Comment by redanddead
13 hours ago
>3. They need revenue yesterday. Increases in borrowing rates means access to capital isn't what it was in the 10s
This is a huge problem, why is it like this
13 hours ago
>3. They need revenue yesterday. Increases in borrowing rates means access to capital isn't what it was in the 10s
This is a huge problem, why is it like this
they've borrowed so much they're directly competing with national governments in capital markets.
OpenAI has hardly borrowed anything. They have a $4B revolving credit line but have hardly touched it. They haven't issued any bonds.
Investment isn't debt.
They owe people hundreds of billions, possibly even over a trillion. They've just been very clever in how they've structured it, so on paper they have low debt.
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The rates environment directly dictates what capital is available to OpenAI and at what terms. When potential investors can get x% virtually guaranteed, then they are less willing to give cash for equity to OpenAI.
> Investment isn't debt.
...yet.
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That’s mostly not the Frontier Labs. They’re definitely creating a lot of the demand but the people taking out those loans are Neoclouds and Big Tech (hence why Facebook + Google et al suddenly all have terrible cash flows after years of having more money than can be spent).
AnthropenAI are the ones driving a lot of that infrastructure spending when they’re such big consumers of compute but they’re not the ones feeling the brunt of the infra spending. Although those costs will bubble up to them indirectly eventually.
Indirectly? They have contracted the capacity with the likes of Oracle, this is not 'debt' in accounting sense, but it is a financial commitment that will require either taking on debt, or getting more investors.
The 10s were totally fake due to ZIRP.
> why is it like this
In part it is like this because they've already borrowed so much.
They have borrowed almost nothing.
Investment isn't debt.
So all those hundreds of billions of dollars investors ploughed into OpenAI was just a gift was it? No expectation of a return of any kind? What if that investment money was originally borrowed by the investors?
Investment isn’t debt, but investment and debt demand revenue in functionally identical ways, and OpenAI has taken an enormous amount of investment, so they are subject to broadly the same pressures as a hypothetical company that had borrowed lots, no?
Isn't investment like a form of debt, or well obligation to make returns?
If VC provide you funds, there is an expectation of returns, otherwise the board would vote you out.
Yeah it's not a traditional loan from a bank, but it's not a 0% interest loan either.
Exorbitant Cloud costs and spending 22 million to solve a 1 million dollar maths problem isn’t investment though.
The duopoly AI labs haven't technically borrowed much, but a metric ass-ton of money has been borrowed by various other entities in service of them as infrastructure proxies.
That's what is driving up the cost of debt and teetering some of these companies into junk status.
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