alt Hacker News> And Google is a major shareholder in SpaceX, so they certainly have incentive to juice the valuation of the IPO.
Google own 5-6% of the shares of SpaceX. SpaceX is seeking a valuation of $1.77T which means Google's shares would be worth $88.5B-$106.2B. I'm not a skeptic of AI/LLMs but this makes me deeply suspicious of these circular deals. What happens when the music stops?
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The music would have a risk of "stopping" if these deals were backed by a speculative entity. However AI actually has real value/revenue, and is not a speculative product (i.e. people aren't buying tokens to resell them, a token is "consumed" at moment of inference)
You seem to imply that with this deal their shares are worth 88B but without it they're worthless.
It's very hard to know how much the deal actually increases SpaceX market cap, but unless Google exits their SpaceX position soon it doesn't even make much sense as a circular deal.
Someone gets bailed out and the cycle starts again. Isnt this how it works?
Google also just announced a new equity raise of $80B. I have no idea if doing this via equity vs debt is trying to suck some of the wind out of the IPO Market for Anthropic and OpenAI but it’s going to be interesting to see how the markets deal with all the new equity being floated. Someone isn’t going to hit their raise targets and the later IPOs may be the ones holding the bag.
There's no realistic way for the music to stop. The demand for LLMs is staggering and the big providers are charging full freight for inference. They might not make back the money from training but these data centers are definitely going to be fully utilized for at least the next 5 years.
I have a riddle for you:
If it looks like a bubble and waddles like a bubble and quacks like a bubble what is it?
The awkward silence at this critical point of this interview...
https://youtu.be/sL9hq7Qj1qc?t=252
shows why the boat is about to go down.
The sci-fi SpaceX S1 talks about asteroid mining and other imaginary chimeric stuff like space data centers... while 80 to 90 of the case is about AI. But their AI case is like BMW bragging about their thriving auto business...while renting all their car factories to Toyota.
It's very healthy to be skeptical but there's nothing weird specifically about this.
It gets weird when people stop looking at the books and ignore the circularity.
It also increase risk by reducing resiliency.
It's also 'cleaner' then the Nvidia style deals with OAI who are customers.
'Google Finance' is investing in a company.
Just so happens that company leases something to Google. Not so bad.
Nvidia invests in OAI so that money comes right back as sales <- much more conspicuous, looks like 'vendor financing'.
At least Alphabet, Microsoft and Amazon can afford it.
Nvidia is not losing anything if their stock falls.
So whats left? The typical candidates of course: We poor people. 401k, ETF, etc. we pay the bill.
These companies are too big to fail. I'm afraid the tax payers will be the ultimate consequences bearer.
Retail investors are currently being set up to hold that bag, and presumably the companies themselves will get government bailouts, so the taxpayer gets hit coming and going.
It's not even subtle at this point, what with the attempt at S&P rules changes, the insane valuation, the attempt to change the trade-through rule, and more.
When the music stops we could start buying hardware again at rational prices.
It's not just that there's a circular deal it's that they're prevalent. And worse, with frontier labs IPOing seeking astronomical valuations that means a lot of the public is now exposed too (even if they don't all get fast-tracked into eg; the SP500).
The problem is the valuations assume astronomical growth... that is likely impossible for all of them to simultaneously achieve. Which means something's got to give.
Answering that question requires determining how much of the valuation is predicated on growth in AI spending from Google->xAI, but not counted as a forecasted expense for Google, and similar for other deals.
Circular deals aren't bad; what's potentially bad is if those deals are misinterpreted by active investores.
Someone told me this isn't "fraud". (Was in another one of these hacker news thread where a guy called all this Brilliant Financial Engineering). How is this not unethical at least, it befuddles me.
Maybe we've come to celebrate unethical behavior and its become so normalized that we forget to ask ourselves what should be allowed.
> What happens when the music stops?
Government hands Wall Street another bailout to the tune of trillions of dollars. Wall Street executives and hedge funds use funds to enrich themselves as usual. Main Street and tax payer get fisted again. These massive data centers go bust. Get gutted during bankruptcy and foreclosure proceedings Public deals with the fallout with no help from government.
> What happens when the music stops?
That's a problem for your kids to figure out ~ those currently getting enriched from these schemes.
The question you should be asking is who prints the money that materializes those valuations.
And who gets stuck with the bonds.
we should all be asking where the downstream ROI suppose to come from, because it sure as shit isnt in any of these AI endevours.
>What happens when the music stops?
Bubble bursts, somewhere between 2008 housing crisis and the dotcom bust.
Really dependent on if there are any OTHER structural problems to compound a fast re-valuation of tech stocks. There's plenty of noise about banks holding large amounts of bad private credit debt. There could be a lot or only a little collapse. There's so much uncertainty and the combination of war, high oil prices, and uncertainty about tarriffs that the market struggles to value anything as international fear drives investment into the US and high prices confusing whether growth is growth or just inflation.
Definitive peace in Iran combined with some sort of sobering AI news signaling the end to the infinite growth party could crush the markets.
> I'm not a skeptic of AI/LLMs but this makes me deeply suspicious of these circular deals. What happens when the music stops?
A financial crash that will make the 2007ff crisis look tame in comparison. That is why Anthropic, OpenAI and SpaceX (which xAI belongs to) are all going public soon and why NASDAQ bent the rules to include them... the current owners all want to raid pension savings worldwide [1] to get their payday before the bubble inevitably bursts.
And when it bursts, you can bet that the vultures will use their fresh cash to buy up assets at fire-sale prices. For the truly rich, a boom-bust cycle is only one thing, an opportunity to achieve extraordinary profit.
A lot of people are emotionally unprepared for a world where the music doesn't stop.
Or, hear me out, maybe there's a compute shortage and xAI has compute and manages that well.
There are no dark GPUs. Compute translates directly to money for these frontier labs.
I think everyone is reading way too much into this. Sure there is some circular transactions that are sus, but this ain't it.