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Hacker News
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 trhway
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).
by logicallee
> Meta alone has amassed around $420 billion in off-balance-sheet debt, according to Nikkei,
Isn't this an existential type of bet?
by JohnMakin
Would have been nice if the article had any substantive facts in it
by Havoc
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.
by FabHK
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.
by chasd00
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
by wongarsu
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 senshan
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- Hacker News
- 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 trhway - 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).
by logicallee - > Meta alone has amassed around $420 billion in off-balance-sheet debt, according to Nikkei,
Isn't this an existential type of bet?
by JohnMakin - Would have been nice if the article had any substantive facts in itby Havoc
- 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.
by FabHK - 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.by chasd00
- 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
by wongarsu - 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 senshan