Le Daron
Gabriele SveltoI have never seen a graph explain more clearly what's going and why it's completely unsustainable (and this is just cash-flow, it doesn't take into account the rapidly climbing debt!).
Also FYI this was calculated by those rabid anti-AI woke radical socialists at... *checks notes* ...Nomura Securities Co., Ltd.
your auntifa liza 🇵🇷 🦛 🦦@gabrielesvelto ooof. had a friend that worked at Nomura and they said they were so conservative, their work attire policy hadn’t changed in more than 40 years.
Jay@blogdiva @gabrielesvelto I had a friend who interviewed for Nomura and noped out _during_ the interview.
@jaystephens @gabrielesvelto the corporate culture in that place sounds hella creepy
@blogdiva yeah, if people at a place as conservative and money-driven as Nomura are clear-eyed about this then it should be pretty evident to everybody that something is really wrong
@gabrielesvelto i dropped out of economics, so am not quite versed on the nitty gritty academic aspects of the field, so gotta ask:
has there ever been a time in history when a few companies trapped themselves into an incestuous cycle of investments?
what’s happening around NVidia and the slopware bros is eyebrow raising, especially since there isn't really any cash or even assets transferring hands. it’s basically promisory notes that make it look like they’re making money.
just wondering.
j-r conlinHuh, interesting question.
First thought was the East India Company, but that one was highly extractive, but still tended to follow "normal" commerce (they paid on contracts for things like ships and some goods without needing those companies to buy from them). In some respects, NVidia is also acting like a monopsony, since it's pretty much the sole provider of the GPUs being used by AI centers, with the rest of the high purchases (memory, disk, etc) being tack-on to that.
The thing that is really weird is that NVidia is essentially funding their customers to establish it's own market, and I'm hard pressed to come up with an example of any other market doing that. Even some of the most egregious self constructed monopsony markets (Standard oil) actually produced something of value outside of it's own market, which lead to it self-maintaining.
( granted, I'm an amateur history buff, so I expect someone actually versed in this to have a better answer )
Solarbird 
@jrconlin @blogdiva @gabrielesvelto Also an amateur looking for a similar answer, the closest I've got and the thing I keep coming back to is the radio boom of the 1920s.
(I'm also not the only one: https://finance.yahoo.com/news/big-short-investor-michael-burry-223042880.html )
It's not a great match, but it's ... got commonalities, particularly in the mass buildout that never paid RCA shareholders back.
The collapse of that bubble didn't cause the great depression by itself, but it sure didn't help.
@blogdiva I am no expert, just worked a couple of years in finance which gave me both a basic understanding of these numbers and a desire not to get anywhere near it again. That being said circular trading is illegal, there's no way around that... but under the current US administration no one is doing anything to prevent or punish it, and all the companies involved are based in the US.
@gabrielesvelto "circular trading" is what they call it? that's good to know. would be interesting to know how the parties involve rationalize it. thanks for answering my question.
Simon ZerafaMaybe the bubble is starting to deflate, at last? 🙂
GLC
an actual bus
🐡🏳️🌈@glc @simonzerafa @gabrielesvelto And let’s hope they haven’t entrenched so much theyre already too big to fail ….
Joe Cooper 🇺🇦 🍉@ayl @glc @simonzerafa @gabrielesvelto that's why Elon Musk rushed the SpaceX IPO and why it is being fast-tracked into the Russell and Nasdaq indexes, so the people left holding the bag are working class folks in the form of their retirement accounts.
It's an unprecedented transfer of wealth from the working class to a handful of billionaires.
cognitively accessible math@glc @simonzerafa @gabrielesvelto with the right manipulation of the media, it appears more gradual.
datarama
domi@gabrielesvelto hey, true, apparently google took on a lot of debt this year, if i didnt fuck up that research somehow.
No wonder their stock is selling off a bit, not a good look
@gabrielesvelto
The debt thing is not true for all mag7 or wannabe ai players tho
(Edit: to be clear, consensus seems to be that spacexai is a scam/rugpull, while openai and cohorts are junk, financially speaking. Antropic had one good massive earning, dubious how the next one will go. The mag7s are massively exposed to this but at least they are burning cash they actually earn and have)
@domi well there's the problem introduced by special purpose vehicles. Some of the mag7 are spinning up companies whose only purpose is to hold debt so it doesn't show up on their balance sheet. That makes it complicated to figure out just how much they are exposed.
@gabrielesvelto
Ah so thats how they do it, thanks for that info, that is interesting.
Ah so thats how they do it, thanks for that info, that is interesting.
Claudius@domi @gabrielesvelto Anthropic did some creative accounting. They got a freebie month from SpaceX while selling Prepaid Tokens that they will have to honour in future months. Here's some more detail about that: https://www.wheresyoured.at/anthropics-profitability-swindle/
Anthropic's "Profitability" Swindle
Yesterday, the Wall Street Journal ran a story about how Anthropic is “about to have its first profitable quarter,” specifically an operating profit, or EBITDA profitability: Anthropic’s revenue is set to more than double to $10.9 billion in the second quarter, an explosive rate of growth that will
Ryek DarkenerTo cite EVE Online film "Clear Skies":
"Our problem is cash flow. We have no cash, thus no flow."
Return of Aadmaa@gabrielesvelto but when can I buy RAM again
Everyday.Human Derek@gabrielesvelto So looks like they knew it would be like this almost a year ago.
diana 🏳️⚧️🦋🌱That purple line, remaining breathable air
Darwin Woodkalooks like you can fool people twice and that's it
matt [newly self-hosted]@gabrielesvelto A stunning graph, though I'm unclear from looking at it where the reported numbers stop and the "predicted cashflow" begins.
Either way, money going around between the hucksters continues, we'll see who doesn't have a seat when the music stops, I guess!
Either way, money going around between the hucksters continues, we'll see who doesn't have a seat when the music stops, I guess!
Florian 'floe' Echtler
Bruce Elrick@gabrielesvelto
And aren't they turning to stock issuances and IPOs because banks are get reluctant to lend to them?
And aren't they turning to stock issuances and IPOs because banks are get reluctant to lend to them?
@virtuous_sloth banks are too exposed so they started buying more and more credit default swaps to cover the risk: https://www.bloomberg.com/news/articles/2026-05-23/hyperscaler-debt-flood-brings-derivatives-bonanza-credit-weekly
@gabrielesvelto That will go well, I'm sure.
Sigh.
@gabrielesvelto @virtuous_sloth i’ve seen this movie before 🫣
Hyblon 
@gabrielesvelto the pop will be so glorious we may come back to typewriter machines.
Vidar Hokstad / Galaxy Bound@gabrielesvelto This looks like a pretty expected graph for startups to me. Holding cash is expensive, and a startup typically believes - rightly or wrongly - that they can buy revenue with it, and by extension a higher valuation. You'd expect cash to drop dramatically when they think raising more is expensive at their current valuation vs future.
Now, of course you'd *also* expect it if they're struggling to raise and struggling to reach profit.
But you can't tell from free cash flow alone.
@gabrielesvelto Put another way, when I worked at a VC, our modelling indicated that it'd be near optimal for a startup to almost run out of cash every 12-18 months, as long as you had reasons to be confident your valuation was going in the right direction - short cycles of nearly running out of cash correlated with higher returns.
Of course, it also correlates with risk, so it's not that none of these companies will fail - odds are many will.
@vidar oh yeah, it makes sense for startups. But these are Microsoft, Google, Amazon and Oracle.
@gabrielesvelto But they are effectively acting like startups in the AI space, and they are if anything taking far less risk than genuine startups would, since they have massive revenue from other sources, and plenty of collateral and liquid shares, so they're not really at risk of running out of cash.
@vidar Amazon long-term debt tripled in 24 months, Google's went up 7 times IIRC, Oracle has an absolutely bonkers >3.5x debt-to-equity ratio. Microsoft doesn't look as bad on paper, but Microsoft has a stake in OpenAI so there's that. And then there's the SPVs. There's been several SPV that have been stood up to hold debt so I don't think anybody knows exactly how much debt has been accumulated. The combination of zero cash flow and a lot of debt is rather explosive.
@gabrielesvelto Low cash on hand != zero cash flow. None of these have zero cash flow, and you *want* debt to increase if you have good reason to think you can buy more cashflow with the money than it costs to service the debt - that motivated my startup comparison.
Debt to equity is meaningless unless you expect the company to fail.
Oracle has a *market cap* of $446bn, or ~3x their debt, and costs of maintaining their debt equivalent to ~20%-25% of operating income. They are not at riskl.
@vidar I don't expect Oracle to fail but my opinion isn't worth much and CDS tell a different story
Weltzeitgeist@gabrielesvelto @vidar I don't think that Oracle can survive, if OpenAI fails to pay their bills. But we'll see..
bit@gabrielesvelto Crash already, can't wait for the price of PC components to go down.
Jay Deiman@gabrielesvelto The bubble is starting to burst at this point. As soon as the VCs get off the hype train, stop flushing money down the toilet, and do the 3rd grade math required to figure out this is all 100% unsustainable, things are going to come crashing down.
US AI Stock Sell-Off Shakes Markets From Wall Street To Asia - Slashdot
An anonymous reader quotes a report from The Guardian: A tech sell-off shook global markets on Tuesday as attention turned away from developments in the US war with Iran and toward the future of AI companies and chipmakers that have driven stock markets to record highs. The tech-heavy Nasdaq index c...
debn@gabrielesvelto Yes! This AI “boom” is going to crash