> Both Alphabet/Google and Amazon have invested recently into Anthropic and are doing all sorts of financial chicanery

OP didn’t say there isn’t circular financing going on. They’re just saying this isn’t an example of it. They’re right.

It’s a potential conflict of interest. And if the agreement is fake—if Google cancels without paying the cash—it could be market manipulation. But the influencer space likes to latch onto jargon, and the one it’s overapplying right now is circular financing.

Enron collapsed due to legitimate fraud. To imply Enron is an apt comparison requires assertion that AI companies are actually cooking the books. Is that what you are saying?

You've made lots of (wild) claims, but provided zero support for them. Also didn't bottom income quartile see the largest growth in last few years?

Sigh, no. Money is not flowing; company valuation might be, but that's temporary and only works if the company keeps delivering insane amounts of value.

yeah I intuitively have felt something like this has been happening, too. And finding the evidence is such an immense task, and feels way out of my current energy level.

When COVID was ongoing there was a term floating around I liked, "Psychosis" was it. The spell is like that of, denial? Terror & shock?

Trauma might be better?

Looking at trauma responses and how to detect it in humans is an interesting perspective to look at all this with. Personally, if I look at it from "people are afraid, traumatized, defending themselves" and use that to extrapolate how most people (the masses, the non-rich) would act and also the rich - that points me to why theres such a sudden hastening of action and pace of wealth up towards the top in the name of AI & war.

That's done quietly behind the scenes so leaders can blame something else for inflation.

See "M2SL" or "TOTBKCR" on tradingview if you want to see inflation live.

They can sit it out but that doesn't mean no one paid the bill.

And some others might need to pull out when its down.

Money doesn't appear out of thin air.

Why would it lead to recession if a handful of big companies lose money they have?

It will show that the USA is in a recession for sure, but otherwise

Until someone can come up with a better option though...

Note that a pension plan that invests for you blindly is no better - either the returns are so bad that they are a scam, or they are investing in stocks anyway and so you get the same results but less control. Similar for things like social security, they are either worse options or you need to pump stocks.

With most 401k plans, you can choose what you invest in to an extent. You can put it in bonds or other investments if you want.

This is what financial capitalism and "democratizing finance" has meant in practice. Rich people have access to different types of investments, and by the time those trickle down to common investors the juice has all been squeezed out. Whatever the trend is, by the time you hear about it the market has already been arbitraged by faster investors with more resources.

We are not going to come up with a market-based solution to fix income inequality. The solution, as much as people in the dwindling middle class resist it, is a strong social safety net coupled with a hard reset on taxation and housing policies. Nobody should be homeless, nobody should be allowed to starve, but you might have to accept that your 401K goes down in exchange for a government guarantee of housing and food.

This is hard for people to accept because they currently have equity in their home or a 401K to save them from starving. But those are transient, individualistic solutions. You can lose your house. You can lose your 401K. Society should be taking care of each other in a broader way than letting everyone accumulate a little, private pile of money.

You don’t have to invest your 401k in stocks.

It makes good financial sense for a company to sell shares when the price is high and do stock buybacks when it's low. I guess they think the price is on the high side?

Also, selling shares puts them in a better position to survive a downturn (more cash, less debt).

When money is cheap you take it. Google sees all the capital waiting to pour into these AI IPOs, and correctly assumed they could tap into that with little dilution.

Just look at the net income of alphabet.

Whatever financial games they play in the background, doesn't matter when you make that much per 2 quarters alone.

I can't wait until these datacenters go bust and bulk DDR5 RAM and GPUs are sold on pallets by the kilogram rather than by the gigabyte.

The pricing on Open router is clear. Anthropic, OpenAI, and Google all garner a massive premium over deepseek and qwen. There's no other realistic explanation except that they're making bank.

>For the investors get their money back and the bubble to not implode, they functionally need to unemploy everyone in the US.

More like $75/mo per user for the next 5-10 years if they can get 5% of the global population to pay that.

> "Profitable on inference" is an unsubstantiated rumour.

So is "unprofitable on inference".

Thankfully we should find out for real as soon as those S-1 documents arrive.

Unemploying everyone was what openai described as their success condition when it was founded a decade ago. There was a q&a on their website that said "How will you know when you have reached AGI? When the system performs most or all economically valuable work." Lots of people thought they were joking, or it was marketing, but they were 100% serious from the first.

This take clearly has a bone to pick. But ignoring that, the first sentence is just not reflective of the reality here—xAI is making a killing on renting out its GPUs, way more than "just power". The dynamics that normally make infrastructure providers have slim margins don't apply when demand far outstrips supply; the situation right now is closer to monopoly pricing power.

It will likely take a few years for supply to fully catch up, which means xAI will eat well for a while.

I can see a world where a few data centers come on line this year and reduce margins a bit, but it's crazy to think the margins will go to "cost of electricity plus a few percent" anytime soon.

Datacenter operators who rent space are selling electricity. SpaceX is selling a fully built datacenter with compute designed for a specific purpose. They’re operating at a higher level of the value chain and can charge accordingly.

They're not any sort of bag holder. They're going to make back what they spent on these data centers in a year.

It's a fairly sweet deal for everyone involved. Anthropic/Google get to sell more tokens and xAI gets a war chest for another bite at the apple. I don't have much confidence that they'll do anything with it but that doesn't mean these deals don't make sense for them.

I thought it was mostly capital costs (chips), not operating costs (electricity).

There is a footnote in the article does the math. It concludes, "power is no more than about 1% of revenue."

Btw how much is MicroStrategy down since the year 2000?

I am of the same mindset as you, but you also have to look at PE multiples of Cisco in 1999 and Nvidia today. One being the "ammunition" supplier in the battle for the Internet, and the other supplier in the battle for AI.

Cisco was over 400 at one point and Nvidia is around 30. Not quite the same.

Other players today: - Digital Realty 48x - Equinix 75x - CoreWeave (still losing money)

There is likely a bubble of some type here, but I don't think this is the same as the Dotcom bubble.

I believe you've described "investing with a hope for a profitable return" which is usually the point of investing.

Circular investing is a thing that is happening with all of these companies related to language models. Google hoping for a ROI isn't a great example of that.

Energy and datacenter scale.

US is a near monopoly of this pairing. A crash will result in the removal of the fluff and ocerpricing of it all but the stance is beyond strong.

Unless China outcompetes Nvidea AND TSMC AND magically gets 4x cheaper energy they are in a much weaker stance for the long haul.

>What happens in a few years when DeepSeek runs on the chinese chips like the Huawei Ascend at a fraction of the cost ?

Nvidia goes back to being a 100 billion dollar business and everyone else reaps the benefits of cheap tokens.

>The post-information age has never felt so well-named as it does lately. Investors dumping billions into completely unproven and, largely, undesired tech. Why?

Eh. There's too much money. Covid response involved printing a lot of money and it all ended up somewhere. The chaos of the current administration has made everything considerably harder to price and the coincidental rise of the LLM has put us in strange situation that is legitimately difficult to price things correctly.

On other hand private corporate credit freezing might take down lot of business that need credit lines to operate regularly. Even the not so bad zombie companies. Tightening up and not being able to revolve credit anymore could lead to bankruptcies.

> It's hard for me to see this being bigger than the great recession unless there's some vulnerabilities in the banking system we're not aware of.

The scenario I see is write-offs. At the moment there are hundreds of billions in IOUs being passed around, much more in liabilities than Lehman had back then in 2007. Compounding that is the frankly insane valuation - it's as clear as day that at least one of the major AI shops will go bust, they all run at a (huge) loss and sooner or later, one of them will run out of cash before achieving market dominance.

Unfortunately, OpenAI and Anthropic are valued at almost 1 trillion $ - backed by nothing but the hope on the winner surviving and achieving the classic VC-backed near-monopoly. The staff can be poached, they don't hold much in IP like patents, the servers and GPUs are mostly owned by third parties like AWS, Microsoft, Google or Oracle - once the cash runs out, they can't sell any assets for even some runway extension because there are no assets. Even the model weights and training data aren't worth much - all competitors already have training data sets of their own, it does not make sense to acquire further data, and model weights are being rendered obsolete by the constant churn of open-weight models particularly from China.

SpaceX is valued even higher, but unlike the other two candidates, they still at least got a viable business even if the entire AI BS bubble collapses, Starlink is a money printer and there's no alternative in sight that matches SpaceX and their reusable rockets.

Now, if either of the three even experiences a large drop in valuation for whatever reason, it's not just experienced VCs that can readily afford (and expect) investments to fail, but this time a lot of "everyday" investment vehicles (such as pension funds) will have to issue write-off losses, and now that they are publicly traded, that may also trigger stop-loss cascade orders further dropping prices, and retail investors will probably join in on the mass panic. That's the #1 risk IMHO.

The #2 risk is that after a collapse, the service providers (i.e. the ones owning the servers) will be sitting on a ton of hardware that has nowhere near recouped its cost. AWS, MS and Google can probably repurpose most of the hardware for their own use and rent out what remains, but they will have to eat significant accounting losses, provoking again a drop in their stock price, but this time with even more blast radius as all three of them are established stock index (and thus ETF) members that a looooot of people have exposure to. But someone like Oracle? They might actually get fried for good.

And the #3 risk is further downstream, particularly relating to NVDA. They have enjoyed years of insane profits because they are the only ones making high-performance AI chips. When demand for new chips collapses due to the event(s) I just described, they can easily shift their TSMC production slots back to GPU wafers and sell these to gamers - but at a far lower profit than before, which again can trigger stock price drops and write-offs.

I won't go further downstream - TSMC and their suppliers are IMHO pretty safe because there is just so much pent up demand from everything not AI, and the construction companies building datacenters don't have too much of a blast radius when the big guns stop expansion projects.

The concrete scenario I'm really, really afraid of: all three succeed with their IPOs, maybe they all survive a year and get included even in S&P 500. The existing shareholders and insiders all slowly dump a lot of their vested stock onto the public market, which in cleartext means into the dozens of billions of $ of retirement contributions. One day, the bubble bursts for whatever reason. The stock markets drop in a panic sell-off, either triggered by stop-loss orders or because retail investors are a herd of sheeple (just like in the 1st covid lockdown). Eventually, circuit breakers on the stock markets will trigger (just like they did in the GME post-apes collapse) and trading will pause, but it will resume until the markets have adjusted to the new valuation... and once the dust clears up, there will be a lot of blood on the floor. Possibly even riots, depending just how much retirement assets just got wiped out.

Where did you get 2-3B from? Colosus 2 GPU's alone were 18B Total cost including construction, power and water treatment facility might be close to 25-30B.

Operating these datacenters is a pretty big cost that isn't factored here

There is a shortage, they are short lived assets. It's a blip and unrelated to their long term profitability and valuation. They can't make a long lived business of building and renting out compute at those margins.

It was definitely a smart business move. It should be troubling to any shareholder than xAI is unable to utilize this infrastructure as renting it out to competitors.

Almost too much so, it often feels like opus is pushing back for the sake of pushing back. The way old models used to add disclaimers to every message regardless of content

I don’t want to open up that whole can of worms but Grok on any vaguely philosophical or political topic is a scaredy cat and has a very hard time staying factual if it could make Musk or the conservative movement appear negatively.

> customers are going to go to whoever has the highest performing gear

This is where we lack data. I’m skeptical of the claim. If anything will force retirement of old chips, it will be power efficiency, not customers being picky amidst a chip shortage.