| ▲ | CoreWeave bond yield tops 16% as AI credit stress rises(cnbc.com) |
| 145 points by lxm 7 hours ago | 104 comments |
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| ▲ | danielodievich 5 hours ago | parent | next [-] |
| Just last week I was on the call with a a techy architect from one of the major-major financial services companies, and he was discussing getting token capacity and his words on third best option was "we'd get it from Coreweave or whoever is still alive". So yeah, I am pretty sure that if that's the sentiment from software people at the major-major financial company, Coreweave is cooked. |
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| ▲ | aurareturn 2 hours ago | parent | next [-] | | So yeah, I am pretty sure that if that's the sentiment from software people at the major-major financial company, Coreweave is cooked.
The ironic thing is, your friend is still trying to get compute, which by all indications is still extremely scarce.So there seems to be a huge mismatch: demand hasn't waned, but the narrative around AI has changed in the last month. | | |
| ▲ | otabdeveloper4 2 hours ago | parent [-] | | Of course there is still demand for RAM and SIMD compute! But also hoarding hardware in glorified warehouses is not the genius business idea everyone thinks it is. | | |
| ▲ | aurareturn an hour ago | parent | next [-] | | I'm assuming his friend's finance company is planning to make use of the cloud compute they find in some finance workload. I don't think they're buying GPUs outright to store in a warehouse. | |
| ▲ | dist-epoch 44 minutes ago | parent | prev | next [-] | | Any sort of hardware produced in the last 5 years has at least doubled in price. Some, like RAM are 3-5x more expensive. So whoever hoarded it in warehouses could sell it now immediately for at least 100% profit. They seem like geniuses to me now, worst case they make 100% profit on the investment. | |
| ▲ | tourmalinetaco an hour ago | parent | prev [-] | | Naturally; it should be hoarded in my glorified homelab, where I can more readily listen to the sweet purr of fans. |
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| ▲ | maerF0x0 5 hours ago | parent | prev [-] | | Which is such a wild thing about our industry. These can be simultaneously true - No one has available tokens/gpus/datacenter for sale at any price - No one will lend people money to build it | | |
| ▲ | KingMachiavelli 5 hours ago | parent | next [-] | | This is how all capital-intensive utilities operate. The marginal cost of using a little more power or tokens is easy to justify because you can at any point stop using more. But the cost to add more power capacity is huge and highly variable. Just because oil is expensive today doesn’t mean the capex to pump more is justified. Really what AI needs is large customers that will commit to large spend over the next 5-10 years. Without this AI companies are basically offering duration arbitrage of electricity. Not a good place to be; the finances will always look bad. Unfortunately, the amount of capital required by the entire AI industry is enough that counterparty risk is now a concern. | | |
| ▲ | belZaah 4 hours ago | parent | next [-] | | Anthropic and OpenAI are these customers, willing to buy the infrastructure. But they are running out of cash, too. | | |
| ▲ | aurareturn 4 hours ago | parent [-] | | Wait, Anthropic has $112 billion in cash right now and generates about $70B in revenue per year and grew 10x YoY. If they succeed in raising $100B in cash in the IPO, which I believe they will, they'll have $212B. If their growth declines to 3x (down from 10x) in 2027, they'll still be at $230B in yearly revenue. Further more, their compute commitments are over 10-20 years. Their average quarterly compute commitment is only about $11B - $15B which they have already surpassed with their revenue. At $230b/year, they’d be at around $57b in quarterly revenue against compute of around $16b. This is not bleeding cash. Why do you say they're running out of cash? Can we see your math? | | |
| ▲ | otherme123 3 hours ago | parent | next [-] | | The only reason Anthropic has cash is because VC keep giving them the money. They never had a positive quarter, with revenue always lower than expenses regardless of their growth, thus burning money from VC. If VC money gets tight, they would have to issue debt, that pay interests. With a current negative EBITDA, their bond will be junk at IPO, paying higher interests and having a lot less market than AAA debt (e.g. Google has access to that market). Both things combined translate to "running out of cash". | | |
| ▲ | aurareturn 3 hours ago | parent [-] | | They were cash flow positive for 2 quarters in a row. Their S1 is public. We have AI. Are people this lazy? Throw it into ChatGPT and ask it to confirm the numbers. | | |
| ▲ | ElProlactin 2 hours ago | parent | next [-] | | > Are people this lazy? It's not exactly laziness. It's that most people don't understand basic financial concepts like fixed versus operating costs. Companies like Anthropic and OpenAI have invested huge sums in building/training models. Those are the headline numbers everyone talks about. What they don't understand is that the gross profit margins on AI model inference are very high. The question is whether these companies ever get to the point where the profit from inference justifies (recoups) the investment made in training. If they have to keep investing vast sums in training new models, and/or competition causes the margins on inference to collapse, they're in trouble. But if training becomes less costly and inference margins don't compress too much, it's a totally different story. | | |
| ▲ | grey-area an hour ago | parent | next [-] | | A few problems for Anthropic or OpenAI: 1. Model Build/Training costs are escalating if anything 2. They are in an arms race with competitors and can't afford to stop building new models - if they lose the perception of leading, they lose lots of customers overnight. 3. Inference margin is under attack from more specialised models and open weights models.* 4. They have no moat given how simple the interface to the products is - a bunch of text files and text prompts, and little prospect of building a moat. So those all run counter the possibility of coasting on previous research. To me the most promising avenue for making money for these companies is to replace Google, not AGI or taking over the world's knowledge work. That would mean they are overvalued. Even coasting on previous research, how long would it take to pay off the money they have spent? * https://strandsagents.com/blog/amazon-saves-millions-replaci... | |
| ▲ | otherme123 an hour ago | parent | prev | next [-] | | > What they don't understand is that the gross profit margins on AI model inference are very high. Can we be sure of this? The second they tried to hike the prices to be profitable, they lost a lot of clients, or a lot of clients lowered they token expenditure. In any market margins tend to go to zero. I am using frontier models, but only because they are dirty cheap if not free. If they raise the price, I just switch to a cheaper model, start exploring the option of renting a GPU-VPS or buying my own card. Or reducing my AI usage, that currently includes stupid useless things like "translate this cooking recipe from french... for free". > But if training becomes less costly and inference margins don't compress too much, it's a totally different story. They are being priced as the "ifs" are certainties, and not only a possibility. If anything goes a millimetre below perfect for them, their finances collapse. High margins attract competitors, and unless you have a huge moat (and their only moat is expensive training), your high margins vanish. | |
| ▲ | surgical_fire 21 minutes ago | parent | prev [-] | | > It's not exactly laziness. It's that most people don't understand basic financial concepts like fixed versus operating costs. > Companies like Anthropic and OpenAI have invested huge sums in building/training models. Those are the headline numbers everyone talks about. What they don't understand is that the gross profit margins on AI model inference are very high. Only when you ignore that the models they provide inference for have an extremely high cost and pretend they don't depreciate. They keep having to train new models. I don't think they recovered the cost for a model when a new one releases. It is kind of cute to say other people "don't understand basic financial concepts like fixed versus operating costs" when you seem to not understand basic financial concepts such as depreciation and amortization. Also, and this is important, we don't really know their true compute cost. We don't know if their compute with the likes of Google and Amazon were initially subsidized, and for how long it might be. In Q2 they also got to not pay SpaceX for compute for a while. |
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| ▲ | dd8601fn 2 hours ago | parent | prev | next [-] | | I just did that. It says that’s not true. | | | |
| ▲ | otherme123 2 hours ago | parent | prev | next [-] | | Ha! Calling people "lazy" for not using ChatGPT? I can read an income statement, is not that difficult, no need for ChatGPT. This is the S1, ammended: https://www.sec.gov/Archives/edgar/data/2130357/000162828026... Income at page F-7 (about 350 overall): (units in Kilo-millions)
Revenue in first 2026 9-months 33.2
Compute and infra expenses 18.8
Personel 4.8
Sales 5.5
Administrative expenses 5.3
Operating earnings (loss) (1.2)
* In the case you are confused, () in finances means negative values.Q-3 only, this is calculated substracting first half from 9 first months: Revenue in Q3 16.9
Compute and infra expenses 9.9
Personel 1.7
Sales 2.3
Administrative expenses 3.6
Operating earnings (loss (0.6)
Cashflow might be confusing here, because the cashflow table include huge items like "Change in fair value of convertible notes, derivative liabilities, and SAFEs" (translates to "we have paper valued at $X, but now it is valued at $Y", but it is still paper) or "Proceeds from issuance of redeemable convertible preferred stock, net of issuance cost" (translates to "we sold paper to VCs for $X") that are not business or recurrent items, or at least I hope Anthropic don't plan on "earning" money by selling paper to VCs forever. | | |
| ▲ | aurareturn 2 hours ago | parent [-] | | Operating income and cash flow are different numbers. The problem with AI is that it's still dependent on the skill of the prompter. |
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| ▲ | Ygg2 44 minutes ago | parent | prev | next [-] | | > Their S1 is public. Their S1 was taken down. As of today (https://www.reuters.com/world/china/global-markets-view-euro...) This is the second time they changed it. Apparently they file it with Claude. | |
| ▲ | ViewTrick1002 2 hours ago | parent | prev [-] | | Those figures are “earnings before bad things”. | | |
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| ▲ | skew-aberration 3 hours ago | parent | prev | next [-] | | Small gripe but I don't like 'declines to 3x'. 3x growth would mean repeating this year's record growth twice over, which is smaller relatively but an increase in absolute growth rate. | | |
| ▲ | aurareturn 2 hours ago | parent [-] | | So what do you think their growth YoY will be in 2027? | | |
| ▲ | skew-aberration an hour ago | parent [-] | | I have seen most revenue projections are on the order of 2-3x, but I suspect about 4-5x. IMHO profitability will be worse though. They will contain to take on more and more investments - training, R&D, and 'sales and marketing' for enterprise share. They will face more competition than ever before. The range and types of models will continue to diversify, with real-time models for robotics and computer use paving the way for new entrants. The investor confidence to back this doubling down will be spurred by rapid progress, panic deregulation while old-guard corporate democrats still hold power in the US, and much stricter sanctions against Chinese competitors, their models, and their eventual domestic hardware. The tech world will look a lot more factional by that point, with pseudo mergers & acquisitions amongst the big companies beginning, unabated by a toothless FTC. Anthropic will probably get closer to Amazon, and we could see big moves amongst Meta, Microsoft, and/or Google too. Ultimately, Anthropic and OpenAI will maintain their market leading positions through at least 2028/2029 but only after a protracted period of significant equity dilution due to the expensive acquisitions and large outside investments which will be necessary in these market conditions. Chinese hardware and models will look like a serious threat by the end of 2027 but will be largely locked out of US/Western markets. At the point the equation will have changed drastically - credit issues in the West led by mortgage security collapses will shape the investment environment and 2028 election, and rapid developments in physical technology and manufacturing will take the spotlight away from intelligence itself. | | |
| ▲ | aurareturn an hour ago | parent [-] | | If 5x, then they'll end Q3 2027 with about $350B annualized revenue. Looking at their 2027 compute commitments, it looks like around $72B total. So I don't understand where this "burning cash" claim comes from by a few people here. | | |
| ▲ | skew-aberration an hour ago | parent [-] | | I'm going to lock in $325B. People lack the accounting know-how to talk about it correctly. But compute for inference is just not the main expense right now. If they take on more funding for training and/or build out, then they have to share the profits with more people. The growing revenue is shared by more people. As more options vest, they have to share with more people. If they need to acquire external companies for particular capabilities, profit is shared. If they have to pay hand over fist for hyperscaler compute in 2027 - more profit shared. So as their revenue grows rapidly, the fraction of that revenue which they've promised to other people is growing too - case in point, they operated at an $80B loss on paper this year because the unrealized future-profits promised to early investors is so valuable relative to current revenues. If they have to make more such deals to continue investment (e.g a low IPO price which require shelling even more shares to stay competitive), then they will continue to create vast value but less of that value will be captured by the current investors (the 'burning cash' may go to compute providers, outside investors, as discounts to enterprise and consumers, etc instead of to Anthropic). |
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| ▲ | byzantinegene 4 hours ago | parent | prev | next [-] | | they also have $1T in commitments | | |
| ▲ | aurareturn 3 hours ago | parent [-] | | Yes, over 10-20 years and I'm guessing many of those contracts are just intents and not hard commitments. Let's say it's 15 years. That's $16B/quarter in commitment. They had $17B in revenue in Q3 2026. If anything, they're far too conservative. | | |
| ▲ | mplappert 2 hours ago | parent [-] | | Most of their compute commitments are non-cancellable. | | |
| ▲ | aurareturn 2 hours ago | parent [-] | | Based on how their growth is going, I think they're far too conservative and they should sign more. |
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| ▲ | ImPostingOnHN 3 hours ago | parent | prev | next [-] | | now do the math with profit instead of revenue most recently (on both a quarterly and annual basis), it was negative | | |
| ▲ | aurareturn 3 hours ago | parent [-] | | Why with profit instead of revenue? Their revenue pays for the compute. | | |
| ▲ | ahtihn 2 hours ago | parent [-] | | Their revenue pays for expenses. If profit is negative, revenue doesn't cover their expenses. They can't just turn off all other expenses and just pay for compute. | | |
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| ▲ | revolvingthrow 2 hours ago | parent | prev | next [-] | | Growing from 7b revenue to 70b revenue is crazy % growth, but with 2026 being the tokenmaxxing year AND it being the year where models are finally 'good enough' for everyday work it sort of makes sense. Growing 70b revenue to 700b revenue is, ah, a smidge tougher. Even getting $70b to $230b would be an immense success, methinks. The initial hypecycle seems to have cooled down slightly, and people are no longer ranked by how many tokens they can burn through with no real deliverables expected. There's even reports that companies are starting to tighten their belts when it comes to token spend; a catastrophe for fat US labs that need those big-wallet companies to spend API prices which pays for everything. Subscriptions might make them some money but it's not where the real profit is. Which isn't to say that the revenue won't grow, or even that it'll contract, but I certainly don't see Anth growing to eye-watering $700b next year, especially as long as open-weights models keep getting released and a BigCo can't get Opus deployed to their own hardware sitting in their basement with no chance of the secret sauce leaking out to anybody, including Anthropic. | |
| ▲ | surgical_fire 28 minutes ago | parent | prev [-] | | > Wait, Anthropic has $112 billion in cash right now and generates about $70B Anthropic operates at a loss. They lose money. That is what they keep having to raise money and are desperate to IPO as soon as possible. > Why do you say they're running out of cash? Can we see your math? My brother in Christ, you can't tell the difference between revenue and profit, and think that just because their revenue (not profits) grew 10x that they can grow now a "measly" 3x. They might have enough money (ot whatever they consider to be equivalent) in hand to keep being unprofitable for a bit, but they alao have something in between half a trillion and a trillion of contracts for compute in the next few years. |
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| ▲ | noosphr 4 hours ago | parent | prev [-] | | AI doomers have predicted 1095 of the last 0 AI bubble pops. Everyone is using more and more tokens, everyone is complaining that providers lobotomize flag ship models because they don't have the capacity to serve everyone. Then they turn around and compare it to the dark fiber bust or railways or whatever when in each of those the issue was the capacity being build that no one used. It's been 2 years since I could buy a gpu for love or money. It's been one for ram. My old rig is worth ~two~ three[0] times what I paid for it inflation adjusted. [0] fuck me ram is rising again. | | |
| ▲ | incrudible 3 hours ago | parent [-] | | If tokens are being given away below cost, of course you're gonna use more. It's not gonna last. How many tokens would you spend on random experiments if they were much more expensive? If tokens are so valuable, why do I (and many others) get to use them on economically worthless things until I'm bored? We just don't know the true value of tokens until those subsidies stop, and the subsidies don't stop because the respective companies don't want to know, at least until everyone cashed out. The valuations of AI companies are very difficult to reconcile with current revenue (which doesn't cover cost) and with a sober mind it's hard to imagine where all this additional revenue is going to come from, down the line. And that's not to say the the technology isn't fundamentally transformative and revolutionary. So was the internet, but it still created an investment bubble. The RAM prices are in yet another pork cycle, which will be exacerbated by the fact that many previous pork cycles left RAM manufacturers with excess capacity and rock-bottom prices, so they're much more careful investing and more assertive negotiating contracts now. | | |
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| ▲ | jurgenburgen an hour ago | parent | prev | next [-] | | Usually the markets react to a supply imbalance by increasing prices which destroys demand. For some reason token prices from the major players have instead been reduced. | |
| ▲ | fhruwbfbrb 5 hours ago | parent | prev | next [-] | | That is precisely what price subsidies look like. These companies are hiding the the true cost of offering these models. | | |
| ▲ | wmf 4 hours ago | parent | next [-] | | They're not subsidizing enough for CoreWeave to make money. | | |
| ▲ | otherme123 3 hours ago | parent [-] | | All the money is being funneled towards nVidia. CoreWeave touches it briefly, and sends it to Jensen. Then nVidia user some of this cash to finance AI labs or clouds again. But the biggest losers seem to be VC's, that are on the basis of this piramid and still have to see a cent in return. |
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| ▲ | aurareturn 3 hours ago | parent | prev [-] | | Source? | | |
| ▲ | fhruwbfbrb 2 hours ago | parent [-] | | Literally any microeconomics class. That's like asking for a source when someone discusses Newton's laws of motion. | | |
| ▲ | aurareturn 2 hours ago | parent [-] | | How does taking a microeconomics class prove that Anthropic is subsidizing the costs? | | |
| ▲ | fhruwbfbrb an hour ago | parent [-] | | Subsidies cause excess demand that can't be met with supply, leading to shortages. Whatever financial wizardry Anthropic is doing to give themselves an apparent operating cost that is orders of magnitude lower than any ML/AI application I've ever seen, is a different question. Edit: And Anthropic was never a specific point of discussion until you brought it up. |
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| ▲ | preommr 5 hours ago | parent | prev | next [-] | | > No one will lend people money to build it The money is there but not at the risk levels these companies have pushed things to. They're spending billions like it's candy, and treating millions like change they found in their couch cushions. Financial systems are usually in the hands of people that have some risk management. When these labs say things like this will change everything, there's no way to know how to evaluate any of this. | |
| ▲ | vasco 3 hours ago | parent | prev [-] | | Trillions have been lent. What you're saying is like eating 55 burgers, 55 pizzas, 55 tater tots and then complaining that the fridge is empty and nobody will give you more food. |
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| ▲ | dragontamer 3 hours ago | parent | prev | next [-] |
| CRWV is about to have an earnings report in less than 20 hours. It's probably best to just shut up for a day, wait for the earnings and then talk after that comes out. |
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| ▲ | trescenzi 5 hours ago | parent | prev | next [-] |
| That’s edging up on credit card rates for strong borrowers wild. NerdWallet has Chase Freedom with a lower bound of 18.49% and Citi Diamond Preferred with 16.74%. https://www.nerdwallet.com/credit-cards/best |
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| ▲ | alsdkgjhgd 4 hours ago | parent [-] | | it's pretty well accepted that if you ever actually pay the credit card rate, you're doing it wrong | | |
| ▲ | reverius42 2 hours ago | parent [-] | | Indeed, that's what's crazy about CoreWeave's bond rate being so high. They're actually paying it?! | | |
| ▲ | Ekaros 2 hours ago | parent | next [-] | | CoreWeave pays 9.625%. But someone expected them to not be able to meet that so they sold what debt they had at discount to someone who now effectively gets 16% on amount they paid for. Still, this means that people would only be willing to loan new money to them at that 16% rate. | |
| ▲ | otterley 2 hours ago | parent | prev [-] | | Unless they issued the bonds with a call option, yes. |
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| ▲ | holysoles 5 hours ago | parent | prev | next [-] |
| Aside from the price signal, the fact they were issuing these at a 9.625% coupon rate continues to run up their future debt servicing costs. Coreweave doesnt seem to be in a winner-take-all sector, they have a narrow moat and will have high ongoing capex. I struggle to see how they dont go under eventually even with the ability to restructure debt |
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| ▲ | adventured 4 hours ago | parent [-] | | CoreWeave is the Exodus Communications of this bubble party. [Sept 2001] https://www.latimes.com/archives/la-xpm-2001-sep-27-fi-50296... "Exodus Communications Inc., which never made a profit since it went public in March 1998, filed for bankruptcy protection after losing customers in the collapsing Internet economy." "Exodus, which runs 44 Internet data centers on four continents, listed $5.98 billion in assets and $4.44 billion in debts in Chapter 11 papers filed Wednesday in U.S. Bankruptcy Court in Delaware. The company operates so-called server farms that provide Web site services for businesses." "The Santa Clara, Calif.-based company’s losses increased more than tenfold in the second quarter, and it fired workers as it failed to win new contracts fast enough to replace those it lost. Exodus counted Yahoo Inc. and AMR Corp.’s American Airlines among its customers." "Trading in Exodus shares was halted before the markets opened Wednesday. The shares fell 33 cents to 17 cents Tuesday and have plunged 99% from a record $89.81 in March 2000." "Analysts say Exodus, with eight different junk bond offerings totaling about $3.4 billion, ran up more debt than it could handle." “We sacrificed profitability in exchange for growth and market share, over-expanding in some areas in advance of demand, not anticipating the decline as the dot-com bubble burst and the economy weakened,” Krause said. "Exodus’ second-quarter loss grew on acquisition and restructuring costs to $583.4 million, or $1.05 a share, from $51.8 million, or 13 cents, a year earlier. Sales rose 79% to $318.7 million but missed analyst estimates. The company lost $256 million on sales of $818.4 million in 2000." |
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| ▲ | bix6 6 hours ago | parent | prev | next [-] |
| So there’s a chance I can pickup some discounted GPUs next year? |
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| ▲ | throwawaypty 5 hours ago | parent | next [-] | | Zero chance. Secondary market for enterprise grade GPUs is white hot. | | | |
| ▲ | CoolestBeans 5 hours ago | parent | prev | next [-] | | Hyperscalers and SPVs are still planning on accelerating the buildout in 2027. Also even if everything hit the fan tomorrow, it will take time for production to shift back into consumer products if that's even what companies decide to shift to. | | |
| ▲ | Hamuko 4 hours ago | parent [-] | | I don't the envisioned scenario is that a data centre company fails and Nvidia starts making RTX 5090s for consumers. Rather, one of these companies fails, their stock of enterprise GPUs gets flooded on the market, and suddenly the people/companies buying RTX 5090s for local inference can buy full fat enterprise GPUs, shifting demand. | | |
| ▲ | reverius42 3 hours ago | parent | next [-] | | If by enterprise you mean datacenter (which is what CoreWeave is), the "full fat" cards aren't as plug-and-play in a desktop PC as the consumer cards. They don't typically come with fans, and are meant to be cooled using some kind of holistic whole-rack (or larger) setup. Hobbyists do sometimes buy datacenter GPUs secondhand (and I have considered it, for the price/performance ratio) but it's kind of a lot of work and they tend to run hot. | | |
| ▲ | overfeed an hour ago | parent | next [-] | | > [...] but it's kind of a lot of work and they tend to run hot. Anyone that can open their computer to install an SSD, or a consumer-grade GPU, can install a data center GPU with a fan-kit; it's not rocket science. | |
| ▲ | Hamuko an hour ago | parent | prev [-] | | There's probably still plenty of demand for that. At least someone in the executive team was floating around the idea of buying up some Nvidia cards to run AI models for the entire company somewhere locally. I don't think they'd be opposed to buying up data centre GPUs without fans if they suddenly flooded onto the market, even if that meant getting a rack chassis and a bunch of noisy server fans. I've also seen someone sell their old fanless Nvidia cards on the local marketplace. There are definitely consumers running these things in their basements. |
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| ▲ | wmf 3 hours ago | parent | prev [-] | | If a neocloud fails, it makes more sense to recapitalize it and leave the GPUs in place. If you sell the GPUs nobody will have enough power to run them. | | |
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| ▲ | latentsea 5 hours ago | parent | prev | next [-] | | GPUs allow you to buy becoming more powerful. They are going to continue to be sought after. | |
| ▲ | ipsum2 5 hours ago | parent | prev | next [-] | | No, the other neoclouds will scoop up the remains. The H100 was released 4 years ago and its still near impossible to find at any discounted price. | |
| ▲ | dgellow 2 hours ago | parent | prev | next [-] | | Nop. The hyperscalers will gobble everything available, including any neo cloud that faces financial troubles | |
| ▲ | water-drummer 6 hours ago | parent | prev [-] | | If you can out-bid the Chinese. |
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| ▲ | laylower an hour ago | parent | prev | next [-] |
| One of the cras published a report on the potential upcoming AI stress and it did highlight a bunch of vulnerabilities. Just checked and coreweave rated at bb- |
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| ▲ | cmiles8 2 hours ago | parent | prev | next [-] |
| This is a preview of what AI companies will face moving forward trying to raise capital. 16% is cheap if AI lives to its promise of massive returns. Problem is the ROI isn’t materializing and 16% would destroy most companies. Meanwhile the traditional VC path is also drying up with OpenAI struggling with its latest round. It’s going to get very ugly for the AI bros as cash starts to run out. |
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| ▲ | aurareturn 2 hours ago | parent | next [-] | | I don't think any of this matters. The only thing that matters is demand and supply. | |
| ▲ | Fordec 2 hours ago | parent | prev [-] | | If the Anthropic valuation over the past week and the only partial OpenAI raise is anything to go by, the ocean is already actively receding. I think we're going to find who was swimming the most naked by February at the rate this is going. Particularly the dedicated Neoclouds who had to fund by pure debt without alternate revenue streams. The problem is not the tech, it's the money. |
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| ▲ | Animats 2 hours ago | parent | prev | next [-] |
| They started at 9.6%. So it was a junk bond when it was issued. Now it's junkier. Where is this bond in the bankruptcy hierarchy?
Is it secured by anything? GPUs, maybe. Is it subordinated behind other debt?
That's probably going to matter. |
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| ▲ | Alien1Being 4 hours ago | parent | prev | next [-] |
| Fraudulent circular accounting is so very entertaining. |
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| ▲ | treebeard901 4 hours ago | parent | prev | next [-] |
| No Chinese honey traps for the Coreweave CEO for the foreseeable future |
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| ▲ | jeffbee 5 hours ago | parent | prev | next [-] |
| It almost reads like a semiconductor process report. |
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| ▲ | fnord77 6 hours ago | parent | prev | next [-] |
| totally crazy that Google has bonds yielding 5.68% That's a great return for practically zero risk. (If google defaults on bonds there's much bigger problems in the world than the loss of your capital) |
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| ▲ | ion_trapper 5 hours ago | parent | next [-] | | The yield is bounded from below by the treasury yield, which is just a little lower - and with the treasury you have really big problems if they default! But realistically the US will inflate its currency rather than default, so the yield is really just reflecting expected future inflation. It’s not as great a deal as it seems. Bonds are probably the most fairly priced assets in the world. | | |
| ▲ | neural_thing 5 hours ago | parent | next [-] | | I'm old enough to remember Argentina issue a 100 year bond with an 8% yield. | | | |
| ▲ | maerF0x0 5 hours ago | parent | prev [-] | | If by fairly priced you mean so competitively priced that essentially all the real profit has been taken out. | | |
| ▲ | panicinducer 5 hours ago | parent [-] | | What else would fairly priced mean? | | |
| ▲ | maerF0x0 5 hours ago | parent [-] | | Fair could be construed as "the layers of market participants receive a share of the profits" . As far as I can tell there is essentially none left, and thats because folks will bid it down to 0 profit because they're lending others' money. (they're only responsible for their opportunity cost, but even 1% on others money is a good deal for the bank) |
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| ▲ | conover 6 hours ago | parent | prev | next [-] | | So much low-risk debt has been issued by the likes of Google, Amazon, etc. that it’s hard for other debt issuers to compete. | |
| ▲ | stymaar 5 hours ago | parent | prev | next [-] | | US 10y bonds are at 4.871, which is lower but fits your description even better. That being said, inflation is at 3.7% YoY and it's the real rate that maters, not the nominal one. | |
| ▲ | aurareturn 3 hours ago | parent | prev | next [-] | | I disagree. I think Google Search is in huge trouble. Most of their profits come from it. | | |
| ▲ | brunoTbear 3 hours ago | parent [-] | | Most recent earnings show continued growth in queries and ad revenue. Phillip made clear we’ve not yet begun to see the full potential for ad placement in ai results. I’m very bullish long term Google. | | |
| ▲ | aurareturn 2 hours ago | parent [-] | | There are discussions here on HN where Google is juicing search growth by simply raising prices or doing shady things like getting rid of exact match. This can raise revenue temporarily but will lose long term. Total human search volume has likely already started to decline. Further more, we are at a point where searching in ChatGPT or AI apps is simply better and faster than Google. In this new world, Google is not the leader nor a monopoly. |
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| ▲ | jesterson 2 hours ago | parent | prev | next [-] | | Google can go under and literally nothing will flinch. I don't think it will cause any trouble on my side, let alone bigger on then loss of capital. | |
| ▲ | Imustaskforhelp 5 hours ago | parent | prev [-] | | The treasury is having daily rates of 4.56% at 2 year bond and 4.88% at 10 years rate. Yes, Google has a very small risk but still it is a non zero risk that google can bankrupt whereas US govt can physically not bankrupt itself given that it can print the money (there could only be some gridlock within raising the ceiling though but that's true) Also I would argue that Google itself has changed with trillions of dollars spent into AI/Datacenters, it simply can't pivot as well. There is a reason as to why Google is having such high level of interest rate Google isn't stupid and wants to give such high level of interests if not for the amount of risk involved. I dont believe that there's free lunch but also that perhaps this can be a good deal to some and this is gonna push people even more away from the more riskier neoclouds funding and cause their debts to rise in interests rate even more. | | |
| ▲ | Esophagus4 5 hours ago | parent [-] | | Matt Levine once noticed that Microsoft’s bonds were actually cheaper than Treasuries (during a time of Trump-instigated turbulence). His point was that Microsoft has an interest in maximizing its credit worthiness which necessitated the corporate governance etc, while the administration had an interest in maximizing… other stuff (?) which did not necessitate the same things. [1] https://www.wsj.com/finance/investing/why-microsoft-has-lowe... |
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| ▲ | Refreeze5224 6 hours ago | parent | prev [-] |
| Now let's see Anthropic sell enough of its junk bonds to cover its half a billion in non-cancelable obligations. |
