As someone who belongs to “all of us”, i vote to not bail us out if shit hits the fan. No need to ask me when it happens, OK? No really, it’s nice of you but we really dont need to be bailed out. You are welcome :)

These are relatively contained private credit markets though. We’re not looking at anything 2009 level. For scale, total US mortgage debt peaked at $9.3T ahead of the subprime mortgage crisis, 73% of GDP at the time. We’re talking here about ~5% of GDP.

If I owe the bank $750,000 and can't pay, it's my problem.

If I owe the bank $1,750,000,000 and can't pay, it's the bank's problem.

> This usually means all of us are on the hook.

And since we are talking about USD (specifically "of" USA), it also means globally a hell lot more of "all of us" are on the hook than we would have been involved (even remotely) had (or would) this endeavour ever ended up in some sort of general success.

I don't know whether it'd be "tails I win, heads you lose" or "I reap the profits alone, you reap the losses alone". Maybe the latter and it becomes magnitudes more interesting when it expands (or rather engulfs) beyond the boundaries of the great nation.

>Well technically they don’t own the debt

Channelling the 1980s for off-balance sheet financing 101.

From an economic perspective there is zero difference between borrowing to buy an asset and entering into a non-cancellable long term (equivalent to its economic life) lease for the asset.

The first option causes an asset and a liability on the balance sheet, affecting debt ratios that appear in financing contracts and so on. The second does not appear on the balance sheet.

You pay every month, like it or not. You call it interest or you call it a lease payment. You need it off balance sheet for reasons, investment bankers will structure that to make it happen for a fee.

Technically, from an economic perspective, it's debt.

We're not on the hook. The systemically important banks are very well capitalized now and have limited exposure to these debts. Even if there are substantial defaults the big banks will be fine.

But how could it be that the banks have lent the money without a leverage or proper risk assessment? Also what I don't understand is that how come the banks cannot claw back the money they lent if they found out corruption or any other ill intention by the borrowers.

The banks aren’t lending the money to these SPVs. It’s mostly private credit.

The way banks get involved is that they may be lending senior financing to the private credit funds but that means they have a ton of subordination.

"U.S. energy company Enron, though fundamentally different from tech giants, collapsed in 2001 due to off-balance-sheet debt hidden behind multiple shell companies. Even with proper accounting practices, an increase in joint ventures with low transparency could raise concerns in the market."

Remember the vendor financing model which got a lot of technology companies into trouble at the same time? It took some years, almost all those companies disappeared. Motorola, Nortel, Lucent ...

> it’s not the tech giants but the banks that lent the money to the SPVs that are at risk

Banks have not been loaning AI money for some time. They hit all their regulatory safeguard limits so they can't keep loaning. Half the money being invested in AI is private capital. There is still systemic risk, because private capital is a shadow banking system and you don't know who will be affected when they go kaput. Your utility company may [read: will] go bankrupt, but the money in your personal bank account is safe. Your retirement account, however...

That is not accurate according to the article:

> By investing in the data center's operating company with a 20% stake and using the facility under a lease agreement, Meta secured computing resources but also increased its hidden debt.

> Meta has a contract guaranteeing investors' losses if the data center becomes unnecessary and the lease is terminated.

The way they are hiding these debts is by having a stake in a data center company. But if shit goes tits up they are contractually liable for 100% of the losses.

It's not the fund that lent the money to the SPV, it is Meta who is offering guarantees here.

s/banks/private credit/

how are these long term commitments structured? Can the big companies default on them? pay a small penalty? I think that probably makes a large difference.

Capitalists love to socialize losses

>SPVs that own the data centers

I mean if AI falls short we might see a collapse in the price of colo but those investments would probably just be paid back over 10x the period.

I'm in the US and I'm either getting NXDOMAIN or NOERROR (with no A record answer) back from every big nameserver I try (my ISP, Google, Cloudflare, etc.).

But a dig +trace archive.ph (which recurses all the way to the root locally) resolves it fine.

Is there some US-mandated DNS filtering I don't know about?

It's mostly for having lower debt-to-equity and higher equity multiplier (better stock price). And you retain your credit rating and can get cheaper debt.

But of course it is obvious in this scale. However, credit ratings do not care, as they are driven by regulation, and regulators get their paycheck regardless.

Also in the joint venture like Blueowl/Meta for the $27B Hyperion data center in the case when things go wrong Meta is in theory bankrupt remote. So in theory it should not affect credit rating because when the bad debt is not served, Blueowl, not Meta, is in the hook for it. And Meta's investors should be protected for this event.

I think it's just a common practice to do it this way in the industry. May not mean these companies are intentionally hiding something at this point of time.

> These debts mean nothing if the US government actually views AI technology as being on par with the Manhattan project. They'll just bail them out or nationalise them.

According to Wikipedia, the Manhattan project only cost $28 billion in 2024 dollars. That's a completely different order of magnitude compared to what we're talking about here. I imagine the size of the investment here would even be hard for the US government to swallow.

If the US companies need trillions to barely beat Chinese companies spending billions, despite a multi year head start...

If they bail them out it should be done like the GM bailout. Shareholders leave with nothing.

The advantages of being a reserve currency and then also blaming your peer competitors as “manipulators”.

They'll bail them out with what money? US is already almost $40T in debt, how do you think the bond market would react if another $2T were abruptly added to it?

In other words, the US gov will simply put all the debt onto the public, as usual.

They can only do that if AI is profitable or at break even. Otherwise they would need to finance these companies yearly.

I am not sure why, but many people (news / media outlets?) love end of world scenarios.

too often pessimists are treated as serious, critical thinkers, while optimists are dismissed as naive or foolish.

remember this guy Michael Burry who saw the 2008 housing crash coming, bet everything against it, and made a fortune?

but then he spent the next 15 years trying to pull off the exact same trick, lost a ton of money fighting a massive bull market, and finally had to shut down his hedge fund because lightning just wouldn't strike twice.

how I deal with this: focus on what you can control. reading news in general seems to be difficult. what can I personally do about all that? very little tbh.

You need to listen to what Bryan Cantrill said about his experience at Oracle, before you go there.

> What you think of Oracle is even truer than what you think it is: "Shit mediocrity, inflict misery, lie our asses off, screw our customers, and make a whole shitload of money"

https://www.youtube.com/watch?v=-zRN7XLCRhc&t=2047s

> You need to think of Larry Ellison the way you think of a lawnmower. You don't anthropomorphize your lawnmower, the lawnmower just mows the lawn, you stick your hand in there and it'll chop it off, the end. You don't think 'oh, the lawnmower hates me' -- lawnmower doesn't give a shit about you, lawnmower can't hate you. Don't anthropomorphize the lawnmower. Don't fall into that trap about Oracle.

https://www.youtube.com/watch?v=-zRN7XLCRhc&t=2308s

Something other than Oracle for only 15% less? Sounds great.

From the "Read Next" section: SoftBank's Son says calling AI a bubble is 'blasphemy'

Softbank always has their finger on the hype pulse ...

I will go against the grain of everyone else - be a hype beast, every crash I have seen they make more and get better jobs on the flip side. Counter Oracle at a higher salary and ask about bonus guarantees for when this all goes to the moon (you have to really really appear to believe).

> To the experienced devs out there; would you take a 15% less offer from a medium sized company for job security?

In a hot job market, no.

In the current job market, yes.

It's one of the main reasons I am sticking to my current employer. I could likely make more money by moving jobs right now ; I still get the odd recruiter reaching out here and there; but I fancy the security when I see dark clouds on the horizon.

And oh boy, those clouds are very dark. Foreboding indeed.

definitely

they should bring back the listicle - it was more honest than the pretend investigation format

And every time some points all of this out, they are "denier", "left behind" and all the other everything-ai fanatics can come up with. As for the imminent crash - I'm all for it. There's a whole generation that is incapable of thinking for themselves without an LLM telling them what to do or worse still - do it for them. And for much of the tech world, that is becoming the single point of failure.

As for China - I think their motivation is clear: if they could have pulled it off from the start, their business model would have been the same as MANGO's. Llamacpp opened up the floodgates and their best bet now is to use this and their resources to start pulling the rug from underneath MANGO. I'm not a fan of the "enemy of my enemy" philosophy - they can both be enemies but wile they are at each-other's throats (albeit not openly), I'll gladly sit back and grab some pop-corn.

For anyone old enough to remember attending bankruptcy/liquidation auctions of "dotcom 1.0" companies in 2000, 2001 or so and buying an Aeron chair, or similar, I really wonder what it will look like this time around. There was one point in time where only very slightly used datacenter cooling systems and diesel backup generators were selling for pennies on the dollar.

The banks aren’t the ones on the hook here. Private credit funds are.

What would be the alternative scenario to a crash? As I understand it, for AI companies to not crash, they have to end up putting us all out of jobs which will end up with us becoming slaves/serfs.

why do you consider 2028 to be the right time for a pop?

Shorting is a very different thing from buying a stock and living through a drawdown. You can bleed money fast and if you don't have options protecting your trade, your loss potential is unlimited. Once you pay for the insurance through options, the profits aren't that attractive unless you can see the future and predict exactly when the stocks will go down.

Go ahead.

Good luck timing it. "The market can remain irrational longer than you can remain solvent."

There isn't always a mechanism that will translate being-right about some fundamental fact into making-money from it.

P.S. It isn't trivially "solved" by someone setting up a gambling scheme either. Many people who are right will still lose because they didn't also guess when other people would start to agree with the conclusion. Plus there's the time-value of money for things which take longer to play out.

Isn't Oracle more likely to collapse first? However, timing these things is next to impossible, so good luck if you attempt shorting them.