Access to infrastructure is a core part of the AI business.

If you are a startup, and you want to buy AI infrastructure, you would typically sell equity to a VC and use that money to buy infrastructure.

If the AI infrastructure vendor would offer to buy that equity, rather than a VC, that’s preferable because you may get ongoing special treatment from the vendor once they have a stake. So it’ a great deal for the startup.

For the infra vendor- you can likely get a good deal on the investment, you get some exposure to higher upside, and it may be useful to manage your cash flow.

Seems like strategic high value moves to me. It’s no wonder the market likes it

When finance folks come up with creative solutions to problems, bad things happen.

Here the “problem” is that these AI companies don’t have enough money to buy things and the traditional pool of investors that would give cash and then sit on the sidelines has dried up. Normally in that scenario companies just go bust.

To keep throwing fuel on the fire suppliers are stepping in the “invest” so AI startups can buy the supplier’s goods. History says that’s a terrible idea.

Markets correct craziness in the end, everyone will wonder how this mess ever happened, hearings will be held, and a range of new regulations will be introduced to prevent this sort of thing from happening again. Then finance folks will come up with some new way with finance to be less boring and the cycle brings anew.

In the case of Nvidia and Poolside, isn't it more like: Poolside pays part of Nvidia's made up price for chips with some of Poolside's imaginary value stock?

> 4. Amazon records a large paper “profit” because the value of the Anthropic “investment” went up after all the stuff it’s doing with the “investment” from Amazon

This will be offset against the cost of the initial investment, though?

I recently listened to a podcast episode about Enron, and one of the red flags was that they reported profits on paper, but didn't generate cash flow proportional to their profits.

Both Amazon and Nvidia probably don't need the cash flow right now, which is why they can get away with it. It'll be interesting to see what happens if their cashflow ever runs dry.

I've heard the business term as a "reciprocal agreement" a common behavior of large companies would be to award a large contract for IT services to a 3rd party and then that company would assist in getting a market foothold in their home country, like India.

I'm not an economist or accountant so take this with a pinch of salt, but this basically transforms Amazon money into datacentres with a guaranteed customer. That's your profit right there.

I agree big time.

This distorts the markets, undermines financial disclosures, and probably stifles innovation. In your example, when Amazon invests in Anthropic, do they then get voting shares and a say where the opex go?

(Rhetorical) Why are we okay with building these card houses?

There’s a whole generation now that wasn’t in the trenches for the .com bust or 2008 crisis that’s blissfully unaware of what’s about to transpire when everything that’s been going on unravels.

    Meanwhile none of the above appears to actually be making any actual profit in terms of revenues > costs.

When Anthropic pays opex for using the data centers?

Isn’t the same with any business just a bit more indirect? So at what threshold is “Fine” and when is not?

1 to 1 cycle: bad 1 to 1 to 1 cycle: good?

…?

I Google News searched Poolside and found this:

https://techfundingnews.com/nvidia-prepares-up-to-1b-investm...

>Poolside operates across the US and Paris, focusing on coding automation tailored for government and defence clients.

>The company is also working on bold infrastructure expansion. Earlier this month, Poolside partnered with CoreWeave to build one of the largest data centres in the US under an initiative called Project Horizon. Set in West Texas, the facility is slated to reach 2 gigawatts of capacity, which is enough to power about 1.5 million homes.

Searching for Project Horizon led to this:

https://poolside.ai/blog/announcing-project-horizon

So another data center company, but focused on the Defense/Intelligence community. A hardware equivalent to Palantir?

So, Poolside is a company that exists solely to secure funding from NVIDIA and use the funds to purchase NVIDIA chips? I wonder if there is a word for it ...

It's like the boss of Citicorp said back in 2008, "as long as the music is playing, you've got to get up and dance". If you withdraw from the market entirely then you'll definitely lose. So they try to time the market and hope to get out when the music stops. Didn't exactly work out well for Citicorp.

VC investments are inherently high-risk, high reward. That is, most of the investments will go to zero, but hopefully one or two really good ones make up for it. In order to make that work, you have to invest in many different startups, which is what Nvidia seems to do.

Nvidia has the additional advantage that some of their invested money will make it back to them in the form of dollars spent on compute, which makes their investments cheaper for them, relatively speaking.

> If it can be explained, that every investment is good now, and the answer to the previous question is something like "greed", why stop at a measly billion? Why not just, say, 10 billion?

If the startup isn't looking to raise 10 billion, why give it 10 billion? Instead, give 10 startups one billion each, to spread out the risk.

I got into following the markets around the time of the housing bubble and everything I read at the time said their was a housing bubble.

I think the properties of a true bubble mean that it is not irrational to invest in the bubble and that is a part of what causes the bubble. If your neighbor makes $100k flipping a house and has no special skills above yourself then it is not irrational to also try to flip a house.

This bubble especially has that property. Like Zuckerberg has said there is a big risk of not taking enough risk on something like AGI or super intelligence. That is a perfectly rational position but that is exactly the self reinforcing nature of a speculative bubble.

I also don't think in general a bubble is fundamentally hard to spot. It is hard to profit though from the bubble bursting because of the self reinforcing process at play that you have to bet against.

Like in 1929 or 1999 everyone knows it is a bubble, but always thinks they're the rational one who can ride the rollercoaster up and time the bubble, then sell before it pops.

It is the same psychology behind meme coins. Everyone knows they are worthless, they gain value because everyone is trying to make everyone else the greater fool holding the bag.

2008 was less a bubble of irrational exhuberance and more a bubble of overvaluation enabled by fraud of bundling bad mortgages into A rated investment products

The closest parallel is probably with the dot com bubble where some companies (notably Cisco & IBM) loaned money to purchase network equipment to their own customers. Since those customers weren't profitable (or arguably even financially viable companies at all) the whole thing exploded rather spectacularly.

Not sure I get the reference here. Share buybacks are essentially a trick to avoid dividend tax, how is that related?

Not quite. If a company is buying back shares, management believes stock is undervalued. The reverse is paying for real assets with stock.

Some of this is paying for barely useful assets using inflated stock, or with cash borrowed with inflated stock as collateral for the cash.

Share buybacks are quite different than round tripping.

I wonder what made them move their headquarters to France

Joint with Finland, no?