The conclusion that this is a bubble seems arbitrary and disconnected from the several true facts outlined in the article. Anthropic's growth _is_ slowing, albeit still strong at ~47%. They do have enormous compute obligations, and it will require a lot of growth to meet them. However, they also increased revenue per dollar spent on compute from $0.40 to $2.08 in five quarters and hold $131.7bn in cash.
Keep in mind this growth has mostly been sustained by low-level business automations, coding, and chatbots. With the adoption of products like personal agents, e.g., Meta's Muse, I am pretty optimistic there will be demand and growth around this level will be sustained for a few quarters. Doubtful we will ever see another ~150% growth quarter.
> revenue per dollar spent on compute from $0.40 to $2.08
So that’s ignoring labor and perhaps facilities? That’s like saying we’ve hit net positive fusion by only considering the power produced by the laser and ignoring the 80% power losses in the feed-in.
I spent 6 months working as a contractor in MS’ Chicagoland data centers. Nothing worked — phones on the walls ran Windows and did not give dial tone. Security systems unable to function because of Windows updates. Personnel more concerned with their required LinkedIn updates than their jobs. Not one FTE liked their role — everyone had a foot out the door.
When they offered to make me FTE I declined and moved on. Because it was an obvious absolute shit-show.
Sorry for those that are currently employed by MS.
We had a vending machine that required an app that made you buy tokens to access the food in the vending machines. Said app was a masterpiece of dark patterns. Put money in, maybe, if you're lucky, get food out. Maybe.
They owe people hundreds of billions, possibly even over a trillion. They've just been very clever in how they've structured it, so on paper they have low debt.
I think there’s some crossed wires here with the wider data centre build outs. OpenAI have their own flavours of sketchy behaviour but I’m not aware of them solely being on the hook for those amounts short of some weird accounting of Microsoft cloud costs onto them or something.
Don’t they have a fully committed preorder for like $500 billion in compute from Oracle starting in 2028? And Oracle is funding that buildout with junk debt?
Oracle is the one with the debt. OpenAI has an order/contract (promise) to someone else.
Presumably there are penalties if OpenAI were to cancel that order (I am confident that Oracle's army of lawyers made sure to include that). That's the unmovable rock on OpenAI's books, not the data center.
AIUI, the building is funded by making the people who order it part owners in the new data center company. Not sure and I don’t care enough to find out; clarification welcome.
The rates environment directly dictates what capital is available to OpenAI and at what terms. When potential investors can get x% virtually guaranteed, then they are less willing to give cash for equity to OpenAI.
but the investment is increasingly _fueled_ by debt, regardless if OpenAI is the direct borrower. just look at the bond market. you think we'd be seeing these rates if corporate bonds weren't directly competing with government-issued bonds?
This is objectively not true. Alibaba, DoorDash, ARM, Slack, etc. were all SoftBank deals. Alibaba alone is considered one of the highest ROI's in the history of investing.
Does SoftBank have some absolute blunders on large bets? Totally. Do they make some super weird billion dollar bets? Absolutely. Can you scrutinize them for making some terribly and laughably large bets go to complete zero returns? Sure. But this would be like saying Michael Jordan had a "bad track record" for scoring points because he had games playing for the Wizards where he had like 5 or 10 pts in a game.
When you can throw billions around for investments then on balance you will make a lot of money because you can take a lot of risk. But it does not say anything about any particular investment and if you look at the ratio of good bets to bad bets then SoftBank is terrible. That does not mean they won't make money or that they won't be able to keep doing this. Capital - especially at this level - begets more capital.
> How does this explain a $20M bet on Alibaba that netted $60B?
It's a 26-year-old investment. The advisors who suggested it are long gone from SoftBank, and the stake in Alibaba was sold to provide liquidity for bagholder investments like WeWork.
SoftBank was lucky, and now their luck is gone. Son had an investment in Nvidia that would have been worth $100+ billion, but sold it in 2019 for only $3.6 billion. Uber is struggling, Arm is a laughingstock of a business, their stake in OpenAI is comically overleveraged, and Softbank Vision Fund is one of the most heavily ridiculed and mocked international VC funds anywhere in the world.
We have to move past a decades-old bet, SoftBank's current state is not reminiscent of their prior investments.
That’s mostly not the Frontier Labs. They’re definitely creating a lot of the demand but the people taking out those loans are Neoclouds and Big Tech (hence why Facebook + Google et al suddenly all have terrible cash flows after years of having more money than can be spent).
AnthropenAI are the ones driving a lot of that infrastructure spending when they’re such big consumers of compute but they’re not the ones feeling the brunt of the infra spending. Although those costs will bubble up to them indirectly eventually.
Indirectly? They have contracted the capacity with the likes of Oracle, this is not 'debt' in accounting sense, but it is a financial commitment that will require either taking on debt, or getting more investors.
But those clouds are taking out debts because they have 'hard' spending commitments from OpenAI and Anthropic, which start the day the clusters are energized (supposedly).
So in effect the debt is backed by OpenAI/Ant's future revenue stream.
Keep in mind this growth has mostly been sustained by low-level business automations, coding, and chatbots. With the adoption of products like personal agents, e.g., Meta's Muse, I am pretty optimistic there will be demand and growth around this level will be sustained for a few quarters. Doubtful we will ever see another ~150% growth quarter.
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