complement of good tools mean! your team is very large your team is very cheap You spend an awful lot on Ai tooling! We spend about £50 - £200 a head per month on AI tooling. Assuming everyone was at the top of of that scale (most aren’t) it’s like ai for 50 employees = cost of 1 employee.
JumpinJack_Cash 1y ago
> > Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. In theory yes but OpenAI doesn't have a stock and in the word of AntiChrist Peter Thiel : "We only have AI, there is nothing else out there except for AI" so with the belief still strong to carry at least up until GPT 7 OpenAI will find ways to present itself to the world as capable of putting to use the AMD GPUs and AMD will benefit from it. And honestly the anti Christ is right. Vibe coding is already bigger than self driving cars, the metaverse and all that stuff that emerged during covid
- plorg 1y ago
  Imagine if the answer to the Fermi paradox ends up being not "they destroyed themselves through war" but "they destroyed themselves trying to find meaning in money and fake thinking machines".
  - specproc 1y ago
    Massive crashes often precede massive wars.
didntknowyou 1y ago
it kinda worked in a way. AMD offered OpenAI 160 million stock options. With AMD's stock jump today it's net worth increased about $35billion, close enough in value to those stocks option they gave away (if it was redeemed instantly). It's too much of a coincidence so I'm guessing market makers and institutional shareholders priced it in their trading today.
- PessimalDecimal 1y ago
  If a company gave away some portion of is assets, shouldn't its market cap go _down_ by that amount not up? That's how stocks trade ex dividend e.g.
  - geerlingguy 1y ago
    You assume the market is in any way rational...
    - nake89 1y ago
      Reminds me of "Markets can remain irrational longer than you can remain solvent"
Havoc 1y ago
It's fundamentally a leap of faith that AI will work out. The entirety of OAI is exactly that - a triple bet the farm on AI. Whether this works out or not no longer depends on the specifics of the deals. This either works big picture or it's all a smoking crater
- baobabKoodaa 1y ago
  Sounds like you are talking about AGI or superintelligence or something? Because productive AI tools are already here and have been for a few years. AI has already "worked out". Nothing speculative about that.
  - Havoc 1y ago
    > AI has already "worked out". Not commercially to an extent that supports the massive infra buildout A couple of neat productivity tricks don’t pay for a 500 billion stargate rollout
    - baobabKoodaa 1y ago
      > A couple of neat productivity tricks This level of denialism if insane. What exactly do you want? What level of proof would be enough for you to admit that AI has worked out?
  - rhetocj23 1y ago
    Lets assume AI has worked out. Can you point me to the effect on earnings of the customers of said AI tools who have publicly disclosed the affect on earnings because of said tools? Thanks.
    - baobabKoodaa 1y ago
      You're sarcastic while there are plenty of examples of the exact thing you ask. But sure. Here's one example: https://x.com/levelsio https://x.com/levelsio
larodi 1y ago
Oh will they? Wonder what they been doing so far, really, as it is only tinygrad that been voraciously pushing for these drivers in recent years, not even AMD themselves. Besides, given ClosedAI's the wonderful record of releasing stuff to the public, even if this happens, may benefit only inside tech, not the general audience.
tim333 1y ago
>On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. I don't think lending money against stock options would be considered at all safe. However the deal may work along the lines of: Investors buy AMD shares, send the price up. OpenAI uses it's option to buy shares for 1c, sell the to the investors for far more, use the profit to buy AMD GPUs. So it potentially works very well for OpenAI, ok for AMD and questionably for the investors funding it buy buying AMD shares.

lumost 1y ago

This depends significantly on the real cost of the gpu. The cost of enterprise ai GPUs is likely 2 orders of magnitude lower than the current list price. These deals avoid the need to markdown the price of the hardware to gain volume. If I understand the math correctly. Amd could offer the GPUs at around a 20x discount to OpenAI on a deal worth 10-20 billion and be profitable on both amortized R&D and Cost of Goods sold.

wmf 1y ago
It's probably closer to 5x (80% gross margin) than 20x.

wmf 1y ago

if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. Nah, nothing in the current market is based on fundamentals.

blitzar 1y ago
> stock price, and AMD's will go down stonks goes up
phkahler 1y ago
>> Nah, nothing in the current market is based on fundamentals. Sure it is. Stock prices are based on supply and demand. Oh, did you mean company fundamentals? Hmm. BTW that demand is all coming from 401k contributions. The powers that be are terrified of a downturn causing too many job losses tanking the whole thing.
- specproc 1y ago
  It's gotta happen though, right? Pretty much guaranteed. What's the event that precipitates it?
  - yifanl 1y ago
    A disappointing release from NVidia would pretty much be unrecoverable I imagine.

coliveira 1y ago

It seems that these American companies have decided, with the government blessing, to form a cartel to split the imaginary money they assume will exist for AI technologies. This is an extremely disturbing notion that will only increase the combined power of these tech companies over our daily lives, but may also spell the doom of the economy in a not-so-distant future.

joenot443 1y ago
Fully anecdotal, but nearly every knowledge worker I know has Copilot or ChatGPT or some kind of corporate LLM subscription included in their job now. I don’t think the majority use it very well, but I know at least a handful who do. Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.
- threecheese 1y ago
  I was told that - with the full complement of good tools for a scrum team- the cost approaches a 6th member of the team. The crap from MS/GH plus a decent agent like Claude/Bedrock. You can squeeze decent behavior from vscode agent if you know what you are doing, but anyone who knows what they are doing wishes they had something better.
  - trenchpilgrim 1y ago
    That isn't true for our team. It's more like the cost of coffee/tea/energy drinks for our team.
  - Incipient 1y ago
    ...I kinda like GH Copilot. Only does something when I ask, and leaves me in my traditional IDE. ...i just wish the code it generated was decent.
  - davidlstanton 1y ago
    One of the following is true: I really don’t know what a full complement of good tools mean! your team is very large your team is very cheap You spend an awful lot on Ai tooling! We spend about £50 - £200 a head per month on AI tooling. Assuming everyone was at the top of of that scale (most aren’t) it’s like ai for 50 employees = cost of 1 employee.

JumpinJack_Cash 1y ago

> > Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. In theory yes but OpenAI doesn't have a stock and in the word of AntiChrist Peter Thiel : "We only have AI, there is nothing else out there except for AI" so with the belief still strong to carry at least up until GPT 7 OpenAI will find ways to present itself to the world as capable of putting to use the AMD GPUs and AMD will benefit from it. And honestly the anti Christ is right. Vibe coding is already bigger than self driving cars, the metaverse and all that stuff that emerged during covid

plorg 1y ago
Imagine if the answer to the Fermi paradox ends up being not "they destroyed themselves through war" but "they destroyed themselves trying to find meaning in money and fake thinking machines".
- specproc 1y ago
  Massive crashes often precede massive wars.

didntknowyou 1y ago

it kinda worked in a way. AMD offered OpenAI 160 million stock options. With AMD's stock jump today it's net worth increased about $35billion, close enough in value to those stocks option they gave away (if it was redeemed instantly). It's too much of a coincidence so I'm guessing market makers and institutional shareholders priced it in their trading today.

PessimalDecimal 1y ago
If a company gave away some portion of is assets, shouldn't its market cap go _down_ by that amount not up? That's how stocks trade ex dividend e.g.
- geerlingguy 1y ago
  You assume the market is in any way rational...
  - nake89 1y ago
    Reminds me of "Markets can remain irrational longer than you can remain solvent"

Havoc 1y ago

It's fundamentally a leap of faith that AI will work out. The entirety of OAI is exactly that - a triple bet the farm on AI. Whether this works out or not no longer depends on the specifics of the deals. This either works big picture or it's all a smoking crater

baobabKoodaa 1y ago
Sounds like you are talking about AGI or superintelligence or something? Because productive AI tools are already here and have been for a few years. AI has already "worked out". Nothing speculative about that.
- Havoc 1y ago
  > AI has already "worked out". Not commercially to an extent that supports the massive infra buildout A couple of neat productivity tricks don’t pay for a 500 billion stargate rollout
  - baobabKoodaa 1y ago
    > A couple of neat productivity tricks This level of denialism if insane. What exactly do you want? What level of proof would be enough for you to admit that AI has worked out?
- rhetocj23 1y ago
  Lets assume AI has worked out. Can you point me to the effect on earnings of the customers of said AI tools who have publicly disclosed the affect on earnings because of said tools? Thanks.
  - baobabKoodaa 1y ago
    You're sarcastic while there are plenty of examples of the exact thing you ask. But sure. Here's one example: https://x.com/levelsio https://x.com/levelsio

larodi 1y ago

Oh will they? Wonder what they been doing so far, really, as it is only tinygrad that been voraciously pushing for these drivers in recent years, not even AMD themselves. Besides, given ClosedAI's the wonderful record of releasing stuff to the public, even if this happens, may benefit only inside tech, not the general audience.

tim333 1y ago

>On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. I don't think lending money against stock options would be considered at all safe. However the deal may work along the lines of: Investors buy AMD shares, send the price up. OpenAI uses it's option to buy shares for 1c, sell the to the investors for far more, use the profit to buy AMD GPUs. So it potentially works very well for OpenAI, ok for AMD and questionably for the investors funding it buy buying AMD shares.