"If you are old enough, or possessed of a certain kind of disposition, you may be thinking, Wait a minute, aren’t you describing Enron? And uh, in some sense, yes! Enron’s whole thing was special purpose vehicles with extremely speculative valuations that were used to take on debt, Luria notes. But Enron lied about what it was doing, and that’s fraud and illegal. (It also got up to other illegal stuff besides.) Nvidia’s relationship with CoreWeave is all happening in plain sight. So are all the relationships with the other neocloud companies. It kind of seems like the tech company version of the GameStop open pump-and-dump."
To answer your question - not unique to AI spending boom - this kind of things was right there for recent major bubbles.
So is this just a hallmark of bubbles in general? They have to start getting silly with the debt financing so they load up SPVs to protect their assets and saddle others with the inevitable losses while they cash out?
I don’t understand how anyone could make this trade. There is no way coreweave outruns those debt obligations…
It’s an extreme case of “fake it till you make it.” They seem to believe they just need to keep the operation afloat until AGI magically appears. Increasingly, it’s clear that neither LLMs nor transformer architectures are going to get them there. That’s likely why many of the original engineers distanced themselves and are looking for new architectures now. Nobody wants their name tied to this fallout when reality lands. I truly believe we will need another tock for our compute backbone and that a lot of the hasty accumulated hardware we see now will be garbage in just a few years. It's true insanity.
> In its third quarter earnings, reported earlier this week, we’ve got $51.9 million in operating income — and $310 million in interest expense.
Holy cow.
> These SPVs aren’t subject to the same kinds of regulations as the parent company.
Have SPVs always been used so egregiously or is this a unique feature of the AI spending boom?
It's mentionned in the article later:
"If you are old enough, or possessed of a certain kind of disposition, you may be thinking, Wait a minute, aren’t you describing Enron? And uh, in some sense, yes! Enron’s whole thing was special purpose vehicles with extremely speculative valuations that were used to take on debt, Luria notes. But Enron lied about what it was doing, and that’s fraud and illegal. (It also got up to other illegal stuff besides.) Nvidia’s relationship with CoreWeave is all happening in plain sight. So are all the relationships with the other neocloud companies. It kind of seems like the tech company version of the GameStop open pump-and-dump."
To answer your question - not unique to AI spending boom - this kind of things was right there for recent major bubbles.
So is this just a hallmark of bubbles in general? They have to start getting silly with the debt financing so they load up SPVs to protect their assets and saddle others with the inevitable losses while they cash out?
I don’t understand how anyone could make this trade. There is no way coreweave outruns those debt obligations…
It’s an extreme case of “fake it till you make it.” They seem to believe they just need to keep the operation afloat until AGI magically appears. Increasingly, it’s clear that neither LLMs nor transformer architectures are going to get them there. That’s likely why many of the original engineers distanced themselves and are looking for new architectures now. Nobody wants their name tied to this fallout when reality lands. I truly believe we will need another tock for our compute backbone and that a lot of the hasty accumulated hardware we see now will be garbage in just a few years. It's true insanity.
https://archive.is/wwGnR
Update link to actual article: https://www.theverge.com/ai-artificial-intelligence/822011/c...