[pocksuppet]

IMHO these signals have more to do with the market than AI. They aren't finding AI to be have less ROI than before - they are requiring higher ROI than before, because there is less money remaining to be invested.

Managing the total amount of money so that investment bubbles peter out before they get excessively big is supposed to be the central bank's job.

[lelanthran]

> They aren't finding AI to be have less ROI than before - they are requiring higher ROI than before, because there is less money remaining.

What ROI? There was no return, and there currently isn't any return on investment, because those companies did not exit yet!

The exit plan is to offload overpriced shares, that they paid billions for, onto the public market. If they don't IPO, those investors get nothing.

[s1artibartfast]

ROI on bank loans to Oracle and corporate bonds. Those will have interest rates and returns.

If Oracle is highly leveraged or betting the farm on AI, then their credit worthiness goes down.

Alternatively, if money floating around to make loans is drying up, companies have to offer better terms to attract the dwindling supply

[quickthrowman]

> ROI on bank loans to Oracle and corporate bonds. Those will have interest rates and returns.

Those are intrinsically linked to ORCL equity. ORCL needs an ROI to service their debt.

[s1artibartfast]

what point are you making? I was clairifying what ROI the parent was discussing.

There are different ROIs which are not the same, even if related.

[ericmay]

> The exit plan is to offload overpriced shares, that they paid billions for, onto the public market. If they don't IPO, those investors get nothing.

I keep seeing these unsubstantiated claims. They’re out to get us and just pump and dump on public markets!

Yet, before they IPO they have to go around and do what? Who sets the IPO price? Who buys the shares? If the shares tank, the valuation of the company goes down and locked up shares lose value. It’s not really in anyone’s interest for IPOs or investments to fail and while pump-and-dump schemes certainly exist they are not the norm. The conspiracy theory level of distrust and cynicism is not healthy and makes one a very poor investor.

If individual investors are buying shares and getting blown up, that’s their problem. Invest and due your own research. Broad market funds exist and have so for decades. Most financial advisors even will put you in to those funds and corporate 401k plans while increasingly allowing for more investment flexibility (freedom is good) default and educate employees by default on target date funds and index funds. There is a wealth of information out there.

[ceejayoz]

> If the shares tank, the valuation of the company goes down and locked up shares lose value.

"Oh no, my $10B became $5B!"

They'll still be happy.

> If individual investors are buying shares and getting blown up, that’s their problem.

Having the general populace fleeced by bad actors is everyone's problem, eventually.

[ericmay]

The flaw in your thinking here is that you’re assuming these greedy people that you are creating in your head would prefer to lose half the value of the shares instead of doubling them. The entire proposition that you are putting forth has no real basis in reality, and doesn’t even match the expected behaviors of your trope of strawman investors.

> Having the general populace fleeced by bad actors is everyone's problem, eventually.

Sure. Creating false narratives and parroting unsubstantiated misinformation and fear mongering is everyone’s problem too.

[ceejayoz]

> The flaw in your thinking here is that you’re assuming these greedy people that you are creating in your head would prefer to lose half the value of the shares instead of doubling them.

The flaw in your thinking is assuming it's actually worth the IPO price.

If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.

[ericmay]

> The flaw in your thinking is assuming it's actually worth the IPO price.

Then don't buy it at the IPO price? The bullshit artist will have to lower their price until there are takers in the market.

> If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.

They're not bullshit artists, they're greedy. If you think you're pulling one over on someone $100 is great but $200 is better - might as well see if you can get $200. Since we're just making up random people and motivations.

[3848484894]

With a couple million dollars, you can buy many many articles on the financial times and barron's. With a couple friends, you can get other friends in pension funds to allocate into you. With other friends, you can get beneficial messaging from all sorts of public and private channels. Banks and funds can pump your offerings for something in return if you went to the right bar mitvah. Of course this only lasts for some time, but if Billy the boomer and the Korean teachers pension fund bought in, you are already half way there.

Information is only relevant in the long term, in the short term the stock market is about FRIENDSHIP.

[ericmay]

Sure, but this applies to any sufficiently advanced conspiracy theory and wouldn't be limited to markets. Secondly you the individual can just not buy the shares if you think they are overvalued. You're confusing your own interpretation of the valuation of some company with "the right valuation". Maybe you're just wrong and they're not over valued? Maybe you're right? It doesn't matter much, except you can buy shares in companies that your investment thesis and modeling suggests you might buy.

[3848484894]

What I'm saying is that it's a very small world. There's no conspiracy here just friendship and love.

[ericmay]

Sure. A great example of that is the corruption of Spain's socialist government: https://www.nbcnews.com/world/spain/spain-pm-sanchez-brother...

Just friendship and love :)

[lelanthran]

My point was that there is no ROI until the investors exit!

IMO, those shares are overpriced even at private investment levels, but my opinion is still irrelevant to the fact that there is no ROI until the investors exit!

[ericmay]

And when do those investors exit?

Nobody forces you or any other individual investor to buy shares in their “pump-and-dump company” when it lists.

[lelanthran]

> And when do those investors exit?

Who knows? Who cares? My point is that until those investors exit, there is no ROI.

The comment I originally responded to was talking about investors getting ROI from AI companies. I'm pointing out that no such thing will happen until the investors exit.

[s1artibartfast]

In terms of Oracle, the topic of this thread, lenders are already getting paid out. Oracle borrows money and issues corporate bonds at fixed percentage rates.

Oracle paid out 5 billion in interest last fiscal year.

[ericmay]

> My point is that until those investors exit, there is no ROI.

Ok well they can just exit in private markets before these shares are "dumped" on public markets. Therefore there is an exit and ROI. QED.

Anyway your overall point, which was a bad one I'm sorry to say, was about investors dumping shares of overvalued companies on public markets.

You are ignoring things like lockup periods, vesting schedules, and other general machinery that specifically exist to prevent day 1 or short-term dumps of shares. It's not in the interest of the company that is IPOing or the bank - how can the investment bank go to investors and market securities and then on Day 1 those securities (because it's a pump and dump remember?) drop by 10% - 20% - 30% or more. That's bad business and investors will leave investment firms that did that.

When one of these "overvalued" companies IPO (and let's be honest, you don't know how to value these companies anyway so your accusation of them being overvalued is faulty from the start), someone has to buy those shares. If everyone starts selling, the value of the company and the value of the shares drop unless there are buyers. This doesn't really serve anyones interests and even better, you as an individual investor don't have to be a buyer! If someone wants to buy because their own model says it's worth it, that's up to them to decide, not you. Fortunes are made betting against the market (and betting in the general direction of the market). If someone wants to forgo buying, that's fine too.

For investors who don't know about the values or models of valuations of securities they can just take industry standard advice and buy index funds or target-date retirement funds. Stop infantilizing people and assuming that because you lack the knowledge that others must too, or that everyone is just out to scheme and "dump" on public markets, especially without any evidence or without considering how the IPO machinery typically works, who buys these shares, or the incentives.

[CamperBob2]

Nobody forces you or any other individual investor to buy shares in their “pump-and-dump company” when it lists.

Well, they certainly tried to, with SpaceX.

[csoups14]

> If individual investors are buying shares and getting blown up, that’s their problem. Invest and due your own research.

This is simply absurd. Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). It's the 1920s all over again; publicly pump and privately sell into the demand you're creating. I'm guessing you're perfectly fine with this behavior from the largest market participants?

[ericmay]

> It's the 1920s all over again; publicly pump and privately sell into the demand you're creating.

It's not the 1920s all over again.

> Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). ... I'm guessing you're perfectly fine with this behavior from the largest market participants?

Who do those investment banks sell to? How familiar are you with, for example, Goldman Sachs finding buyers for SpaceX shares? The minimum account requirement at Goldman last I checked was something like $10mm - do you really care if such investors are buying shares in overvalued companies or, like me, declining to purchase?

You are just throwing things around and not providing a coherent argument. Everyday investors don't have to buy these shares. They can continue to follow industry standard advice to buy total market index funds, or target date retirement funds or whatever. Investment banks sell to high net worth individuals who are by definition sophisticated investors - they know and accept the risk of such offerings. So no I don't care even a tiny bit if a Morgan Stanley client decides to buy what you consider to be overpriced shares in a "pump-and-dump" scheme based on your own certainly flawed and unsophisticated valuation of SpaceX or any other company.

[csoups14]

Every day investors absolutely buy these shares; these price targets are publicly available and SpaceX shares are equally publicly available. You've claimed everyone who is disagreeing with you in this thread is not providing a coherent argument. Have a great day mate.

[ericmay]

> Every day investors absolutely buy these shares; these price targets are publicly available and SpaceX shares are equally publicly available.

And you can just not buy the shares. It's very straightforward.

[cmiles8]

The bond market is measuring the risk of repayment though not the success ROI of the dollars invested by the company (that impacts the stock price but not so much the bond price). The bond markets are hiccuping on AI because there’s growing concern that these loans simply won’t get repaid.

[jstanley]

> there is less money remaining.

In what sense?

This may be related to the commonly-held fallacy of "cash on the sidelines". Cash is always on the sidelines. Cash is not created or destroyed by buying and selling stocks or bonds. Cash is simply handed from one party to another, but the cash has to be held by somebody.

[s1artibartfast]

Challening bond offerings and higher yields can be a funtion of supply.

Downgrade of credit worthiness is different. That depends on how leveraged the company is

[qeternity]

> is supposed to be the central bank's job.

What? No it's not, and never has been.

Without even getting into the practical vs. theoretical of Fed dual mandate (funding deficits), even the most uncharitable take on modern CBs wouldn't suggest this.

[toomuchtodo]

Kinda cool to be at a point in the hype cycle where the capital markets are almost exhausted due a to a speculative bubble, pushing up yield demand. Move over tulip mania.

https://en.wikipedia.org/wiki/Tulip_mania

> No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer. -- Gil Luria (Managing Director and Analyst at D.A. Davidson)