This $100bn deal didn't cost anything and isn't worth anything. Remember back two weeks ago when Nvidia gave OpenAI $100bn so they can keep buying Nvidia GPUs? This is AMD trying to do the same, but they don't have $100bn so they are offering OpenAI share options to buy GPUs.
The share options will be worth at least $100bn too, if the conditions are met. But meeting the conditions will require buying huge numbers of GPUs from AMD. GPUs worth $100bn, and somewhere to put them. OpenAI can't afford that - not even close.
So they need to raise financing. On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. You take the stock options as collateral. You lend the money, OpenAI buy the GPUs, the AMD stock goes up, the option conditions are met, and even if OpenAI didn't pay you back the options will let you recover your investment.
However, this loan is far less safe than it first appears. The problem is that although lending the money allows openAI to buy GPUs, this doesn't necessarily cause AMD stock to rise. Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. And you'll be left with worthless collateral and a big loan to a company which can't afford to pay it back. So they haven't actually magically created financing at all. They just created the illusion of it. It's very clever. But it's fake. The real announcement will be when or if someone lends OpenAI cash.
It seems that these American companies have decided, with the government blessing, to form a cartel to split the imaginary money they assume will exist for AI technologies. This is an extremely disturbing notion that will only increase the combined power of these tech companies over our daily lives, but may also spell the doom of the economy in a not-so-distant future.
Fully anecdotal, but nearly every knowledge worker I know has Copilot or ChatGPT or some kind of corporate LLM subscription included in their job now. I don’t think the majority use it very well, but I know at least a handful who do.
Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.
Back in the dotcom boom years, Internet adoption growth was real - with a lot of people and businesses paying real money to get online. And yet, the dotcom bust happened. The existence of paying customers adopting a technology does not assure the sustainability of the industry at any point in time.
i dont see dotcom technologies replacing droves of workers and creating panics in /r/screenwriters, /r/3dmodelers etc. The displacement is real and we are not going back. Dotcom tech created fake problems so their 'advance technology solution' can be presented as solution. With AI wave, it's the opposite - business heads are actually thinking 'what other real problems can i solve with AI'. OpenAi and Claude don't even have to do any preaching. That's real value.
Two things could simultaneously be true: (a) trillions of dollars in value will be created/replaced/subsumed by AI solutions, and (b) even with near-universal adoption among knowledge workers, the value captured by the vendors of advanced AI solutions may never rise high enough to justify the valuations we're seeing now.
OpenAI's bet is that its frontier models will be so far ahead of the current status quo that, if they are the only ones providing those frontier models, they will be able to name their price (to end users and advertisers alike) while increasing their share of spend in the space.
But even today, last-generation and open-source models form a meaningful portion of adopted solutions. Not every application in 2028 will need the AGI-approaching GPT-10 - especially if those applications can leverage a relatively small amount of code, perhaps even written by that GPT-10, that can in turn orchestrate (say) DeepSeek V5 running on compute that can be obtained for pennies on the dollar.
OpenAI could become a victim of its own success, and cause a house of cards to take down the global economy in the process. I personally hope this doesn't happen, but there is real risk here.
You missed my point entirely. There was real value created during the dotcom boom too: Amazon, eBay, PayPal, Google, etc did not 'create fake problems'. Amidst the pearls of real value, were dozens/hundreds of overvalued, dogshit companies which never get a ROI for their investors, and the even marginally useful companies went under when the market correction hit.
There will be the WebVans of the AI boom era, we just don't know their names yet. There also will be Ciscos and Suns that will never reach their high-water mark ever again, or become obsolete in a few years, and sold for less that what people expect.
I was told that - with the full complement of good tools for a scrum team- the cost approaches a 6th member of the team. The crap from MS/GH plus a decent agent like Claude/Bedrock. You can squeeze decent behavior from vscode agent if you know what you are doing, but anyone who knows what they are doing wishes they had something better.
> Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.
It's still pretty funny money. Companies are buying those subscriptions to show their shareholders how trendy they are, not because they're useful to them. And the subscription price points are widely speculated to not even have positive gross margin, yet alone starting to recoup any investment. It's far from clear that there's any kind of viable business here.
I am personally paying $200/month for the ChatGPT pro version. It’s the best investment I’ve made in my career in a long time. It’s like having 2-3 direct reports. The alternatives provided by my companies are too slow and aren’t anywhere as good. If people start using it anywhere near how I’m using it, there will be profound changes to the workplace in the coming 3 years.
I have a senior that talks like this. Does everything through AI now. Barely writes anything himself. Has 5x'd his productivity. Like having his own team. Thing is his work is awful. The people who review his PRs have to spend 5x the time looking at his work. He's been pushed off to another team thank god. Not saying there aren't advantages and uses for AI. but if what you are saying were true (like having 2-3 reports) and it was a great benefit, there would be way more examples out there I could look at.
I run a team. So for me this is like having 2-3 extra people to just do some exploratory work and prototyping. Having actual people to do this is a luxury I don’t have and can’t justify currently.
I can’t just copy-paste what comes out. But I have to say I’m able to get substantially more done as it saves me a lot of grunt work. You do have to learn how to use it like any other tool. I have found that it’s helped me sharpen a lot of my own skills in multiple areas and improved my understanding of systems I’m working on. I am able to learn new things much faster because it has a real-time feedback mechanism.
I can’t speak to your direct report but I’d be concerned about falling behind as a leader if you aren’t using it in the course of your regular work.
And then people turn around and hand-wave that away by saying: But youre assuming that the development of LLMs stop and they wont be able to address that problem.
Like Okay, it sounds like a valid point. The issue is the hand waving and the fact it is not grounded in reality.
The assumption that it will just keep getting better is a big one. Maybe they will. Maybe they wont. If they get better I'll stop complaining. Right now I just don't think they are at the level people claim.
I took GP's comment to say that, even if LLMs get massively better in the next six months (which they will), the colleagues still have to wade through the slop during the review this week.
So while one person is getting a 5x increase in productivity, one or two get a corresponding 5x decrease.
But also under the assumption that the taxpayers will bail them out and foot the bill when things go wrong. Privatize the gains, socialize the losses. This is completely on the assumption that the US government would be able to do this, despite the bond market, inflation, debt that would constrain any response.
Does anyone here who lived through the dotcom bubble feel like we're in a similar situation with AI? I am excited about AI and recognize its potential. However, the increasing number of business deals like this one is raising my concerns that we may be heading toward a harsh bubble.
It seems to be the general consensus. I'm not sure the investment up until now is that crazy but the proposed deals going forward making huge investments based on iffy financial engineering like this deal seem quite bubbly.
Most definitely yes. We see all signs of companies receiving money at incredibly high valuation without any business plan. It is a ticking time bomb. We just don't know how long the madness will continue.
Yeah, it feels like deja vu. The speed of this bubble inflating, though, is much faster. It's feeling very dangerous and the longer this goes on the more dangerous it gets. I saw something yesterday that said AI spending is propping up 40% of US GDP right now. That would mean that this bubble popping would probably have a bigger effect over a bigger part of the economy than the dotcom bust.
It feels like the dotcom bubble was recent to those of us who lived through it, but 25 years is about a generation. But a lot of the people in the markets now (and running companies) were kids back then and thus weren't really aware of what was going on.
This depends significantly on the real cost of the gpu. The cost of enterprise ai GPUs is likely 2 orders of magnitude lower than the current list price. These deals avoid the need to markdown the price of the hardware to gain volume.
If I understand the math correctly. Amd could offer the GPUs at around a 20x discount to OpenAI on a deal worth 10-20 billion and be profitable on both amortized R&D and Cost of Goods sold.
>> Nah, nothing in the current market is based on fundamentals.
Sure it is. Stock prices are based on supply and demand. Oh, did you mean company fundamentals? Hmm.
BTW that demand is all coming from 401k contributions. The powers that be are terrified of a downturn causing too many job losses tanking the whole thing.
> > Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down.
In theory yes but OpenAI doesn't have a stock and in the word of AntiChrist Peter Thiel : "We only have AI, there is nothing else out there except for AI" so with the belief still strong to carry at least up until GPT 7 OpenAI will find ways to present itself to the world as capable of putting to use the AMD GPUs and AMD will benefit from it.
And honestly the anti Christ is right. Vibe coding is already bigger than self driving cars, the metaverse and all that stuff that emerged during covid
Imagine if the answer to the Fermi paradox ends up being not "they destroyed themselves through war" but "they destroyed themselves trying to find meaning in money and fake thinking machines".
Sounds like you are talking about AGI or superintelligence or something? Because productive AI tools are already here and have been for a few years. AI has already "worked out". Nothing speculative about that.
Lets assume AI has worked out. Can you point me to the effect on earnings of the customers of said AI tools who have publicly disclosed the affect on earnings because of said tools?
You can see that his old ventures (which he has built over many many years) are bringing in less money than his new ventures (built over fewer years). How is this not "effect on earnings of the customers of said AI tools"? Levels is a customer of AI tools. His earnings have gone way up as a result of AI tools.
Wonder what they been doing so far, really, as it is only tinygrad that been voraciously pushing for these drivers in recent years, not even AMD themselves. Besides, given ClosedAI's the wonderful record of releasing stuff to the public, even if this happens, may benefit only inside tech, not the general audience.
it kinda worked in a way. AMD offered OpenAI 160 million stock options.
With AMD's stock jump today it's net worth increased about $35billion, close enough in value to those stocks option they gave away (if it was redeemed instantly).
It's too much of a coincidence so I'm guessing market makers and institutional shareholders priced it in their trading today.
The share options will be worth at least $100bn too, if the conditions are met. But meeting the conditions will require buying huge numbers of GPUs from AMD. GPUs worth $100bn, and somewhere to put them. OpenAI can't afford that - not even close.
So they need to raise financing. On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. You take the stock options as collateral. You lend the money, OpenAI buy the GPUs, the AMD stock goes up, the option conditions are met, and even if OpenAI didn't pay you back the options will let you recover your investment.
However, this loan is far less safe than it first appears. The problem is that although lending the money allows openAI to buy GPUs, this doesn't necessarily cause AMD stock to rise. Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. And you'll be left with worthless collateral and a big loan to a company which can't afford to pay it back. So they haven't actually magically created financing at all. They just created the illusion of it. It's very clever. But it's fake. The real announcement will be when or if someone lends OpenAI cash.