So debt financing (Oracle) vs fund-it-more-on-your-own (other big tech?) vs fund-it-with-equity (startups?)... I guess that makes some kind of sense? Oracle raises 4x the debt of e.g. Google?
I’m bullish on AI as tech but folks are starting to sniff out that the financials of everything going on at the moment aren’t sustainable for much longer.
I hope we have more of a “reality correction” than full blown bubble bursting, but the data is increasingly looking like we’re about to have a massive implosion that wipes out a generation of startups and sets the VC ecosystem back a decade.
I said this earlier but: It's interesting to see the market try to do anything to rally. The problem is you guys are rallying on the thought that you've scared the Fed into cutting rates, but actually by rallying you short circuit it. You ensure they won't cut. And that's how the market's lillypad hopping thinking is actually just stupidity. You rallied, so now there are no rate cuts so the crash will be even more brutal.
Edit: They're trying to do everything they can to stop people from seeing this lol
Edit 2: Specifically trying to stop people from seeing this:
Yeah for sure but -
'It’s impossible to quantify how much cash flowed from OpenAI to big tech companies. But OpenAI’s loss in the quarter equates to 65% of the rise in underlying earnings—before interest, tax, depreciation and amortization—of Microsoft, Nvidia, Alphabet, Amazon and Meta together. That ignores Anthropic, from which Amazon recorded a profit of $9.5 billion from its holding in the loss making company in the quarter' - WSJ
Their earnings growth is their own money that they gave to OpenAI.
Coreweave for instance, now has its CDS trade around 600bp, which is a 1/3 rise in 2 months, which implies that the probability of a default in 5 years is 40% at a 40 cent recovery rate.
That makes Coreweave's credit rating the equivalent of CCC-, which aint good.
Sorry if this is basic, but do you mind explaining the logic here for those who aren’t familiar? Also where are you getting this data? Thanks in advance.
It's just returning to relative sanity. Go look at a 6-month chart. Of course, it's mostly risen with the SP500 tide. The mid-September jump was some sort of mechanical move caused by things deep in the market (and outside it) that you're not allowed to know about. Someone needed collateral.
I don't think Oracle's stock price has anything to do with AI. That's just the public narrative.
It just seems so obvious that all of these companies are going to unwind and yet I don't know how to avoid being damaged by this in my retirement funds in the S&P 500.
Hopefully all of this happens before Open AI can be flogged to the public in an IPO large enough to get into the S&P 500 -- in which OpenAI then goes to zero
If you aren’t close to retirement you don’t worry about damage, and if you are close to retirement your funds are hopefully already stuffed into munch more conservative funds.
Long term investment strategy assumes and welcomes volatility to maximize returns.
Continuous investment in a 401k means that every bubble burst lowers your cost basis (buying stocks at a “discount” post-burst, lowering your average price paid).
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[ 5.5 ms ] story [ 60.4 ms ] threadI hope we have more of a “reality correction” than full blown bubble bursting, but the data is increasingly looking like we’re about to have a massive implosion that wipes out a generation of startups and sets the VC ecosystem back a decade.
Edit: They're trying to do everything they can to stop people from seeing this lol
Edit 2: Specifically trying to stop people from seeing this:
Yeah for sure but -
'It’s impossible to quantify how much cash flowed from OpenAI to big tech companies. But OpenAI’s loss in the quarter equates to 65% of the rise in underlying earnings—before interest, tax, depreciation and amortization—of Microsoft, Nvidia, Alphabet, Amazon and Meta together. That ignores Anthropic, from which Amazon recorded a profit of $9.5 billion from its holding in the loss making company in the quarter' - WSJ
Their earnings growth is their own money that they gave to OpenAI.
You have that waiting in the wings.
Coreweave for instance, now has its CDS trade around 600bp, which is a 1/3 rise in 2 months, which implies that the probability of a default in 5 years is 40% at a 40 cent recovery rate.
That makes Coreweave's credit rating the equivalent of CCC-, which aint good.
Oracle's credit default swaps surge as Barclays downgrades its debt rating
https://news.ycombinator.com/item?id=45910711
A nice start.
EDIT:
Downvote it all you want, he's not going to increase your pay.
I don't think Oracle's stock price has anything to do with AI. That's just the public narrative.
Core Scientific (CoreWeave): -19% in one month
That said, I hope Oracle doesn't survive this transition. We need higher moral companies to usher in the AI era.
Hopefully all of this happens before Open AI can be flogged to the public in an IPO large enough to get into the S&P 500 -- in which OpenAI then goes to zero
Long term investment strategy assumes and welcomes volatility to maximize returns.
Continuous investment in a 401k means that every bubble burst lowers your cost basis (buying stocks at a “discount” post-burst, lowering your average price paid).