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Why is this flagged? It’s a legitimate conversation important to our industry.

skybrian 1y ago
I didn’t flag it, but it looks like accounting nonsense. These advance commitments probably aren’t assets on the books and there is likely no debt between OpenAI and its vendors. So at most, it’s a stock market bubble. If OpenAI doesn’t pay, its vendors have whatever data centers that they’ve built so far and can use them themselves or rent them to someone else.
- 1970-01-01 1y ago
  I can't imagine a world where tenancy in massively overpowered DCs is cheaper than the electricity it costs to run them due to OpenAI. Reads like pure fiction.
- johanstokking 1y ago
  I think the main point is in the closing of the article; that valuations of companies are driven up by OpenAI spent commitments, and that those companies combined now would represent 40% of S&P 500. You’re right, this is not accounting debt. I don’t think OpenAI’s spending commitments alone are the problem, but OpenAI imploding will have a cascading effect and a realization check for everyone in the industry. What are the real prices for profitability and are businesses and consumers willing to pay for that, will we need ads, do we need an integrated product offerings to amortize the cost instead of standalone chat, etc. Also, S&P 500 going down by 10-20% will have a real impact on the real economy. If it happens. I don’t think this should have been flagged.
  - skybrian 1y ago
    If the bubble bursts then lots of investors will discover that they're poorer than they thought. I think the big tech firms will come out of it okay, though, due to holding lots of cash and little debt. They have other sources of income. But apparently there are ways to keep the debt used to build data centers off the books? What happens if the data centers are no longer needed? I can't tell if that's an accounting fiction (the tech company has to buy the data centers anyway) or if the tech company can say "never mind, I don't need any more datacenters" and bondholders lose their money.
    - deleted 1y ago
      [deleted]

I didn’t flag it, but it looks like accounting nonsense. These advance commitments probably aren’t assets on the books and there is likely no debt between OpenAI and its vendors. So at most, it’s a stock market bubble. If OpenAI doesn’t pay, its vendors have whatever data centers that they’ve built so far and can use them themselves or rent them to someone else.

1970-01-01 1y ago
I can't imagine a world where tenancy in massively overpowered DCs is cheaper than the electricity it costs to run them due to OpenAI. Reads like pure fiction.
johanstokking 1y ago
I think the main point is in the closing of the article; that valuations of companies are driven up by OpenAI spent commitments, and that those companies combined now would represent 40% of S&P 500. You’re right, this is not accounting debt. I don’t think OpenAI’s spending commitments alone are the problem, but OpenAI imploding will have a cascading effect and a realization check for everyone in the industry. What are the real prices for profitability and are businesses and consumers willing to pay for that, will we need ads, do we need an integrated product offerings to amortize the cost instead of standalone chat, etc. Also, S&P 500 going down by 10-20% will have a real impact on the real economy. If it happens. I don’t think this should have been flagged.
- skybrian 1y ago
  If the bubble bursts then lots of investors will discover that they're poorer than they thought. I think the big tech firms will come out of it okay, though, due to holding lots of cash and little debt. They have other sources of income. But apparently there are ways to keep the debt used to build data centers off the books? What happens if the data centers are no longer needed? I can't tell if that's an accounting fiction (the tech company has to buy the data centers anyway) or if the tech company can say "never mind, I don't need any more datacenters" and bondholders lose their money.
  - deleted 1y ago
    [deleted]