It’s starting… buckle up folks.
It’s a shame we won’t have Anthony Bourdain to explain this move to us in the AI implosion docu-flick that comes out in 2029. It’s not stale fish, it’s fish stew! It’s a whole new thing!
It’s a shame we won’t have Anthony Bourdain to explain this move to us in the AI implosion docu-flick that comes out in 2029. It’s not stale fish, it’s fish stew! It’s a whole new thing!
In the end, Amazon is still going to be the ones leasing and hence using the chips; nominally the 'owner' changes hands, and it looks like a bond (with a small equity component) in just about every way, except through some legal and accounting magic, it doesn't go on their balance sheet.
The WSJ had some great reporting on the SPV games recently and found $3 trillion in liabilities being kept off balance sheets by playing these sorts of things. However this time around it seems like most folks aren’t getting fooled.
What do you mean? These vehicles only exist if investors buy into them. Are you saying they were "fooled" by buying these investments?
Their existence is not a secret, which is why those journalists were able to find them and add them up. These aren't hidden secrets being hidden from investors.
I see a lot of theories that this is being done to prop up stock prices by hiding debt and making the balance sheet look better, but large investors understand these financial engineering operations and factor it into their decisions to buy and sell stock.
I do think it's funny that so many people think these reporters have uncovered a scandalous secret that all of the investors missed. The way the stock prices didn't collapse after that reporting is a good clue that the investors in these companies were already aware of the situations.
Those folks initially viewed bonds as a safe bet just like folks thought mortgages were a safe bet. However if it turns out they just bought into a mess of “sub-prime” AI bro fantasies and these bonds go bad they’re in for a world of hurt just like 2008 when folks stopped paying their mortgages.
As this all starts to unwind it’s going to be fun watching these same folks run for the exits.
Frankly I don’t think so. I don’t think investors factor this in. I have, anecdotally, seen simple financial engineering prop up stock prices. From what I’ve seen, the big investors look just at the numbers. They don’t even really consider strategy very much. Just making your numbers look better is enough to, at least temporarily, greatly inflate your stock.
This part is confusing a lot of people. This isn't a secret account trick that makes debt go 'poof' without any consequences.
Companies have debts, assets, and liabilities. They can't keep the assets, move the debt to another vehicle, and do it all without incurring any liabilities.
They move the GPU assets into the SPV. Their assets on the books are decreased.
In return, they get funds they can use to pay down debts, buy more assets (more GPUs), or keep on the balance sheet.
In the process, they incur liabilities because they have to continue paying the SPV to lease the GPUs.
EDIT: Since it wasn't clear, debts are a subset of liabilities. They get the debt off the book, but they trade it for a liability because they are contractually obligated to continue paying to use those GPUs. This is why "keeping the debt off the books" isn't a dramatic game-changing reveal. They're still paying.
Investors know this. Anyone who understands basic financial accounting knows this.
A lot of the shallow reporting and comments avoid discussing these tradeoffs because it feels more scandalous that way. It's not unlike when we're discussing homeowners and someone interrupts to say "Well actually, don't you know, it's the bank who owns the home!" as if that completely changes the situation.
Debt is a liability - putting it separate in the way you have signals your knowledge is probably mangled and you’re stepping way out of your domain of expertise.
Happens here pretty often.
Anyone who knows basic accounting will understand this. I'm trying to explain this in basic terms to an audience who isn't understanding these deals, not from smug drive-by comments like yours that attack people and add nothing to the conversation.
The reason I separated debts out from liabilities is because a lot of these conversations are specifically talking about how this is a mechanism to keep debt, specifically, off the balance sheet.
There are more types of liabilities than debts.
Are you the same person who keeps creating throwaway accounts to attack comments on these posts? There's an awful lot of green text ad-hominem attacks happening in this thread. The other new account attacking my comments also has a name that looks like someone smashed the i and e keys on the keyboard: https://news.ycombinator.com/user?id=eiieke
(If you haven't seen it, you might think I'm joking. I'm not, and it's an amazing film.)
https://www.tomshardware.com/tech-industry/artificial-intell...