[fsckboy]

you won't get debt if you don't have assets that can be repossessed, so having debt means these AI companies have assets: that's a strong thing, not a weak thing. interest rates are what they are, and they go up and down for reasons exogenous to your industry; debt regardless of interest is always "cheaper" than equity, and the shareholders expect to make their money from equity, paying interest on debt as a type of impedance matching and cost of keeping more equity.

so everything is going according to plan, and nobody knows the future, and predicting collpses has never been a profitable business.

I didn't have to read past the first few confusing contorted and convoluted paragraps of this article to decide to come over here and explain it, this is all straightforward corporate finance 102 and the article is fluff

[Kon5ole]

>you won't get debt if you don't have assets that can be repossessed, so having debt means these AI companies have assets

That's the ideal scenario, but you can also have immense debt because someone once thought you had assets.

[stnikolauswagne]

I agree with the general sentiment, but I feel like it is also a bit reductive. Assets in this space are near impossible to evaluate and can fluctuate in value greatly based on other actors. In a hypothetical scenario where, say, google releases a new frontier model that somehow leapfrogs the competition by 5 months all of a sudden the value of the Asset of Fable 5 and GPT 5.6 might completely crater.

[ragebol]

Yes, they have assets: GPUs sitting in datacenters, and data.

Question is: is that worth enough to cover the debt after the market crashed?

[AlexCoventry]

I would be delighted to see a glut of compute. I'm not optimistic, though.

[sssilver]

Don’t they all have mostly the same data, with a small / negligible delta between each other?

[stnikolauswagne]

I'd argue that data in this case is more like the actual models they use, their codebase and their engineering talent. Not deep enough in the sauce to say one way or another how big the realistic delta between companies is though.

[ragebol]

Maybe so. That leaves just the hardware. Deprecates badly. Maybe gamers will take it off their hands gladly?

[sndgndgndgndy]

GPUs have a five year lifespan before they become obsolete and start experiencing reliability issues. We're already 1-2 years into that five year lifespan.

[missedthecue]

The payback time for a GPU running 24/7 inference is ridiculously short though. As little as 6 months according to some calculations. Most of that 5 year lifespan it will be earning well in excess of its replacement cost.

[gymbeaux]

I would imagine Anthropic et al. are largely leasing land/buildings, so as the other commenter said… must be the server racks that are acting as collateral (if anything). Generally enterprise hardware depreciates very harshly. I’m used to paying $10 for Intel Xeons that once retailed for over $5,000. I expect to pick up some NVIDIA Blackwell 6000s for $100 each someday.

[jamesfinlayson]

Yep, a friend recently told me that he remembers working somewhere that gave away old empty server racks - they were unnecessary, and expensive to store, so why keep them?

[blitzar]

We are in odd times however - I for one am sitting on paper profits on the consumer gpu I bought 2 years ago. If anyone goes down before the supply side is fixed - the first to fall will probably be able to liquidate their gpus at a profit.

[matwood]

> the first to fall will probably be able to liquidate their gpus at a profit

Meta and xAI announcing they are leasing out capacity is a version of this already happening.