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OpenAI is generating $13B a year in revenue. Let’s be generous and say $20B. They’ve signed commitments to spend something like $1.4 trillion on compute. An ass

by JCM9 11mo ago

OpenAI is generating $13B a year in revenue. Let’s be generous and say $20B. They’ve signed commitments to spend something like $1.4 trillion on compute. An asset that to date has proven to have a hyper-depreciation cycle. Someone has to come up with $1.4 trillion in actual cash, fast, or this whole thing comes crashing down. Why? At the end of all this circular financing and deals are folks that actually want real cash (eg electricity utilities that aren’t going to accept OpenAI shares for payment). If the above doesn’t freak you about a bit at how bonkers this whole thing has become then you need a reality check. “Selling ads” on ChatGPT ain’t gonna close that hole.

hluska 11mo ago
Is there a reason you’re posting so often on this thread? Everyone gets your point.
- JCM9 11mo ago
  Fair enough. I guess I’m just like those guys at the investors conference in The Big Short and can’t believe what I’m seeing.
  - gretch 11mo ago
    Why does it matter if everyone else knows or cares? If you were actually the guys from the big short and you have strong conviction, you should short the market (literally like the guys from big short) and get really rich. Money is the language they understand, so hit them where it hurts.
    - Uehreka 11mo ago
      People always talk about shorting like it’s an efficient and reliable way to make money being right when everyone else is wrong. But it isn’t. When you go long, you can still make money by being “sort of right” or “obliquely right” or “somewhat wrong but lucky”or by just collecting dividends if the market stays irrational long enough. If you short something you have to be exactly right (both about what will happen and precisely when) or your money will end up in the hands of the people you’re betting against. It’s not a symmetrical thing you can just switch back and forth on.
      - WA 11mo ago
        Correct and the reason is that borrowing stock for shorting isn't free. You gotta pay interest on that. Or if you go the option route, your options lose value because of time.
  - lesuorac 11mo ago
    I think the main issue with your theory is that it's $38B in today's dollars. In the 1970s we saw a lot less independence between the Fed and White House and as a consequence severe inflation. Trillions of dollars of liabilities is not going to sound so bad after 4 years of double-digit inflation ... Also, IIUC the guys in The Big Short would've lost everything if the government stepped in sooner since the banks controlled the price of the CDSs and could've maintained the incorrect price if they had a bunch of extra cash.
    - ceejayoz 11mo ago
      > Also, IIUC the guys in The Big Short would've lost everything if the government stepped in sooner since the banks controlled the price of the CDSs and could've maintained the incorrect price if they had a bunch of extra cash. Yeah. "Markets can remain irrational longer than you can remain solvent." https://en.wikipedia.org/wiki/Michael_Burry https://en.wikipedia.org/wiki/Michael_Burry had an investor panic and nearly lost everything. He was right, but he nearly got the timing wrong.
  - confirmmesenpai 11mo ago
    did the price of NVIDIA made sense to you 2 years ago, when a lot of people were screaming it's in an obvious bubble? if no, and you thought it was a bubble, does that price of NVIDIA from 2 years ago (not from today) makes sense to you now?
  - vessenes 11mo ago
    You'll have your shot at shorting oAI soon apparently. I'm in a lot of these threads on the bull side, and I'll say - please be careful if you do, and only short what you can afford to lose. I'm sure the stock will be crazy volatile, but I don't see signs of anything unsustainable in oAI's ops right now, with the sole exception of increasing training spend using investor money. We're not in a good position outside the company to know if that will pay off. The parts we do know about, inference, users, growth, revenue growth and net income, are all generationally significant, and make shorting really risky.
  - hluska 11mo ago
    You’re using a movie to justify this?
deleted 11mo ago
[deleted]
Razengan 11mo ago
> electricity utilities that aren’t going to accept OpenAI shares for payment What if AI invents fusion power? (Thanks for the downvotes I wanted to keep my karma at 69)
- jdlshore 11mo ago
  1. There’s no indication that AI is capable of doing so. 2. Outside of software, inventions have to be turned into physical things like power plants. That doesn’t happen overnight and is expensive. 3. The industry is already going through a power revolution in the form of battery + solar and it’s going to take a while for a new technology to climb the learning curve enough to be competitive. 4. What if AI gives us all a pony?
  - Razengan 11mo ago
    What if ChatGPT invents the Matrix? Electricity problem solved.
- JumpCrisscross 11mo ago
  > Thanks for the downvotes “Please don't comment about the voting on comments. It never does any good, and it makes boring reading.” https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
jonas21 11mo ago
The $1.4T commitment is spread over multiple years. Let's assume 4 -- then that's $350B/year. Coincidentally, Google had $350B in revenue in 2024 (and projected to be ~$400B in 2025). It's certainly possible to imagine OpenAI eventually generating far more revenue than Google, even without anything close to AGI. For example, if they were to improve productivity of 10% of the economy by 10% and capture a third of that value for themselves, that would be more than enough. Alternatively, displacing Google as the go-to place for search and selling ads against that would likely generate at least Google levels of revenue. Or some combination of both. Is this guaranteed to happen? Of course not. But it's not in "bonkers" territory either.
- Aurornis 11mo ago
  > The $1.4T commitment is spread over multiple years. Let's assume 4 The Amazon deal is actually spread over 7 years. Other deals have different terms, but also spread over multiple years. Deals like these have cancellation terms. OpenAI could presumably pay a fee and cancel in the future if their projections are too high and they don't need some of the compute from these deals. The deals also include OpenAI shares. The deals are being made with companies that have sufficient revenue or even cash on hand to buy the compute and electricity. The claim above that someone needs to come up with $1.4 trillion right now or everything will collapse isn't grounded in any real understanding of these deals. It's just adding up numbers and comparing them to a single annual revenue snapshot.
  - cmiles8 11mo ago
    I don’t think the OP is saying $1.4 trillion cash is needed “right now.” The point being made is simply that with all the circular deals and financing for this to make sense OpenAI does need to generate $1.4 trillion in cash that can eventually work its way through the economy to pay for all of this. Hype and inflated valuations can be built on numbers on paper but real business are built on cash flow. The OP is simply calling out the lack of cash flow. Even under the most bullish cases for AI the real $ requires here looks iffy at best. I think we all know that a big part of the angle here is to keep the hype going until there’s a liquidity event, folks will cash out and then at the like they won’t care what happens.
Aurornis 11mo ago
> Someone has to come up with $1.4 trillion in actual cash, fast, or this whole thing comes crashing down. These deals aren't for 100% payment up front. The deals also include stock, not just cash. So, no, they do not need to come up with $1.4 trillion in cash quickly. This AWS deal is spread over 7 years. That's $5.4 billion per year, though I assume it's ramping up over time. > At the end of all this circular financing and deals are folks that actually want real cash (eg electricity utilities that aren’t going to accept OpenAI shares for payment). Amazon's cash on hand is on the order of $100 billion. They also have constant revenue coming in. They will not have any problem accepting OpenAI shares and then paying electricity bills with cash. These deals are also being done in the open with publicly traded companies. Investors can see the balance sheets and react accordingly in the stock price.
- mandevil 11mo ago
  Interestingly, it looks like there is a move away from financing these data centers with tech company cash-on-hand and moving to Special Purpose Vehicles over the past 18 months or so. So now there is a lot more debt involved in funding DC's than equity, in ways that are a sudden change to what was largely a funded-by-equity process at the beginning of 2024. The one I found best documented (1) is a Meta's SPV to fund their Hyperion DC in Louisiana, which is a deal that is 80% financed by private credit firm Blue Owl. There is a lot of financial trickery to getting the SPV to be counted by the ratings agencies as debt belonging to a different entity that does not count against Meta's books but treated by the market as basically something that Meta will back. But xAI's Memphis DC is also a SPV, and Microsoft is doing that as well. I'm not sure about AMZN, but that we're starting to see that from their competitors suggests they will also be going to this way. 1: By the invaluable Matt Levine, here: https://www.bloomberg.com/opinion/newsletters/2025-10-29/put-the-data-center-in-the-box https://www.bloomberg.com/opinion/newsletters/2025-10-29/put... but the other major companies have their own SPV's
  - brendoelfrendo 11mo ago
    I saw this, and honestly, it's kind of silly. We all know what's going on, so why do the credit ratings agencies play dumb to this kind of financial engineering? Why don't they just say "actually no, we all know that's debt and it's owned by Meta so we will consider it when rating their credit."?
jgbuddy 11mo ago
The obvious answer is that they are going to IPO
- officeplant 11mo ago
  I hope so just so I can watch the funny line graph of people burning money.
  - xarope 11mo ago
    it's funny until you realise your pension fund invested heavily in AI and are now down 30%
    - officeplant 11mo ago
      At this point I'll be surprised if the financial company in charge of my 401k exists when I retire. I know there are laws to protect things, but my faith in US laws is dwindling fast.
confirmmesenpai 11mo ago
token usage is growing exponential at all providers. it will grow even more with the next generation of models.
- shellfishgene 11mo ago
  Are these tokens paid for by customers, or is it mostly the freebies thrown around by ChatGPT et al.?
mv4 11mo ago
This circular game is wholly dependent on OpenAI's ability to access public funds via IPO.
rdsubhas 11mo ago
The proportion of the utilities involved are a fraction of 1.4T.
jstummbillig 11mo ago
Let's actually be generous and assume that all parties involved did the math and some due diligence and are not just idiots. If we try that approach, what could that plausibly tell us about a situation where OpenAI has struck deals with not one, but basically all the major chip/infra providers?
- dontlikeyoueith 11mo ago
  > Let's actually be generous and assume that all parties involved did the math and some due diligence and are not just idiots Economic history strongly suggests this would be a bad assumption.
  - jstummbillig 11mo ago
    How do you mean? Western economic history is, on average, one of success. So on average, that's a pretty good assumption.
    - ben_w 11mo ago
      Western economic history is 75% of businesses failing in the first 15 years, and the market still growing because the last 25% has outsized rewards. More pertinently, we have a long history of people buying into bubbles only for them to crash hard, no matter how often people tell them "past performance is not a guarantee of future growth" or whatever the legally mandated phrase is for the supply of investment opportunities to the public where you live. Sometimes the bubbles do useful things before they burst, like the railways. Sometimes the response to the burst creates a bunch of social safety nets, sometimes it leads to wars, sometimes both (e.g. Great Depression).
- cmiles8 11mo ago
  The history of bubbles strongly suggests this is precisely evidence of a bad decision, not a good one. For a bubble to exist and be sustained everyone needs to get on board with things that wouldn’t normally make any sense.
Bleehmi 11mo ago
Why would it freak me out? I have not invested in OpenAi. But the truth is, right now the potential revenue is not achievable with a relevant investment into energy generation. Interesting rat race which will lead to something. Let's see what it will be
mise_en_place 11mo ago
It doesn't freak me out and it's actually completely rational. If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging.
- JumpCrisscross 11mo ago
  > If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging It can’t be the same hedge on both sides of the trade.
  - mise_en_place 11mo ago
    Correct, oAI is short rates vol.
    - JumpCrisscross 11mo ago
      > Correct, oAI is short rates vol Why vol? They're just short rates, which is a silly way to say leveraged. If rates become volatile but halve, OpenAI does fine. If rates stabilise at 10%, OpenAI fails. There is no "duration hedging," which for OpenAI would involve buying duration, i.e. bets that profit when rates go up, going on.
lumost 11mo ago
If OpenAI continues on their current revenue growth trajectory, they should be larger than AWS by 2027. Burning 2x revenue to grow that fast is not really a concern beyond your continued ability to attract financing. Given the trajectory of inference cost, it unlikely that they would fail to reach profitability. The big question would be how much of this revenue is unjustifiably circular, and how much of it is extractable - but those are questions for when the growth slows. Im certain every supplier has ways to back out of these commitments if the finances look shaky.
- mvdtnz 11mo ago
  https://xkcd.com/605/ https://xkcd.com/605/
- hiq 11mo ago
  > Given the trajectory of inference cost, it unlikely that they would fail to reach profitability. Is there evidence that their revenues are growing faster than their costs?
  - lumost 11mo ago
    We don't have evidence one way or the other. But from the public statements the idea that they lose roughly their revenue seems constant over time. It's possible that that is simply a psychological barrier for investors. Meaning they grow their losses at roughly 2x their revenue growth rate.
    - vel0city 11mo ago
      > Given the trajectory of inference cost, it unlikely that they would fail to reach profitability. > We don't have evidence one way or the other I don't see how both of these things can be true. How can we know something to be likely or unlikely if we have no evidence of how things are? If we don't have any evidence they're moving towards profitability, how is it likely they will become profitable?
      - 11mo ago
JumpCrisscross 11mo ago
“OpenAI CEO Sam Altman sounded exasperated when Altimeter Capital founder—and OpenAI shareholder—Brad Gerstner asked him the question that Gerstner said was ‘hanging over the market’: how a company generating $13 billion in revenue this year would pay for the $1.4 trillion in computing capacity that Altman has said the company is on the hook for. ‘Brad, if you want to sell shares, I’ll find you a buyer…I just—enough,’ Altman said on Gerstner’s podcast.” https://www.theinformation.com/articles/ilya-saw-mira-muratis-screenshots-sam-altman https://www.theinformation.com/articles/ilya-saw-mira-murati...
- dgfitz 11mo ago
  > I’ll find you a buyer…I just—enough,’ Altman said on Gerstner’s podcast.” Hopefully nobody reading this has experienced it: these are the words of a true sociopath/addict. "I'm mad you questioned me" is fucking classic. I told dang I was out and I am after this. Sorry dang.
  - Imustaskforhelp 11mo ago
    > I told dang I was out and I am after this. Sorry dang. Sorry but is there some lore behind it as I feel like the last sentence has me wondering what it means. If you could share the lore, I would really appreciate it. but overall, I agree that this is a very weird thing to say by Sam Altman
    - gpt800 11mo ago
      dang is the hackernews moderator https://news.ycombinator.com/user?id=dang https://news.ycombinator.com/user?id=dang
      - anon7000 11mo ago
        Yeah, but why would it matter to us if they tell dang they’re out? That’s the missing context.
        11mo ago
xnx 11mo ago
Can the "bubble" pop/deflate in a way that just takes out OpenAI? I don't see Google overextended at all.
- Imustaskforhelp 11mo ago
  The bubble will burst and I think it might take the S&P 500 down with it simply because of how damn concentrated it is. The effects would be devastating to say the least in how I feel like it. If S&P 500 grew thanks to this AI bubble, it sure as well will shrink as well due to the popping of this bubble too. There is no free lunch but more precisely I am worried more about the retirement schemes in which people put their money into etc. Personally I was saying this thing a long time ago that AI feels like a bubble and maybe S&P 500 would have some issues and thus to diversify into international or gold etc. and I was met with criticism because "S&P 500 is growing the fastest so I am wasting money investing in gold etc.", Yea because that's because bubbles can also grow... and they also shrink... and they do both of these things fast.
- f4uCL9dNSnQm 11mo ago
  OpenAI might actually survive, even if investors lose significant part of their investment. It those those companies that took out loans to invest in "AI" or took overpriced shares as a payment that are getting wiped out.
parsimo2010 11mo ago
You're probably right about how disconnected the spending vs. revenue is, but I've also seen the entire USA's public debt go so high that it requires nearly $1 trillion per year just to service the interest payments [1]. That sounds ludicrous to me too, and yet somehow the economy is booming. There are two important points by Keynes that are relevant: 1. The market can remain irrational longer than you can remain solvent. Even if you're betting on a crash, it will probably happen after you get margin called and lose all your money. You can be absolutely right about where this is headed, but keep your personal investments away from this. 2. The value of a company isn't determined by any sound fundamentals. It's determined by how much you can get a sucker to pay (aka Keynes' castles in the air theory). Until we run out of suckers OpenAI will be able to keep getting cash infusions to pay whoever actually demands cash instead of stock. And as long as there are suckers that are CEOs of big tech companies they are going to be getting really big cash infusions. [1] https://www.pgpf.org/programs-and-projects/fiscal-policy/monthly-interest-tracker-national-debt/ https://www.pgpf.org/programs-and-projects/fiscal-policy/mon...
- RA_Fisher 11mo ago
  Or, maybe you don’t understand why it’s rational?
- raincole 11mo ago
  The logical conclusion is that we don't have an AI bubble. We have a USD flood. Or consequentially, fiat floods. You see stupid expected valuation of OpenAI et al. not because investors are stupid. It's because there is a stupid amount of USD and it has to go somewhere. You either get real estate bubble or AI bubble or whatever bubble.
  - tarsinge 11mo ago
    And when everything is a bubble then it’s simply that money has just less value overall. Remember asset inflation is not accounted into CPI, the money surplus/devaluation can take a long time to trickle down into the consumer economy.
  - AbstractH24 11mo ago
tim333 11mo ago
Headlines say: >OpenAI thought to be preparing for $1tn stock market float. ChatGPT developer is considering filing for an IPO by the second half of 2026...
browningstreet 11mo ago
We had impossible financial projections written up just like this for Uber and WeWork. They’re still here. The MBAs will probably win this too.
- hattmall 11mo ago
  What is WeWork's market cap today?
drake99 11mo ago
Sam can pay the cloud bill by selling openai shares , it is very expensive and very limitation
tartoran 11mo ago
They're going for too big to fail because failing would wipe out a lot of profits and that's a nono.

by JCM9 11mo ago

hluska 11mo ago

Is there a reason you’re posting so often on this thread? Everyone gets your point.

JCM9 11mo ago
Fair enough. I guess I’m just like those guys at the investors conference in The Big Short and can’t believe what I’m seeing.
- gretch 11mo ago
  Why does it matter if everyone else knows or cares? If you were actually the guys from the big short and you have strong conviction, you should short the market (literally like the guys from big short) and get really rich. Money is the language they understand, so hit them where it hurts.
  - Uehreka 11mo ago
    People always talk about shorting like it’s an efficient and reliable way to make money being right when everyone else is wrong. But it isn’t. When you go long, you can still make money by being “sort of right” or “obliquely right” or “somewhat wrong but lucky”or by just collecting dividends if the market stays irrational long enough. If you short something you have to be exactly right (both about what will happen and precisely when) or your money will end up in the hands of the people you’re betting against. It’s not a symmetrical thing you can just switch back and forth on.
    - WA 11mo ago
      Correct and the reason is that borrowing stock for shorting isn't free. You gotta pay interest on that. Or if you go the option route, your options lose value because of time.
- lesuorac 11mo ago
  I think the main issue with your theory is that it's $38B in today's dollars. In the 1970s we saw a lot less independence between the Fed and White House and as a consequence severe inflation. Trillions of dollars of liabilities is not going to sound so bad after 4 years of double-digit inflation ... Also, IIUC the guys in The Big Short would've lost everything if the government stepped in sooner since the banks controlled the price of the CDSs and could've maintained the incorrect price if they had a bunch of extra cash.
  - ceejayoz 11mo ago
    > Also, IIUC the guys in The Big Short would've lost everything if the government stepped in sooner since the banks controlled the price of the CDSs and could've maintained the incorrect price if they had a bunch of extra cash. Yeah. "Markets can remain irrational longer than you can remain solvent." https://en.wikipedia.org/wiki/Michael_Burry https://en.wikipedia.org/wiki/Michael_Burry had an investor panic and nearly lost everything. He was right, but he nearly got the timing wrong.
- confirmmesenpai 11mo ago
  did the price of NVIDIA made sense to you 2 years ago, when a lot of people were screaming it's in an obvious bubble? if no, and you thought it was a bubble, does that price of NVIDIA from 2 years ago (not from today) makes sense to you now?
- vessenes 11mo ago
  You'll have your shot at shorting oAI soon apparently. I'm in a lot of these threads on the bull side, and I'll say - please be careful if you do, and only short what you can afford to lose. I'm sure the stock will be crazy volatile, but I don't see signs of anything unsustainable in oAI's ops right now, with the sole exception of increasing training spend using investor money. We're not in a good position outside the company to know if that will pay off. The parts we do know about, inference, users, growth, revenue growth and net income, are all generationally significant, and make shorting really risky.
- hluska 11mo ago
  You’re using a movie to justify this?

deleted 11mo ago

[deleted]

Razengan 11mo ago

> electricity utilities that aren’t going to accept OpenAI shares for payment What if AI invents fusion power? (Thanks for the downvotes I wanted to keep my karma at 69)

jdlshore 11mo ago
1. There’s no indication that AI is capable of doing so. 2. Outside of software, inventions have to be turned into physical things like power plants. That doesn’t happen overnight and is expensive. 3. The industry is already going through a power revolution in the form of battery + solar and it’s going to take a while for a new technology to climb the learning curve enough to be competitive. 4. What if AI gives us all a pony?
- Razengan 11mo ago
  What if ChatGPT invents the Matrix? Electricity problem solved.
JumpCrisscross 11mo ago
> Thanks for the downvotes “Please don't comment about the voting on comments. It never does any good, and it makes boring reading.” https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

jonas21 11mo ago

The $1.4T commitment is spread over multiple years. Let's assume 4 -- then that's $350B/year. Coincidentally, Google had $350B in revenue in 2024 (and projected to be ~$400B in 2025). It's certainly possible to imagine OpenAI eventually generating far more revenue than Google, even without anything close to AGI. For example, if they were to improve productivity of 10% of the economy by 10% and capture a third of that value for themselves, that would be more than enough. Alternatively, displacing Google as the go-to place for search and selling ads against that would likely generate at least Google levels of revenue. Or some combination of both. Is this guaranteed to happen? Of course not. But it's not in "bonkers" territory either.

Aurornis 11mo ago
> The $1.4T commitment is spread over multiple years. Let's assume 4 The Amazon deal is actually spread over 7 years. Other deals have different terms, but also spread over multiple years. Deals like these have cancellation terms. OpenAI could presumably pay a fee and cancel in the future if their projections are too high and they don't need some of the compute from these deals. The deals also include OpenAI shares. The deals are being made with companies that have sufficient revenue or even cash on hand to buy the compute and electricity. The claim above that someone needs to come up with $1.4 trillion right now or everything will collapse isn't grounded in any real understanding of these deals. It's just adding up numbers and comparing them to a single annual revenue snapshot.
- cmiles8 11mo ago
  I don’t think the OP is saying $1.4 trillion cash is needed “right now.” The point being made is simply that with all the circular deals and financing for this to make sense OpenAI does need to generate $1.4 trillion in cash that can eventually work its way through the economy to pay for all of this. Hype and inflated valuations can be built on numbers on paper but real business are built on cash flow. The OP is simply calling out the lack of cash flow. Even under the most bullish cases for AI the real $ requires here looks iffy at best. I think we all know that a big part of the angle here is to keep the hype going until there’s a liquidity event, folks will cash out and then at the like they won’t care what happens.

Aurornis 11mo ago

> Someone has to come up with $1.4 trillion in actual cash, fast, or this whole thing comes crashing down. These deals aren't for 100% payment up front. The deals also include stock, not just cash. So, no, they do not need to come up with $1.4 trillion in cash quickly. This AWS deal is spread over 7 years. That's $5.4 billion per year, though I assume it's ramping up over time. > At the end of all this circular financing and deals are folks that actually want real cash (eg electricity utilities that aren’t going to accept OpenAI shares for payment). Amazon's cash on hand is on the order of $100 billion. They also have constant revenue coming in. They will not have any problem accepting OpenAI shares and then paying electricity bills with cash. These deals are also being done in the open with publicly traded companies. Investors can see the balance sheets and react accordingly in the stock price.

mandevil 11mo ago
Interestingly, it looks like there is a move away from financing these data centers with tech company cash-on-hand and moving to Special Purpose Vehicles over the past 18 months or so. So now there is a lot more debt involved in funding DC's than equity, in ways that are a sudden change to what was largely a funded-by-equity process at the beginning of 2024. The one I found best documented (1) is a Meta's SPV to fund their Hyperion DC in Louisiana, which is a deal that is 80% financed by private credit firm Blue Owl. There is a lot of financial trickery to getting the SPV to be counted by the ratings agencies as debt belonging to a different entity that does not count against Meta's books but treated by the market as basically something that Meta will back. But xAI's Memphis DC is also a SPV, and Microsoft is doing that as well. I'm not sure about AMZN, but that we're starting to see that from their competitors suggests they will also be going to this way. 1: By the invaluable Matt Levine, here: https://www.bloomberg.com/opinion/newsletters/2025-10-29/put-the-data-center-in-the-box https://www.bloomberg.com/opinion/newsletters/2025-10-29/put... but the other major companies have their own SPV's
- brendoelfrendo 11mo ago
  I saw this, and honestly, it's kind of silly. We all know what's going on, so why do the credit ratings agencies play dumb to this kind of financial engineering? Why don't they just say "actually no, we all know that's debt and it's owned by Meta so we will consider it when rating their credit."?

jgbuddy 11mo ago

The obvious answer is that they are going to IPO

officeplant 11mo ago
I hope so just so I can watch the funny line graph of people burning money.
- xarope 11mo ago
  it's funny until you realise your pension fund invested heavily in AI and are now down 30%
  - officeplant 11mo ago
    At this point I'll be surprised if the financial company in charge of my 401k exists when I retire. I know there are laws to protect things, but my faith in US laws is dwindling fast.

confirmmesenpai 11mo ago

token usage is growing exponential at all providers. it will grow even more with the next generation of models.

shellfishgene 11mo ago
Are these tokens paid for by customers, or is it mostly the freebies thrown around by ChatGPT et al.?

mv4 11mo ago

This circular game is wholly dependent on OpenAI's ability to access public funds via IPO.

rdsubhas 11mo ago

The proportion of the utilities involved are a fraction of 1.4T.

jstummbillig 11mo ago

Let's actually be generous and assume that all parties involved did the math and some due diligence and are not just idiots. If we try that approach, what could that plausibly tell us about a situation where OpenAI has struck deals with not one, but basically all the major chip/infra providers?

dontlikeyoueith 11mo ago
> Let's actually be generous and assume that all parties involved did the math and some due diligence and are not just idiots Economic history strongly suggests this would be a bad assumption.
- jstummbillig 11mo ago
  How do you mean? Western economic history is, on average, one of success. So on average, that's a pretty good assumption.
  - ben_w 11mo ago
    Western economic history is 75% of businesses failing in the first 15 years, and the market still growing because the last 25% has outsized rewards. More pertinently, we have a long history of people buying into bubbles only for them to crash hard, no matter how often people tell them "past performance is not a guarantee of future growth" or whatever the legally mandated phrase is for the supply of investment opportunities to the public where you live. Sometimes the bubbles do useful things before they burst, like the railways. Sometimes the response to the burst creates a bunch of social safety nets, sometimes it leads to wars, sometimes both (e.g. Great Depression).
cmiles8 11mo ago
The history of bubbles strongly suggests this is precisely evidence of a bad decision, not a good one. For a bubble to exist and be sustained everyone needs to get on board with things that wouldn’t normally make any sense.

Bleehmi 11mo ago

Why would it freak me out? I have not invested in OpenAi. But the truth is, right now the potential revenue is not achievable with a relevant investment into energy generation. Interesting rat race which will lead to something. Let's see what it will be

mise_en_place 11mo ago

It doesn't freak me out and it's actually completely rational. If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging.

JumpCrisscross 11mo ago
> If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging It can’t be the same hedge on both sides of the trade.
- mise_en_place 11mo ago
  Correct, oAI is short rates vol.
  - JumpCrisscross 11mo ago
    > Correct, oAI is short rates vol Why vol? They're just short rates, which is a silly way to say leveraged. If rates become volatile but halve, OpenAI does fine. If rates stabilise at 10%, OpenAI fails. There is no "duration hedging," which for OpenAI would involve buying duration, i.e. bets that profit when rates go up, going on.

lumost 11mo ago

If OpenAI continues on their current revenue growth trajectory, they should be larger than AWS by 2027. Burning 2x revenue to grow that fast is not really a concern beyond your continued ability to attract financing. Given the trajectory of inference cost, it unlikely that they would fail to reach profitability. The big question would be how much of this revenue is unjustifiably circular, and how much of it is extractable - but those are questions for when the growth slows. Im certain every supplier has ways to back out of these commitments if the finances look shaky.

mvdtnz 11mo ago
https://xkcd.com/605/ https://xkcd.com/605/
hiq 11mo ago
> Given the trajectory of inference cost, it unlikely that they would fail to reach profitability. Is there evidence that their revenues are growing faster than their costs?
- lumost 11mo ago
  We don't have evidence one way or the other. But from the public statements the idea that they lose roughly their revenue seems constant over time. It's possible that that is simply a psychological barrier for investors. Meaning they grow their losses at roughly 2x their revenue growth rate.
  - vel0city 11mo ago
    > Given the trajectory of inference cost, it unlikely that they would fail to reach profitability. > We don't have evidence one way or the other I don't see how both of these things can be true. How can we know something to be likely or unlikely if we have no evidence of how things are? If we don't have any evidence they're moving towards profitability, how is it likely they will become profitable?
    - 11mo ago

JumpCrisscross 11mo ago

“OpenAI CEO Sam Altman sounded exasperated when Altimeter Capital founder—and OpenAI shareholder—Brad Gerstner asked him the question that Gerstner said was ‘hanging over the market’: how a company generating $13 billion in revenue this year would pay for the $1.4 trillion in computing capacity that Altman has said the company is on the hook for. ‘Brad, if you want to sell shares, I’ll find you a buyer…I just—enough,’ Altman said on Gerstner’s podcast.” https://www.theinformation.com/articles/ilya-saw-mira-muratis-screenshots-sam-altman https://www.theinformation.com/articles/ilya-saw-mira-murati...

dgfitz 11mo ago
> I’ll find you a buyer…I just—enough,’ Altman said on Gerstner’s podcast.” Hopefully nobody reading this has experienced it: these are the words of a true sociopath/addict. "I'm mad you questioned me" is fucking classic. I told dang I was out and I am after this. Sorry dang.
- Imustaskforhelp 11mo ago
  > I told dang I was out and I am after this. Sorry dang. Sorry but is there some lore behind it as I feel like the last sentence has me wondering what it means. If you could share the lore, I would really appreciate it. but overall, I agree that this is a very weird thing to say by Sam Altman
  - gpt800 11mo ago
    dang is the hackernews moderator https://news.ycombinator.com/user?id=dang https://news.ycombinator.com/user?id=dang
    - anon7000 11mo ago
      Yeah, but why would it matter to us if they tell dang they’re out? That’s the missing context.
      - 11mo ago

xnx 11mo ago

Can the "bubble" pop/deflate in a way that just takes out OpenAI? I don't see Google overextended at all.

Imustaskforhelp 11mo ago
The bubble will burst and I think it might take the S&P 500 down with it simply because of how damn concentrated it is. The effects would be devastating to say the least in how I feel like it. If S&P 500 grew thanks to this AI bubble, it sure as well will shrink as well due to the popping of this bubble too. There is no free lunch but more precisely I am worried more about the retirement schemes in which people put their money into etc. Personally I was saying this thing a long time ago that AI feels like a bubble and maybe S&P 500 would have some issues and thus to diversify into international or gold etc. and I was met with criticism because "S&P 500 is growing the fastest so I am wasting money investing in gold etc.", Yea because that's because bubbles can also grow... and they also shrink... and they do both of these things fast.
f4uCL9dNSnQm 11mo ago
OpenAI might actually survive, even if investors lose significant part of their investment. It those those companies that took out loans to invest in "AI" or took overpriced shares as a payment that are getting wiped out.

parsimo2010 11mo ago

You're probably right about how disconnected the spending vs. revenue is, but I've also seen the entire USA's public debt go so high that it requires nearly $1 trillion per year just to service the interest payments [1]. That sounds ludicrous to me too, and yet somehow the economy is booming. There are two important points by Keynes that are relevant: 1. The market can remain irrational longer than you can remain solvent. Even if you're betting on a crash, it will probably happen after you get margin called and lose all your money. You can be absolutely right about where this is headed, but keep your personal investments away from this. 2. The value of a company isn't determined by any sound fundamentals. It's determined by how much you can get a sucker to pay (aka Keynes' castles in the air theory). Until we run out of suckers OpenAI will be able to keep getting cash infusions to pay whoever actually demands cash instead of stock. And as long as there are suckers that are CEOs of big tech companies they are going to be getting really big cash infusions. [1] https://www.pgpf.org/programs-and-projects/fiscal-policy/monthly-interest-tracker-national-debt/ https://www.pgpf.org/programs-and-projects/fiscal-policy/mon...

RA_Fisher 11mo ago
Or, maybe you don’t understand why it’s rational?
raincole 11mo ago
The logical conclusion is that we don't have an AI bubble. We have a USD flood. Or consequentially, fiat floods. You see stupid expected valuation of OpenAI et al. not because investors are stupid. It's because there is a stupid amount of USD and it has to go somewhere. You either get real estate bubble or AI bubble or whatever bubble.
- tarsinge 11mo ago
  And when everything is a bubble then it’s simply that money has just less value overall. Remember asset inflation is not accounted into CPI, the money surplus/devaluation can take a long time to trickle down into the consumer economy.
- AbstractH24 11mo ago

tim333 11mo ago

Headlines say: >OpenAI thought to be preparing for $1tn stock market float. ChatGPT developer is considering filing for an IPO by the second half of 2026...

browningstreet 11mo ago

We had impossible financial projections written up just like this for Uber and WeWork. They’re still here. The MBAs will probably win this too.

hattmall 11mo ago
What is WeWork's market cap today?

drake99 11mo ago

Sam can pay the cloud bill by selling openai shares , it is very expensive and very limitation

tartoran 11mo ago

They're going for too big to fail because failing would wipe out a lot of profits and that's a nono.