3 ms·

Thanks, that is indeed a much better piece than most financial reporting on the AI industry. Like everyone goes on about "Circular investment! Bad!!" and many e

by keeda 2mo ago

Thanks, that is indeed a much better piece than most financial reporting on the AI industry. Like everyone goes on about "Circular investment! Bad!!" and many even interpret it as fraudulent accounting, but as this points out instead, it is a different, pretty valid, and perfectly legal strategy with significant but well-understood risks. I'll just pick a nit, on the topic of demand concentration, it cites that "MIT NANDA study / 95% AI pilots failed" number without considering the provenance (and, frankly, accuracy and relevance) of that number: https://archive.md/AvSYL https://archive.md/AvSYL

LogicFailsMe 2mo ago
Great article as well, but I'd even be happy with an initial 5% rate out of the gate given ~90% of startups fail. AI build out is a risk. Is anyone serious saying it isn't? It might blow up, certainly some egregiously overpriced endeavors will revert to mean, but risk taking is what businesses and investors do for a living. But for giggles, I threw Nvidia's latest 10Q into Sol 5.6 to analyze it as Patrick Boyle suggested that was the only way to understand the games they're playing. And its summary: "financial distress risk is very low; earnings-volatility risk is moderate to high. NVIDIA’s debt is trivial relative to earnings and liquidity. The main downside scenario is not creditors forcing distress—it is an AI-demand slowdown or regulatory shock colliding with enormous supply commitments, concentrated customers, and investment exposure. Even then, its margins, cash generation, net-cash position, and discretionary buybacks provide a substantial cushion." So broadly nothing I didn't more or less know already.