alt Hacker NewsUpvote because can someone explain to someone as dense as me, whether or not this is likely to make some likely AI bubble worse? Is this just how industry allocates capital?
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These deals certainly make the bubble look larger because people are double-counting revenue. They also seem to be triggering extreme investor FOMO.
>AI bubble worse?
Is it worse than the dot-com bubble? I remember everyone and their mom who knew HTML could get hired, and there were way more companies that went IPO during the dot-com bubble, like theglobe.com.
AI is a bubble, but is it worse than the dot-com bubble or the real estate bubble in 2008?
The money is allocated by institutional investors. They buy the stock, the companies trade their more valuable stocks amongst themselves for various deals. If institutional investors stop investing then the flow of deals stops & the bubble pops. There is nowhere else the institutional investors could park their money other than tech so I don't think the bubble is going to pop any time soon. But infinite growth is obviously a logical & physical impossibility so eventually there will be a correction but whoever says they know exactly when that will happen is lying & they'd be better off buying lottery tickets to cash in on their ability to predict the future.
Personally think this makes a tech bubble a contagion for other parts of the financial industry - especially if institutional investors take the "easy" trade that everyone is doing and add leverage to it.
Now once these folks don't get 800B per year in revenue and the money runs out, all of the banks go as well. But don't worry - they'll get bailed out with our money...
Part of what's concerning here is that the deals are conditional. OpenAI must meet XYZ conditions before cash/stock/etc is transferred, and the conditions are pretty hard to meet.
The money between OpenAI, Nvidia, Oracle, AMD is not circulating. There is no cashflow, only future commitments that may (and quite likely will) collapse. Yet the stock market & media react as if it's a sure thing. Even in the criticisms of these deals, the hype is affirmed.
This is the same problem as Enron's accounting, minus the fraud. (No need for fraudulent accounting when people simply don't read the fine print.)