Imagine you promised to buy a house from your friend for $300,000, and your friend spends money on renovations, and then the renovation company gives you $100,000. This is precisely the method $NVDA, OpenAI, $ORCL, and many more “AI-focused” companies are carrying out. I wrote a few weeks ago in my final Friday Filter how the then Nvidia-OpenAI-Oracle trifecta was absurdly shammy. Without joking, that partnership was (summarized): Nvidia gives money to OpenAI to give money to Oracle, who gives money to Nvidia, who gives money to OpenAI. But since this post, so many more Nvidia and OpenAI deals have been announced. I don’t want to make this post longer than it needs to be; I just want to give investors a heads up about these practices. Any current multi-billion-dollar partnership from a leading AI company, isn’t something to be strictly bullish on. You should look at the fine print. OpenAI at this point in time has pledged over ~$1.4 trillion worth of commitments to other companies for their services. In actual dollars it needs to pay. This is why Oracle has such high Remaining Performance Obligations (RPOs) (70% of Oracle’s RPOs are from OpenAI), and why Nvidia has injected a hundred billion in OpenAI to help with future infrastructure projects. So far, the same $100-200 billion is being passed around like hot potato (also called circular financing). We’ve known this for a while, but now that $AMZN has made a $40 billion deal with OpenAI, it’s getting even more AI craze-y. Remember: when this money is passed around, it becomes less after every stop. When (or if) OpenAI pays Oracle $300 billion, Oracle has to spend money on expenses such as construction, wages, etc., to build the data centres. By the time Oracle buys Nvidia GPUs, Nvidia may only make $30 billion back in revenue despite having already spent $100 billion investing into OpenAI originally. It’s truly absurd. OpenAI doesn’t have any money. Not nearly as much as it’s promised. And if you’ve noticed infinite AI slop products (Sora) being launched from OpenAI (which by the way, can’t monetize effectively), constant funding raises, and IPO rumours at a $1 trillion valuation… this is all because OpenAI is pulling every lever possible to earn cash. I really do believe AI is the future, but the only circumstance these shammy circular business efforts make perfect financial sense is if artificial general intelligence (AGI) is achieved. As we continue to hear from Sam Altman, Zuckerberg $META, Musk and more: AGI is the ultimate goal, and whichever company gets to this goal first will reap immense gains. This is huge sums of money we’re talking about. Trillions of dollars as a benefit to society, while at the same time being a geopolitical tool that “America needs to get as soon as possible, before China” I’m not calling or predicting a bubble, but I want to explain to anyone reading that this is not normal. It’s not sustainable. Be rightfully cautious. Don’t buy at absurd valuations. Don’t get overly excited when some AI company makes a deal. Be. Cautious. That’s it. Thanks for reading. Major companies in the image not already mentioned and/or companies part in these business practices: $MSFT, $NBIS, $AMD, $INTC, $CRWV, $PLTR.
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86 Comments
Jacob B
@jacobb · 11moEdited
Update on my newsletter (Substack). I’ve started publishing 1-2 posts every week, depending on the workload. Each post will be a full analysis. If this interests you, subscribe.
Brett
@birdmanbrett · 11mo
J
@icallbullshit · 11mo
Beskar Capital@beskar_capital · 11mo
Needs updated to include Amazon! What a frickin' scam!?!?! 😂 🤣 TIME to look up the definition of the word "slaughtered", and speculate how it can happen to anyone in these names! 👍
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