- As long as this debt does not make it into life insurance and pension funds, we are fine. The trouble is that private credit is taking control of some life insurance companies and off-loads this debt to these. When these fail, it will become everyone's problem.
> Risks to financial stability may also stem from entities with particularly high exposure to private credit markets, such as insurers influenced by private equity firms and certain groups of pension funds. The assets of private‐equity‐controlled insurers have grown significantly in recent years, with these entities owning significantly more exposure to less‐liquid investments than other insurers
https://www.imf.org/-/media/files/publications/gfsr/2024/apr...
https://www.imf.org/-/media/files/publications/gfsr/2024/apr...
by wongarsu
10 subcomments
- Do they? Is a company with $200 billion annual revenue and earnings (EBITDA) of $100 billion having $420 billion of off-balance-sheet debt really staggering?
In many other industries that would be a perfectly normal amount of debt to have. It's only unusual because we are used to tech companies having so much cash on hand they don't know where to put it
- Are they really "trying to hide" this debt? I think it's pretty common knowledge that a lot of these companies are using debt/bonds for funding. The debt not showing up where the author wants is a reporting formality not an attempt to hide it.
- If you're talking about dodgy accounting at hyperscalers, a larger worry might be that they are overstating profits by depreciating their assets (such as datacenters and CPUs/GPUs) too slowly.
Estimates are that this could overstate profits by tens of percent. (However, this only allows earnings to be "pulled forward" - sooner or later the servers must be written off and the accounting catches up.)
See e.g. https://deepquarry.substack.com/p/depreciation-of-gpus-betwe...
https://www.ft.com/content/0dbfe94f-2136-432c-b075-4587092de...
Michael “The Big Short” Burry:
> Understating depreciation by extending useful life of assets artificially boosts earnings -one of the more common frauds of the modern era.
https://x.com/michaeljburry/status/1987918650104283372
- Would have been nice if the article had any substantive facts in it
by JohnMakin
3 subcomments
- > Meta alone has amassed around $420 billion in off-balance-sheet debt, according to Nikkei,
Isn't this an existential type of bet?
by andreygrehov
0 subcomment
- Is that why China pushing for open weight models? If these models are on par with the quality of the proprietary ones, the US stock market will go south fairly fast, imho.
by mark_l_watson
0 subcomment
- I am repeating myself: at least a partial solution is enforcing anti-dumping laws, that is, make money losing subscriptions illegal. If businesses and individuals pay actual token costs, then they will naturally only use tokens in ways that make business sense.
Usually I applaud optimism, but the current approach in the USA will probably adversely affect most non-rich people, and I would like to see more public well grounded in reality pessimism.
by jimnotgym
1 subcomments
- If I were nearing retirement and had a decent pension pot where I could control it in fine detail...I would be diversifying away from tech stocks and holding some cash for immediate needs. There probably won't be much time when it unravels...I wouldn't be over exposed to the Nasdaq 100, for instance. Although you could probably pick some AI safe companies out of it.
The real problem will be figuring out where all this debt is
- It won't pay off if LLMs efficiency gets good enough to make those data centers obsolete.
It's a huge gamble.
- Article appears to be conflating big tech companies that print money with AI startups like OpenAI and Anthropic.
After the opening paragraphs about the accounting practices of meta, Microsoft, alphabet, etc - which, it should be noted are not “houses of cards” and earn plenty of money - the article quietly transitions to
> Experts continue to warn of an AI bubble, noting the enormous and widening gulf between company valuations and their comparatively measly profits.
I think hoping people will apply the “house of cards” logic by that analyst they quoted to the startups, when instead the analyst was talking about the megacorps’ accounting.
by softwaredoug
1 subcomments
- Really feels like the govt + industry, through protectionism and fear-mongering, are propping up a "Too big to fail" situation.
Long term, I think the best thing the economy could do is to make training on model outputs fair-use, as suggested by Ben Thompson[1]. Short of that, the companies should enter into distillation agreements with other US labs to let them make near-Fable models.
As it stands now, the companies want to hold all the upside. While also being culturally so safety focused - "only we have the right to regulate this" that its IMO counterproductive to US leadership in AI.
A different universe where X.ai, Meta, and everyone were also building Fable competitive open weights models - because they can distill - would probably be better for the US long term. But there's too much capital on the line right now behind OpenAI / Anthropic for them to do this.
They're really in a bind IMO.
1 - http://stratechery.com/2026/whos-afraid-of-chinese-models/
- Only Oracle is in any kind of danger from their debt load, though. I have not checked SpaceX situation.
Meta, Google, Amazon, .. they can take the hit and go on.
- This post should probably get removed by now
See here
https://news.ycombinator.com/item?id=49027426
Your lease agreement with your landlord isn't debt (though if you don't pay it, you will get a hit on your credit report)
by PeterStuer
0 subcomment
- What if Enron and CDO's had a baby ...
- Something doesn't quite smell
right about this story. Here's a key paragraph from the Nikkei story that this Futurism story re-tells:
> Companies disclose such future debt not in their balance sheets, but in annotations to their quarterly financial statements. This is a legitimate practice under accounting rules, but may make it difficult for retail investors to recognize risks.
Does that justify a "tries to hide" headline?
This is also one of those cases where the headline is free but the details are behind a paywall.
I do think the story itself is notable, but I expect the discussion is going to lack some nuance.
by ghtbircshotbe
0 subcomment
- The article is light on details. Presumably the original Nikkei article has more details but it's behind a paywall.
Recently watched Enron: The Smartest Guys in the Room. I still don't know how Enron made money which remarkably seems like it was also true at the time.
by LetsGetTechnicl
0 subcomment
- This is probably bad right?
- Experts say that they aren't.
by 1970-01-01
0 subcomment
- The crux of the problem is models are not evolving anymore, they're iterating. Cheaper, faster, better. We're only seeing better, and that's because there is fierce competition with massive debt behind it. The "cheaper and faster" part is all taking place with local models. All of this adds up to a big red flag for a bubble.
by logicallee
1 subcomments
- They're obviously not taking on enough debt because I'm paying $200 per month for one AI, $100 per month for a second, a $20 "donation" to Gemini[1] paying for a service I never use just to fund its development, and yet here I am doing my own laundry, making my own damn breakfast, lunch, and dinner and manually tracking my Calories and macros, I'm putting my own damn dishes away, racking and unracking my own damn weights at home, and taking minutes to set up and record my exercise form and then take screenshots of it of key frames that I manually ask the AI's to form check (they don't consume video natively as an input) rather than have a robot do any of the above (including act as a fitness coach) because where's my household robot I can rent on a monthly payment? Can't be that expensive, servos and pressure sensors and cameras are cheap, what's missing here is that here we are and AI can't do shit for me day to day other than knowledge work and software engineering. I'd like these companies to take on as much debt as possible and rent me a robot that can do stuff for me. I have a petition for this that you can sign here if you want:
https://www.change.org/p/create-a-physical-embodiment-for-cl...
[1] I don't use Gemini for anything ever, I pay just to put my vote to them making a useful model (I know my $20 isn't much but I apply Kant'e categorical imperative - if everyone did it they'd take their AI seriously and not be in last place behind OpenAI, Anthropic, and even open-weight models).
- It would be better if you all read the article this article was referring to:
https://asia.nikkei.com/business/technology/five-us-tech-gia...
- Is it time to short AI companies?
- what ppl in this thread dont realize is: you gotta spend money to make money
- the business model is burning billions, hiding the debt, and telling investors the losses are actually R&D. we used to call this fraud. now it's a pitch deck.
by neuroelectron
0 subcomment
- Oh, that's crazy when you buy every single piece of computing hardware that's ever been made in the last five years, for inflated prices to preempt competition, then sit on it because there isn't enough electric in the entire world to power it, do you think that would be pure profit?
- For the last 20+ years i was really relaxed about tech industry - the fat cash positions maintained by the companies as a lesson from the early 2000-s crash (when companies were running out of cash and failing or severely downsizing, etc.) almost guaranteed that the tech will easily weather any trouble times - and that was clearly demonstrated in 2008 and in 2020.
Now i'm starting to get scared - these cash positions are basically gone if matched against the new debt and various creative financing taken on for the AI buildouts. That looks a lot like 2000 - very promising tech everybody is piling money in. And i'm sure that several years later it will provide several decades of tremendous success like Internet did in the last 20 years. It is just those few initial choppy years of the hockey stick trough that we may be coming upon and that many may not survive not having that fat cash position anymore, and thus those years may happen to be very painful for the tech and for the whole economy.
25 years ago there were a lot (estimates put even as high as 95%) of dark fiber left as a result of the dotcom buildout and crash. It was successfully put back into action several years later. I wonder whether we will have similar dark datacenters in a few years.
by mrbluecoat
0 subcomment
- Alternative title: Memory, GPUs, and SBCs are about to become affordable again :)
- This is the tech industry's version of 2008.
by __natty__
2 subcomments
- Is the bubble bursting? Amount of the news about bad shape of companies highly invested in AI in the past days are quiet alarming or is it just bias?
by Xalutiono
7 subcomments
- And? Its not my debt.
If they continue investing in compute, memory, memory bandwidth, network infrastructure, etc. it makes a relevant contribution of progress in all of these fields which I will leverage.
A small form factor PC with 100gb fast memory and being able to run something like sonnet or opus level LLM would be massive.
I have so many things i want to do and still sitting it out due to cost.
by dude250711
1 subcomments
- I guess "try to hide" means to be posted about all over the news weekly.
- [dead]
by lardosaurusrex
3 subcomments
- "No you guys it isn't actually an issue because it isn't."
Why?
"Because it isn't; okay?!"
oh ok.
by emberagentic
0 subcomment
- [flagged]
- [dead]
- [dead]
by martinbfine
0 subcomment
- [dead]
- with US Government owning huge chunks now "too big to fail"
bailout incoming
will make subprime crash seem like child's play
sure you won't be able to ever afford a home but we'll have tons of cheap super-hardware barely used
by ChrisArchitect
0 subcomment
- [dupe] Discussion on source: https://news.ycombinator.com/item?id=48987863
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