Market signals on an impending AI bust are broader than just Oracle’s woes.
For example, Amazon just had a challenging bond offering where the market is clearly starting to seriously question the ROI on all this money being pumped into AI buildout. That does not bode well at all for AI-only companies without broader cash flow from other businesses. And when the cash dries up this whole thing comes crashing down like a house of cards.
> Market signals on an impending AI bust are broader than just Oracle’s woes.
It's worse than that - I believe that Oracle is one of the (many) companies right now that, if their AI experimentation fails, will stop the music, and everyone will be running for a chair.
Oracle is one of a few foundational components in the circular-investing group of AI companies. If they fail to make their commitments they're the first domino to fall.
My understanding of the ai circular financing racket is that not everyone will be running for a chair.
Nvidia owns all the chairs, and they’re letting other companies pretend to for a while, but if it all falls apart the backstop to the collapse will be nvidia.
I moved 80% of my money out of Vanguard's Target Date Retirement funds and into a money market on June 1st. In the 1.5 months since, the remaining Target Date Retirement fund has fluctuated up and down by about 0.1%. It has basically plateaued. I don't think I am losing out on potential short term gains. I like the idea that I have cash available to buy in on the day of the crash.
Good luck dude! This kind of move can pay off big or not, clearly. I’ve personally talked to fable about this a lot, suggest everyone does.
There are a lot of failure modes. The dot-com bubble looked obvious in 1997; it popped in 2000. Anyone shorting in '97-'98 was carried out on a stretcher before being vindicated. In fact 2000-2002 fell in three brutal legs over two years, and anyone who leveraged up after the first 25% leg was destroyed by the next two.
My boss has already done this several times over the past couple years because of some impeding market crash. Then he goes back and buys a week or so later.
It's worth adding that conventional wisdom says, you can't time the market. On average, people shifting between cash and stocks to time shocks lose out over just holding a fixed portfolio.
At the same time, one can make financial decisions based on risk rather than longterm expected returns. For instance, I'm happy with fixed income yields rn.
What would scare me is losing a big chunk of my portfolio in a downturn, exactly when I'm also most likely to lose my job.
Sometimes conventional wisdom stops being wise. Also 90% of the people in charge of conventional wisdom have their personal wealth depend on retail investors not selling.
#1: Great question, and I would love to hear the answers (And am learning from the ones posted)
#2: What I've done so far: Haven't bought stock in a year. Have moderate short positions on Palantir, SpaceX, and Tesla. Have big short positions in the most popular Quantum computing companies. (Scams IMO). I have sold most of my positions ("profit taking"?) in stocks which have gone up a lot in the past year. (Nvidia, Broadcom etc), and am no longer using margin; about 1/3 of my brokerage value is now "cash", generating ~3% interest.
Stay well diversified, keep investing each month, and take a nap.
There are almost surely severe bumps ahead for the AI space and that will likely spill over into the broader market. But unless you’re retiring in the next few years don’t worry about it. You can’t time the ups and downs and the only proven strategy is to just keep investing in a broad indexed portfolio and just ride out. You’ll take a short term hit but also end up buying on the dip because you don’t stop investing.
I suppose I'm just a little worried about a 10 year sideways market. The run-up has been absolutely insane the past year...some graphs are just a literal straight line up. I didn't get to participate in much of that and concerned the prevailing wisdom on these larger timescales may no longer hold true.
Wouldn't it be wiser to get out of the market into fixed rate assets like government bonds? Maybe have some into puts on SPY (or QQQ since tech would probably have bigger losses) too, but mainly getting out of long positions on what seems a really overvalued stock market
It's tempting to sell a bunch, but then you've got cash. What do you do with cash when the government keeps printing money and assets are all overpriced?
You think the hedge funds selling SPY options don't have this priced in already? Of course, you can still make money on this bet, just like you can win money at a roulette table, but unless you think have some special insight that hedge/quant funds don't have, buying options should be negative EV.
Everyone in the tech and media world is dead set on this being a bubble.
Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer. Teams can and will shrink.
Look at all the production and advertising companies switching over to Seedance. I know ad firms bidding 1/4th their typical contract price (pharma, P&G, etc.) and winning contract after contract.
This isn't dotcom "dark fiber" before demand. The demand is here now, big legacy firms are just struggling with deploying it. Nimble small teams are making a killing.
A financial bubble has almost nothing to do with how good the product is. It's about how much of the value the company can capture, and what the ratio of that capture is compared to the investment.
It doesn't matter to investors if OpenAI or Anthropic can build AGI if a year later 10 competitors have similar models and eat into the revenue. OpenAI and Anthropic needs years, if not decades, of significant market dominance, post-enshitification, to justify their investment spend.
> Everyone in the tech and media world is dead set on this being a bubble.
is completely orthogonal to this:
> Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer.
The industry being in a bubble or not is irrelevant to the tech being good or bad. The dot-com bubble popped (and was a bubble) even while the tech was fit for purpose.
I think the "bubble" is more about return on investment and not usefulness of the technology. So much money has been invested on the assumption that so much return is going to materialize. The more money going in the bigger the expectation of return, that's the bubble.
Yes, but all bubbles (except the tulips...) have a real, valuable, new technology at their core. That it's amazing technology doesn't stop the financial side of it being a bubble. In fact it all but ensures it is.
> Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer. Teams can and will shrink.
If that's true or not, it's a bit irrelevant. Maybe teams won't shrink because of Jevon's paradox, or maybe tech debt will catch up.
But it doesn't matter because the people calling this a bubble mostly believe that the companies burning money cannot have the return on investment needed. This can be for a variety of reasons, but my favourite one is just that open source AI models are good enough, cost a fraction of what the frontier ones do (with predictable costs), can be fine tuned, and can be relied upon (no orange tweet banning your acces to the model you've been using). So for me OpenAI and Anthropic will really struggle to merit their valuations.
And then companies like Oracle are just a dumpster on fire. GPU hosting is a commodity business; expensive one, for sure, but there's no way in hell they'll make actual returns on the money burned with zero moat. And things are even worse when you consider the political involvement of the CEO and his nepo baby, which can easily burn good will.
This is a pretty Oracle-specific situation, isn't it? They bet the company on an AI infrastructure buildout and levered hard to do it. Google, Amazon, and Microsoft aren't in comparable situations. Oracle is transforming itself into a value-added CoreWeave (not just in terms of product packaging but also the financial structure of the company), in a way the other hyperscalers aren't.
This story has been playing out for years now, and reads to me like the market simply recognizing that Oracle is not in the same business as it once was. It could succeed, wildly, at this new thing, but its risk isn't going to be valued based on the business it was 10 years ago.
Pretty sure Google fits any definition of major model maker that SpaceX does, and had their IPO long before SpaceX.
Meta and Microsoft both are also significant makers of GenAI models that are public, though neither has a big tentpole LLM line that they sell access.to commercially like OpenAI, Anthropic. Google, SpaceX, which I infer might be what you mean by major model maker.
If you don't count the autosummary/gen answer at the top of googling an answer I would say so. Outside of the more technically inclined crowd I think the sentiment is if you aren't at the forefront (opus/fable/chatgpt) then your last or at least indistinguishable from all the rest of the lesser models.
If you're selling deterministic output, just use traditional code. If you product is inference, it has to be the best inference. This becomes more apparent when you bounce between powerful models and smaller cheaper ones, the cheaper ones _feel_ worse to use.
I was at the ophthalmologist for the second time in two weeks - my new prescription wasn't quite right, new lenses should be here this week.
All that to say: I had to move my focus around a bit and re-read "...pumped into AI buildout." several times, because I thought I was reading Ed Zitron :D
A bunch of press on this today you can look up. Demand on the offering was much lower than expected and what materialized in prior rounds. Amazon had to sweeten the deal to get the money loaned.
Low bid to cover ratio - it's rare for bond auctions to out and out fail (that would be fairly disastrous), but you can have an auction where they successfully sell all the bonds they were trying to sell but with much less demand than they were hoping for.
That's not a good sign and it's a blatant red flag for the market
Nothing says “full of shit” like someone saying “market is signaling an impending X”. Why not make a huge levered bet and get wildly rich if you think so?
Also, even knowing both what will happen and when is a separate thing from having access to capital. You can't really tell that someone posting that hasn't already also taken the biggest leveraged position they can (unless that person is so rich that doing so would itself visibly move the market, which most people who might post comments are not.)
IMHO these signals have more to do with the market than AI. They aren't finding AI to be have less ROI than before - they are requiring higher ROI than before, because there is less money remaining to be invested.
Managing the total amount of money so that investment bubbles peter out before they get excessively big is supposed to be the central bank's job.
> The exit plan is to offload overpriced shares, that they paid billions for, onto the public market. If they don't IPO, those investors get nothing.
I keep seeing these unsubstantiated claims. They’re out to get us and just pump and dump on public markets!
Yet, before they IPO they have to go around and do what? Who sets the IPO price? Who buys the shares? If the shares tank, the valuation of the company goes down and locked up shares lose value. It’s not really in anyone’s interest for IPOs or investments to fail and while pump-and-dump schemes certainly exist they are not the norm. The conspiracy theory level of distrust and cynicism is not healthy and makes one a very poor investor.
If individual investors are buying shares and getting blown up, that’s their problem. Invest and due your own research. Broad market funds exist and have so for decades. Most financial advisors even will put you in to those funds and corporate 401k plans while increasingly allowing for more investment flexibility (freedom is good) default and educate employees by default on target date funds and index funds. There is a wealth of information out there.
> If individual investors are buying shares and getting blown up, that’s their problem. Invest and due your own research.
This is simply absurd. Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). It's the 1920s all over again; publicly pump and privately sell into the demand you're creating. I'm guessing you're perfectly fine with this behavior from the largest market participants?
> It's the 1920s all over again; publicly pump and privately sell into the demand you're creating.
It's not the 1920s all over again.
> Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). ... I'm guessing you're perfectly fine with this behavior from the largest market participants?
Who do those investment banks sell to? How familiar are you with, for example, Goldman Sachs finding buyers for SpaceX shares? The minimum account requirement at Goldman last I checked was something like $10mm - do you really care if such investors are buying shares in overvalued companies or, like me, declining to purchase?
You are just throwing things around and not providing a coherent argument. Everyday investors don't have to buy these shares. They can continue to follow industry standard advice to buy total market index funds, or target date retirement funds or whatever. Investment banks sell to high net worth individuals who are by definition sophisticated investors - they know and accept the risk of such offerings. So no I don't care even a tiny bit if a Morgan Stanley client decides to buy what you consider to be overpriced shares in a "pump-and-dump" scheme based on your own certainly flawed and unsophisticated valuation of SpaceX or any other company.
Every day investors absolutely buy these shares; these price targets are publicly available and SpaceX shares are equally publicly available. You've claimed everyone who is disagreeing with you in this thread is not providing a coherent argument. Have a great day mate.
> And you can just not buy the shares. It's very straightforward.
Sure, but the SEC exists, in theory, to make that decision one you can make an informed decision on, because con artists don't typically put a disclaimer in that says "this is bullshit".
The flaw in your thinking here is that you’re assuming these greedy people that you are creating in your head would prefer to lose half the value of the shares instead of doubling them. The entire proposition that you are putting forth has no real basis in reality, and doesn’t even match the expected behaviors of your trope of strawman investors.
> Having the general populace fleeced by bad actors is everyone's problem, eventually.
Sure. Creating false narratives and parroting unsubstantiated misinformation and fear mongering is everyone’s problem too.
> The flaw in your thinking here is that you’re assuming these greedy people that you are creating in your head would prefer to lose half the value of the shares instead of doubling them.
The flaw in your thinking is assuming it's actually worth the IPO price.
If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.
> The flaw in your thinking is assuming it's actually worth the IPO price.
Then don't buy it at the IPO price? The bullshit artist will have to lower their price until there are takers in the market.
> If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.
They're not bullshit artists, they're greedy. If you think you're pulling one over on someone $100 is great but $200 is better - might as well see if you can get $200. Since we're just making up random people and motivations.
If I invested $0.50/share, I know my company is worth realistically $10/share, and I can convince you to buy at $100/share, and it plunges to $50/share before I can offload, I am still a pretty happy camper.
Retail investors are the marks, not the scammer here.
My point was that there is no ROI until the investors exit!
IMO, those shares are overpriced even at private investment levels, but my opinion is still irrelevant to the fact that there is no ROI until the investors exit!
Who knows? Who cares? My point is that until those investors exit, there is no ROI.
The comment I originally responded to was talking about investors getting ROI from AI companies. I'm pointing out that no such thing will happen until the investors exit.
In terms of Oracle, the topic of this thread, lenders are already getting paid out. Oracle borrows money and issues corporate bonds at fixed percentage rates.
Oracle paid out 5 billion in interest last fiscal year.
> My point is that until those investors exit, there is no ROI.
Ok well they can just exit in private markets before these shares are "dumped" on public markets. Therefore there is an exit and ROI. QED.
Anyway your overall point, which was a bad one I'm sorry to say, was about investors dumping shares of overvalued companies on public markets.
You are ignoring things like lockup periods, vesting schedules, and other general machinery that specifically exist to prevent day 1 or short-term dumps of shares. It's not in the interest of the company that is IPOing or the bank - how can the investment bank go to investors and market securities and then on Day 1 those securities (because it's a pump and dump remember?) drop by 10% - 20% - 30% or more. That's bad business and investors will leave investment firms that did that.
When one of these "overvalued" companies IPO (and let's be honest, you don't know how to value these companies anyway so your accusation of them being overvalued is faulty from the start), someone has to buy those shares. If everyone starts selling, the value of the company and the value of the shares drop unless there are buyers. This doesn't really serve anyones interests and even better, you as an individual investor don't have to be a buyer! If someone wants to buy because their own model says it's worth it, that's up to them to decide, not you. Fortunes are made betting against the market (and betting in the general direction of the market). If someone wants to forgo buying, that's fine too.
For investors who don't know about the values or models of valuations of securities they can just take industry standard advice and buy index funds or target-date retirement funds. Stop infantilizing people and assuming that because you lack the knowledge that others must too, or that everyone is just out to scheme and "dump" on public markets, especially without any evidence or without considering how the IPO machinery typically works, who buys these shares, or the incentives.
With a couple million dollars, you can buy many many articles on the financial times and barron's. With a couple friends, you can get other friends in pension funds to allocate into you. With other friends, you can get beneficial messaging from all sorts of public and private channels. Banks and funds can pump your offerings for something in return if you went to the right bar mitvah. Of course this only lasts for some time, but if Billy the boomer and the Korean teachers pension fund bought in, you are already half way there.
Information is only relevant in the long term, in the short term the stock market is about FRIENDSHIP.
Sure, but this applies to any sufficiently advanced conspiracy theory and wouldn't be limited to markets. Secondly you the individual can just not buy the shares if you think they are overvalued. You're confusing your own interpretation of the valuation of some company with "the right valuation". Maybe you're just wrong and they're not over valued? Maybe you're right? It doesn't matter much, except you can buy shares in companies that your investment thesis and modeling suggests you might buy.
The bond market is measuring the risk of repayment though not the success ROI of the dollars invested by the company (that impacts the stock price but not so much the bond price). The bond markets are hiccuping on AI because there’s growing concern that these loans simply won’t get repaid.
This may be related to the commonly-held fallacy of "cash on the sidelines". Cash is always on the sidelines. Cash is not created or destroyed by buying and selling stocks or bonds. Cash is simply handed from one party to another, but the cash has to be held by somebody.
Without even getting into the practical vs. theoretical of Fed dual mandate (funding deficits), even the most uncharitable take on modern CBs wouldn't suggest this.
Kinda cool to be at a point in the hype cycle where the capital markets are almost exhausted due a to a speculative bubble, pushing up yield demand. Move over tulip mania.
> No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer. -- Gil Luria (Managing Director and Analyst at D.A. Davidson)
When we tried to do a pilot with their cloud we couldn't even sign-up. None of the corporate credit cards were accepted.
In addition to that the form basically only worked in Edge. We emailed support, they changed something on the backend. It still did not work. We gave up.
In retrospective that was a very clear warning sign that their priorities were misguided. I'm glad we did not waste any further time and effort on them.
I signed up for Oracle Cloud. I couldn’t get any of the free trial options to work due to capacity limits. I couldn’t get my payment method added so I could pay for real servers.
Then they terminated my free trial early with no explanation. I tried to add a payment method again and it didn’t work.
It turned into a bigger joke when Oracle sales people started emailing me to ask how my trial was going. They must have been given a list of email addresses and no information about the accounts. I would ask them for help getting my account unlocked or adding a payment method, they would send me emails for a couple weeks saying they were looking into it, then they’d ghost me.
Then a month later a new sales rep would email me and start the process over.
I checked Reddit and there were dozens of stories with the same experience.
Oracle Cloud sometimes feels like an elaborate prank that I'm not in on. I know people and companies on AWS (obviously), Azure, Google Cloud, Hetzner, CloudFlare's various PaaS offerings, etc., but I can't name a single thing running on Oracle Cloud. Somebody out there is clearly using but I'll be damned if I know who it is.
We host more than 200 customers in OCI (because we have to). Its terrible. The service is terrible and they are breaking stuff all the time. Amsterdam down for a few hours today alone. We spend millions with them and can’t even get someone to join a bridge. It’s baaad
Uh, while the sale to the Oracle-led group was government mandated, the use of Oracle Cloud for hosting by the new US TikTok is just self-dealing by the new ownership.
Of course, when your “customers” are just self-dealing, that’s also not a great sign.
I think the market for Oracle Cloud is the same for early GCP: companies with large enough needs and strong enough engineering teams that they can leverage "X runs on Oracle Cloud" into deep discounts. And then cover the gaps with engineering.
Partially. It's basically only enterprise and upper market organizations that were hit by billing re-negotiations by AWS, GCP, or Azure and want a high touch experience.
I know at least one of those only uses Oracle for internal/HR "cloud" purposes, while their main customer-facing business is on AWS. Not sure about the others, but when I think of a business using "Oracle cloud" I don't interpret it as just their marketing/HR.
Good to know it's not only problematic on the free tier. I wanted to sign up to get the free credits but couldn't finish the setup. I tried again now and it accepted/charged my card ($1 verification test) but then after the account was created it said I need a credit card?
For the longest time they were a piñata for free compute with people making multiple accounts for their free ARM instance, but with the AI crunch they're clamping down.
I'm guessing they don't care if actual business gets caught up in that because from their POV actual business comes from an account manager, and self-serve is just them cargo culting AWS/GCP
True. The linked article's title says that. I wonder if that was a typo by the OP or one of those HN quirks where the title was automatically changed when it shouldn't have been.
I looked this up yesterday triggered by their threat to move the combined company out of CA. Oracle’s stock price, at least, which is way off its 52-week high, is about the same as it was at the time the WBD deal was announced.
What does that tell me? Just one of many things about the prospects of the deal still happening. That one in particular says to me they won’t be deterred. Bond rating may suggest the opposite. Lots more complexity than those two things but “fun” to speculate.
This site is shady as hell. You try to decline marketing in their pop-up and it hides maybe a 100 providers and expects you to click each one individually.
Is it me or do none of the AI companies have a "moat" in the Ben Grahmm sense.
I use their services, but I frankly don't care who provides it. I'll chase the chepest/best and have no issue switching from one to another.
The only moat I can see is Microsoft providing its services to companies in its Azure system. Nervous IT departments probably like that it's not leaving their control if Bob in the SAP team spins up some AI crap.
I've been thinking for a while, there's not real winners here except the incumbent technology providers. Hear me out: all models are converging towards the same level, gains are getting smaller and harder to come by. The models are commodities nothing more.
This is the leap, nobody really wants to front a model for someone else. If i build an agent, or a service that requires a model, I'd prefer to push the model onto someone else, preferably at no cost. This is a leap as I'm sure right now, most people / businesses are thinking actually i do want to own / front the model.
However, if you accept the leap the easiest way to do this is to make the model the users problem.
From a business point of view that makes things really easy, from a customer point of view, they simply have to accept whatever their vendor of choice is pushing down their throats.
So as a business I build for whatever model Google makes available to android, and whatever model windows bundles, and whatever model Apple bundles, and, excluding the long tail of Chinese vendors and Linux (sorry, its always left out) and that's it, problem solved, and the customer picks up the tab for the tokens
I think anthropic with its enterprise strategy and google
with its integration in everything have a bit of a moat.
But I switched from ChatGPT to Claude 3 months ago because my account was down for like 6 hours. I haven’t used it since. It’s too easy to switch away from chatbots on a whim. There is no moat for that.
The narrative that superintelligence is imminent is partially at fault here.
There are competing definitions of what intelligence even is, and the one that I find most striking is from Francois Chollet which is that intelligence can be boiled down to skill acquisition efficiency. This type of definition makes intelligence more akin to polishing a ball than growing a watermelon.
The superintelligence doomers warn that the watermelon is going to start growing exponentially and crush everyone. But what might actually be happening is that we are not growing a watermelon but rather polishing the ball until its really smooth and shiny. There's a point where you can get it to micron levels of polish but for most tasks (white collar text domains tasks), it's smooth enough! You will be able to go to the ball store and buy a low cost made in china ball for most tasks.
The real challenge is actually branching out domains and modalities to tackle things like blue collar labor. Over time, white collar work automatable or able to be made hyperefficient by LLMs will see LLM commoditization.
Observationally, for people that /aren't/ using models to code but to just do their white-collar job, claude.ai /is/ AI, now. The entire perspective for how to use AI is through claude skills, claude projects, claude cowork, etc. They've massively won the corp buy-in at the moment I believe.
I guess I’m thinking a lot of companies seem to be getting Claude code subscriptions. It usually takes some time and effort for an org to switch away from one solution. In the meantime a lot of workflows get more and more tied to Claude in particular.
It’s not much of a moat, but it’s more than a lot of orgs have.
obligatory correction: the semiconductor layer is still owned by TSMC and Samsung. Google sketches chip designs for them to implement - that's the lowest layer they control. I am not denying that this is impressive.
google might have tons of integration. But if it invested too heavily into AI then it will also suffer when increased competition causes returns to fall:
AWS and Google at least own their own hardware (Trainium and TPUs, respectively). It's a moat in the sense that designing, building, and deploying your own chips at scale is quite a feat and not easily replicated. The vertical integration will allow them to continue to be profitable once the models get good enough and competitors' prices race to the bottom. Google has Gemini; AWS may not deploy its own models (yet?), but that's not necessarily a losing position, as long as the market is able to run models sourced elsewhere on Trainium and the price is right.
Isn't specialized hardware also a big risk? GPUs are more amenable to any big changes that may happen in the next 5, 10 years of AI research. Maybe we won't even be talking about LLMs anymore. Maybe matrix multiplication won't even be the main primitive.
Maybe it isn't that far fetched, but I could see them specializing for some super high dimension multiplication and meanwhile 5 years later turns out "all you need" are 3x3 matrices and suddenly 90% of your specialized hardware is now dark silicon :)
The moat is shifting from technology to access to proprietary training data. It doesn't matter how good your LLM platform is if you don't have good data to feed the training run. Public Internet data and published media is already mined out. Now the frontier LLM vendors have shifted to licensing proprietary data that's locked up behind corporate firewalls, and even hiring human domain experts specifically to create new training content in target verticals. You'll see the effects of this next year, although it might not be obvious to those who mostly only use LLMs for coding tasks in popular programming languages for which there was already a lot of training data.
> Now the frontier LLM vendors have shifted to licensing proprietary data that's locked up behind corporate firewalls, and even hiring human domain experts specifically to create new training content in target verticals.
That's a losing proposition for any token provider - it's expensive and slow, and when you're done everyone with money to rent a last-gen H100 is going to distill your "closed" model anyway.
> That's a losing proposition for any token provider
The specialized models for targeted verticals being discussed may well not be sold by tokens, but instead be behind the scenes powering dedicated packaged solutions where the customers don't have raw access to the model. Token providers still won’t have a moat, but AI isn't just selling tokens.
Google has a bit of a Network Effect going... my vehicle got an OTA update to use Gemini. Between that, search, storage, and the YT Premium bundle it was enough to convince me to float a subscription.
The adoption of standards like skills and agent setup helps a ton. Nobody wants to be locked into an AI vendor like with cloud systems in general. And companies can't hold on to the #1 spot across multiple areas for very long, so users are even more motivated to move their process and stack between coding tools and AI companies behind them like Claude code.
You may not care, but a lot of people I know care what brand chat bot they use personally,. usually it's tied to trust and reputation more than anything else. People are fickle.
If/when open-weight models do catch up (i.e. become the dominant product in demand), Amazon transitions from a middle-man to the supplier with the best economies of scale.
Great business either way. You could even draw an analogy to Linux/OSS & the origins of AWS. They started as basically an infra middle-man for other people’s technology. But as the core tech commoditized, they transitioned into selling their own higher level services at scale—like Bedrock.
> I use their services, but I frankly don't care who provides it. I'll chase the chepest/best and have no issue switching from one to another.
For the hyperscalers, there is an ease of remaining in the Azure/AWS/GCP fabric from a data provenance perspective, particularly for regulated industries or large, risk-averse enterprises. There's also, of course, a certain network egress tax in most cases.
Yes. We have a quad MI300A server and run several inference models on it. For $107k it has saved us so much money on tokens already and it's a heck of a lot faster than cloud services.
> Have you ever actually had anyone work with these chips? Developer ux on amd is terrible.
Just how much of dev ux do you need? A foundational library, of course, but as the AI companies keep saying, their models can vibe-code what's needed for those chips anyway.
AMD is held back by their interconnect and firmware disadvantage compared to nvidia. They’ve been trying really hard to create their own cuda, but rocM and HIP still aren’t very popular especially for research.
And their repeated refusal to either implement CUDA or reimplement everyone's CUDA libraries on their own platform. They say that AMD never misses a chance to miss a chance.
I thought that Nvidia's moat was more in CUDA? Hardware is hard but we've already seen other companies like Google design neural processors with compute efficiency close to Nvidia.
That's fine, but your inexperience with large companies that are MS's bread and butter doesn't really give you any credibility here. It's the standard for a reason.
There is AI data center overcapacity already. The KOSPI crashed last week, and it's a leading indicator for the cyclical hardware industry. It already had been that indicator in the 2000 bubble.
I don't know what possessed Ellison to ruin a functioning company, but it will be interesting if he gets a margin call for ORCL's other debt exposures, which are Ellison's massive loans against his ORCL stock.
The KOSPI went up already 125% in the past year, so some sort of correction was inevitable, even if the underlying companies are healthy. The crash has been exacerbated by South Koreans levering up heavily in the past few months and now getting wiped out.
I remember one thing that struck me when skim reading that the first time:
it only "works" if the government actively does everything in its power to support the boom. No restrictions on new power sources, on pylons and transformers, on new factories to make power sources and compute, on data centres.
This was never going to be the world we live in.
Still surprised by the admin actively punishing politically incorrect power supplies (renewables) and then starting a stupid war with Iran, but even without that nonsense, we were never going to see the US do a command economy pivot, and even if we had something would've broken like it usually does with noobs (and even most politicians are noobs) trying a command economy pivot.
This AGI silliness is predicated on a flawed "Platonic" view of epistemology. The notion that there is some well-defined "idea space" and therefore superintelligence can explore that space faster than any human. In fact, there is no such space. There is a "token space" that can be explored, but that has only fleeting overlaps with reality.
It also completely ignores what we know about evolution. Our brains are the result of billions of years of natural selection. The amount of “training data” that resulted in our neural structures is on a completely different scale than the training data used for today’s LLMs. And this isn’t even up for debate.
The assumption that this process can be “distilled” from written word is completely insane. I’m not sure how people trick themselves into thinking it’s even remotely possible.
The ability of Silicon Valley to hype itself up into a frenzy is unparalleled. Apparently nothing was learned from "blockchain for everything" and "we're going to live in the metaverse".
Campaign? They're friends of the administration, and the US is firmly in the kleptocracy stage now (the last wrungs of democracy are about to be undone this Thursday evening).
They'll give a bribe to Trump, they'll offer up 5% of the stock to Chairman Trump as the People's Stock now that the US is basically a bizarre oligarchy form of communism, and Oracle will be declared a state enterprise that cannot lose money.
The super rich simply do not fail, and they utterly control every aspect of the US now, exactly as the people apparently wanted.
Americans are in a state of profound denial, but things are about to become very real, very quickly.
Nah, they tried the invulnerable thing. They tried really, really hard to avoid the "chaos in the White House" firings from the first term. Noem wrecked it.
> They'll give a bribe to Trump, they'll offer up 5% of the stock to Chairman Trump as the People's Stock now that the US is basically a bizarre oligarchy form of communism, and Oracle will be declared a state enterprise that cannot lose money.
A little bit dangerous for a US administration (any US administration) to do a bailout of unloved companies just before a midterm.
Not that Trump won't do it, just saying that he'll think twice about it if he wants to hold on to the power that the American people have given him. It's one thing to boast that he can shoot someone in the street and the public won't care, quite another to tell the masses that he's funding their upcoming unemployment using their tax money :-)
The Republican strategy has moved away from swaying public opinion for a while now. Now their strategy is to manipulate voting maps, intimidate voters and suppress votes in areas likely to vote against them.
The Iran war is unpopular, but they did it anyway.
> A little bit dangerous for a US administration (any US administration) to do a bailout of unloved companies just before a midterm.
You think there will be a free and fair election? Do Americans realize that Trump has openly floated pardons to anyone in his circle? What do you think all of his "every election that I/we don't win is corrupt" rhetoric -- dangerous, grossly unacceptable, anti-democratic horseshit -- is all leading to?
Trump has done brazenly criminal things, repeatedly. He is pardoning anyone who bribes him. He lies with every utterance from his garbage mouth. He doesn't even attempt to pretend that he's delivering his promises now. Congress has completely abdicated any and all responsibility. His entire administration is just shockingly, unbelievably incompetent, from Epstein-Island Nutlick, to Kegsbreath the ChatGPT warrior weakling dipshit.
Remember how outraged everyone was about Hunter Biden selling a painting, or Pelosi trading stocks? ROFL, how bucolic and corruption-lite that is compared to having a crypto-rug pull, inside trader and his family of halfwit runts running around destroying the US for their own family fortunes.
This Thursday evening is going to be eye opening for a lot of Americans that have tried to delude themselves into thinking they're getting lulz for a couple of years. It is shocking that people still pretend you're a democracy, or even capitalist for that matter. The US is post capitalism, and the plutocrats have decided to be done with this whole democracy farce.
It remains shocking that Americans would re-elect this garbage racist self-dealing criminal imbecile again. And I would like to say "you get the government you deserve", only the US is now a worldwide menace so the entire planet will suffer from this idiocracy.
Trump is currently having an armoured facade installed on the front of the Whitehouse, alongside the very well documented bunker complex. Do Americans really not realize what this is actually for?
There's still a massive compute crunch, I know the opencode guys had been struggling to get capacity, Claude effectively lowered it's limit till the SpaceX deal, Google is struggling.
Anthropic isn't a hyperscaler, but instead a hyperscaler customer.
And I've seen first hand hyperscalers go to extremely large lengths to eradicate any use of Oracle (which mainly comes in these days through their acquisitions).
Their competitors eat them. I would not be surprised to see Oracle's cloud business get absorbed by IBM or Microsoft. Maybe Amazon. The extra DC capacity is valuable to a couple companies right now.
Whatever happens, I can assure you that the Ellisons will remain multi-billionaires and the American taxpayer will manage to end up poorer, courtesy of their friend in the White House.
This is surprising to me. Judging by what appears to be the common sentiment here on HN - which is that AI inference is already profitable, and OpenAI is fairly valued by private markets.
Given that Oracle and Microsoft are major counterparties of OpenAI, it seems odd that their stocks have been performing so poorly recently. Can anyone square this circle for me?
The general fallacy of the “but inference is profitable” argument is that it tends to ignore all the costs of building and training the model. Given the fact that 1) that’s not trivial, and 2) the arms race underway means one can’t stop training, then it ruins the financial picture.
It’s like saying a new apartment building is “profitable” because the monthly income covers the monthly running costs, but ignoring the giant mortgage that covers the cost of building the building. That thinking is a good way to go bankrupt in real estate and a good way to go bankrupt in AI.
> The general fallacy of the “but inference is profitable” argument is that it tends to ignore all the costs of building and training the model. Given the fact that 1) that’s not trivial, and 2) the arms race underway means one can’t stop training, then it ruins the financial picture.
Or that it’s all hearsay and no one has released financials yet?
Well there is clearly also a lot of non-GAAP style “trust us bro” things going on too which generally boil down to “if you ignore all the reasons why we’re not profitable then we’re profitable.” It’s WeWork’s “community adjusted EBITDA” messaging repackaged.
If the company who holds the mortgage wanted to own the building, they would have just bought it themselves. They don't, for whatever reason, so to some extent they have an incentive to help their customer succeed.
That's why it's so hard to get a residential mortgage, for example. It's more of a partnership, with more mutual vulnerability, than most people think. Same thing seems to be true here.
Given what happened with xAI’s excess capacity lease to Anthropic, and Meta’s noises about doing the same, seems likely that the demand for inference will continue to slope upwards for a while. If I’m Oracle, I’m not worried about being able to utilize the data centers I’ve built for some price, almost certainly a profitable one.
I’m guessing, though, that Oracle made their capital investments on assumptions of a higher price & return. Possibly because it wasn’t clear when these decisions were made how much competition OpenAI would have at the frontier.
I don’t think this math is all that hard. Capital markets have everything they need to start to figure it out, most especially a year or two of history to project forward.
Inference might be profitable, but it does not mean the profits of AI datacenters will rise in future. Open weight models and local AI already put the pressure on the AI datacenter profit margins, and local AI is set to become much more efficient in the future.
For example, Amazon just had a challenging bond offering where the market is clearly starting to seriously question the ROI on all this money being pumped into AI buildout. That does not bode well at all for AI-only companies without broader cash flow from other businesses. And when the cash dries up this whole thing comes crashing down like a house of cards.
It's worse than that - I believe that Oracle is one of the (many) companies right now that, if their AI experimentation fails, will stop the music, and everyone will be running for a chair.
Oracle is one of a few foundational components in the circular-investing group of AI companies. If they fail to make their commitments they're the first domino to fall.
Nvidia owns all the chairs, and they’re letting other companies pretend to for a while, but if it all falls apart the backstop to the collapse will be nvidia.
A few puts on SPY dated a year or two out?
Never buy derivatives as a non institutional investor.
There are a lot of failure modes. The dot-com bubble looked obvious in 1997; it popped in 2000. Anyone shorting in '97-'98 was carried out on a stretcher before being vindicated. In fact 2000-2002 fell in three brutal legs over two years, and anyone who leveraged up after the first 25% leg was destroyed by the next two.
At the same time, one can make financial decisions based on risk rather than longterm expected returns. For instance, I'm happy with fixed income yields rn.
What would scare me is losing a big chunk of my portfolio in a downturn, exactly when I'm also most likely to lose my job.
#2: What I've done so far: Haven't bought stock in a year. Have moderate short positions on Palantir, SpaceX, and Tesla. Have big short positions in the most popular Quantum computing companies. (Scams IMO). I have sold most of my positions ("profit taking"?) in stocks which have gone up a lot in the past year. (Nvidia, Broadcom etc), and am no longer using margin; about 1/3 of my brokerage value is now "cash", generating ~3% interest.
There are almost surely severe bumps ahead for the AI space and that will likely spill over into the broader market. But unless you’re retiring in the next few years don’t worry about it. You can’t time the ups and downs and the only proven strategy is to just keep investing in a broad indexed portfolio and just ride out. You’ll take a short term hit but also end up buying on the dip because you don’t stop investing.
But that's not what they said?
>> I didn't get to participate in much of that*
(As for me, I'm just hedging my rhetorical front lawn.)
I just hope the companies aren't considered too big to fail. Bailing them out would be a bad idea.
https://www.openmarketsinstitute.org/publications/no-bailout...
I dunno.
"The market can remain irrational longer than you can remain solvent"
You think the hedge funds selling SPY options don't have this priced in already? Of course, you can still make money on this bet, just like you can win money at a roulette table, but unless you think have some special insight that hedge/quant funds don't have, buying options should be negative EV.
I’d argue that it is very normal for hedging to be giving up expected value in return for a reduction in volatility of returns.
If you have a lot of exposure to the market already one could say not buying the option is more akin to roulette.
Of course not, but it is a hedge, is it not? What would be your preferred hedge in this scenario?
Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer. Teams can and will shrink.
Look at all the production and advertising companies switching over to Seedance. I know ad firms bidding 1/4th their typical contract price (pharma, P&G, etc.) and winning contract after contract.
This isn't dotcom "dark fiber" before demand. The demand is here now, big legacy firms are just struggling with deploying it. Nimble small teams are making a killing.
It doesn't matter to investors if OpenAI or Anthropic can build AGI if a year later 10 competitors have similar models and eat into the revenue. OpenAI and Anthropic needs years, if not decades, of significant market dominance, post-enshitification, to justify their investment spend.
> Everyone in the tech and media world is dead set on this being a bubble.
is completely orthogonal to this:
> Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer.
The industry being in a bubble or not is irrelevant to the tech being good or bad. The dot-com bubble popped (and was a bubble) even while the tech was fit for purpose.
If that's true or not, it's a bit irrelevant. Maybe teams won't shrink because of Jevon's paradox, or maybe tech debt will catch up.
But it doesn't matter because the people calling this a bubble mostly believe that the companies burning money cannot have the return on investment needed. This can be for a variety of reasons, but my favourite one is just that open source AI models are good enough, cost a fraction of what the frontier ones do (with predictable costs), can be fine tuned, and can be relied upon (no orange tweet banning your acces to the model you've been using). So for me OpenAI and Anthropic will really struggle to merit their valuations.
And then companies like Oracle are just a dumpster on fire. GPU hosting is a commodity business; expensive one, for sure, but there's no way in hell they'll make actual returns on the money burned with zero moat. And things are even worse when you consider the political involvement of the CEO and his nepo baby, which can easily burn good will.
This story has been playing out for years now, and reads to me like the market simply recognizing that Oracle is not in the same business as it once was. It could succeed, wildly, at this new thing, but its risk isn't going to be valued based on the business it was 10 years ago.
Oracle is in a weird shape.
The problem in this market is that too many players are trying to play a winner-takes-all angle.
For the companies that pull it off, it could be very lucrative.
In a real market we’ll get a couple of big winners rather than one, but there isn’t enough room for all of these moonshot efforts to land.
I don’t see the whole thing coming crashing down, but I do see a consolidation coming that leaves some companies in a very bad state.
Meta and Microsoft both are also significant makers of GenAI models that are public, though neither has a big tentpole LLM line that they sell access.to commercially like OpenAI, Anthropic. Google, SpaceX, which I infer might be what you mean by major model maker.
If you're selling deterministic output, just use traditional code. If you product is inference, it has to be the best inference. This becomes more apparent when you bounce between powerful models and smaller cheaper ones, the cheaper ones _feel_ worse to use.
Is Meta even in this race anymore?
All that to say: I had to move my focus around a bit and re-read "...pumped into AI buildout." several times, because I thought I was reading Ed Zitron :D
That's not a good sign and it's a blatant red flag for the market
Managing the total amount of money so that investment bubbles peter out before they get excessively big is supposed to be the central bank's job.
What ROI? There was no return, and there currently isn't any return on investment, because those companies did not exit yet!
The exit plan is to offload overpriced shares, that they paid billions for, onto the public market. If they don't IPO, those investors get nothing.
If Oracle is highly leveraged or betting the farm on AI, then their credit worthiness goes down.
Alternatively, if money floating around to make loans is drying up, companies have to offer better terms to attract the dwindling supply
Those are intrinsically linked to ORCL equity. ORCL needs an ROI to service their debt.
There are different ROIs which are not the same, even if related.
I keep seeing these unsubstantiated claims. They’re out to get us and just pump and dump on public markets!
Yet, before they IPO they have to go around and do what? Who sets the IPO price? Who buys the shares? If the shares tank, the valuation of the company goes down and locked up shares lose value. It’s not really in anyone’s interest for IPOs or investments to fail and while pump-and-dump schemes certainly exist they are not the norm. The conspiracy theory level of distrust and cynicism is not healthy and makes one a very poor investor.
If individual investors are buying shares and getting blown up, that’s their problem. Invest and due your own research. Broad market funds exist and have so for decades. Most financial advisors even will put you in to those funds and corporate 401k plans while increasingly allowing for more investment flexibility (freedom is good) default and educate employees by default on target date funds and index funds. There is a wealth of information out there.
This is simply absurd. Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). It's the 1920s all over again; publicly pump and privately sell into the demand you're creating. I'm guessing you're perfectly fine with this behavior from the largest market participants?
It's not the 1920s all over again.
> Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). ... I'm guessing you're perfectly fine with this behavior from the largest market participants?
Who do those investment banks sell to? How familiar are you with, for example, Goldman Sachs finding buyers for SpaceX shares? The minimum account requirement at Goldman last I checked was something like $10mm - do you really care if such investors are buying shares in overvalued companies or, like me, declining to purchase?
You are just throwing things around and not providing a coherent argument. Everyday investors don't have to buy these shares. They can continue to follow industry standard advice to buy total market index funds, or target date retirement funds or whatever. Investment banks sell to high net worth individuals who are by definition sophisticated investors - they know and accept the risk of such offerings. So no I don't care even a tiny bit if a Morgan Stanley client decides to buy what you consider to be overpriced shares in a "pump-and-dump" scheme based on your own certainly flawed and unsophisticated valuation of SpaceX or any other company.
And you can just not buy the shares. It's very straightforward.
Sure, but the SEC exists, in theory, to make that decision one you can make an informed decision on, because con artists don't typically put a disclaimer in that says "this is bullshit".
"Oh no, my $10B became $5B!"
They'll still be happy.
> If individual investors are buying shares and getting blown up, that’s their problem.
Having the general populace fleeced by bad actors is everyone's problem, eventually.
> Having the general populace fleeced by bad actors is everyone's problem, eventually.
Sure. Creating false narratives and parroting unsubstantiated misinformation and fear mongering is everyone’s problem too.
The flaw in your thinking is assuming it's actually worth the IPO price.
If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.
Then don't buy it at the IPO price? The bullshit artist will have to lower their price until there are takers in the market.
> If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.
They're not bullshit artists, they're greedy. If you think you're pulling one over on someone $100 is great but $200 is better - might as well see if you can get $200. Since we're just making up random people and motivations.
I think you're getting lost here.
If I invested $0.50/share, I know my company is worth realistically $10/share, and I can convince you to buy at $100/share, and it plunges to $50/share before I can offload, I am still a pretty happy camper.
Retail investors are the marks, not the scammer here.
> They're not bullshit artists, they're greedy.
Those aren't mutually exclusive.
Musk is both, for instance.
IMO, those shares are overpriced even at private investment levels, but my opinion is still irrelevant to the fact that there is no ROI until the investors exit!
Nobody forces you or any other individual investor to buy shares in their “pump-and-dump company” when it lists.
Who knows? Who cares? My point is that until those investors exit, there is no ROI.
The comment I originally responded to was talking about investors getting ROI from AI companies. I'm pointing out that no such thing will happen until the investors exit.
Oracle paid out 5 billion in interest last fiscal year.
Ok well they can just exit in private markets before these shares are "dumped" on public markets. Therefore there is an exit and ROI. QED.
Anyway your overall point, which was a bad one I'm sorry to say, was about investors dumping shares of overvalued companies on public markets.
You are ignoring things like lockup periods, vesting schedules, and other general machinery that specifically exist to prevent day 1 or short-term dumps of shares. It's not in the interest of the company that is IPOing or the bank - how can the investment bank go to investors and market securities and then on Day 1 those securities (because it's a pump and dump remember?) drop by 10% - 20% - 30% or more. That's bad business and investors will leave investment firms that did that.
When one of these "overvalued" companies IPO (and let's be honest, you don't know how to value these companies anyway so your accusation of them being overvalued is faulty from the start), someone has to buy those shares. If everyone starts selling, the value of the company and the value of the shares drop unless there are buyers. This doesn't really serve anyones interests and even better, you as an individual investor don't have to be a buyer! If someone wants to buy because their own model says it's worth it, that's up to them to decide, not you. Fortunes are made betting against the market (and betting in the general direction of the market). If someone wants to forgo buying, that's fine too.
For investors who don't know about the values or models of valuations of securities they can just take industry standard advice and buy index funds or target-date retirement funds. Stop infantilizing people and assuming that because you lack the knowledge that others must too, or that everyone is just out to scheme and "dump" on public markets, especially without any evidence or without considering how the IPO machinery typically works, who buys these shares, or the incentives.
Information is only relevant in the long term, in the short term the stock market is about FRIENDSHIP.
In what sense?
This may be related to the commonly-held fallacy of "cash on the sidelines". Cash is always on the sidelines. Cash is not created or destroyed by buying and selling stocks or bonds. Cash is simply handed from one party to another, but the cash has to be held by somebody.
What? No it's not, and never has been.
Without even getting into the practical vs. theoretical of Fed dual mandate (funding deficits), even the most uncharitable take on modern CBs wouldn't suggest this.
Downgrade of credit worthiness is different. That depends on how leveraged the company is
https://en.wikipedia.org/wiki/Tulip_mania
> No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer. -- Gil Luria (Managing Director and Analyst at D.A. Davidson)
https://www.forbes.com/sites/jonmarkman/2026/04/06/oracles-m...
In addition to that the form basically only worked in Edge. We emailed support, they changed something on the backend. It still did not work. We gave up.
In retrospective that was a very clear warning sign that their priorities were misguided. I'm glad we did not waste any further time and effort on them.
Then they terminated my free trial early with no explanation. I tried to add a payment method again and it didn’t work.
It turned into a bigger joke when Oracle sales people started emailing me to ask how my trial was going. They must have been given a list of email addresses and no information about the accounts. I would ask them for help getting my account unlocked or adding a payment method, they would send me emails for a couple weeks saying they were looking into it, then they’d ghost me.
Then a month later a new sales rep would email me and start the process over.
I checked Reddit and there were dozens of stories with the same experience.
Of course, when your “customers” are just self-dealing, that’s also not a great sign.
Any hosted service can be bent into the shape of a cloud. Large parts of Oracle Cloud balance sheet is probably just hosted PeopleSoft and similar.
They have this in common with IBM which, at least on paper, have a large cloud business.
CrowdStrike and Uber
> Hetzner
I don't know of any upper market EMEA customers on Hetzner. I've met Scaleway, OVHCloud, and even STACKIT users but never Hetzner.
I'm guessing they don't care if actual business gets caught up in that because from their POV actual business comes from an account manager, and self-serve is just them cargo culting AWS/GCP
Uh, good luck guys.
Wouldn't want to be negative at a time like this.
What does that tell me? Just one of many things about the prospects of the deal still happening. That one in particular says to me they won’t be deterred. Bond rating may suggest the opposite. Lots more complexity than those two things but “fun” to speculate.
[1] https://en.wikipedia.org/wiki/Heise_Group
I use their services, but I frankly don't care who provides it. I'll chase the chepest/best and have no issue switching from one to another.
The only moat I can see is Microsoft providing its services to companies in its Azure system. Nervous IT departments probably like that it's not leaving their control if Bob in the SAP team spins up some AI crap.
This is the leap, nobody really wants to front a model for someone else. If i build an agent, or a service that requires a model, I'd prefer to push the model onto someone else, preferably at no cost. This is a leap as I'm sure right now, most people / businesses are thinking actually i do want to own / front the model.
However, if you accept the leap the easiest way to do this is to make the model the users problem.
From a business point of view that makes things really easy, from a customer point of view, they simply have to accept whatever their vendor of choice is pushing down their throats.
So as a business I build for whatever model Google makes available to android, and whatever model windows bundles, and whatever model Apple bundles, and, excluding the long tail of Chinese vendors and Linux (sorry, its always left out) and that's it, problem solved, and the customer picks up the tab for the tokens
https://www.youtube.com/watch?v=2J2Fb1bBufA
But I switched from ChatGPT to Claude 3 months ago because my account was down for like 6 hours. I haven’t used it since. It’s too easy to switch away from chatbots on a whim. There is no moat for that.
But... Anthropic doesn't have a moat. It's clear at this point that SOTA models are not a moat, and Opus 4.6-level (or GLM 5.2) is sufficient.
Google, though... they own the entire vertical, from the semiconductors to the end-user software. They may have a moat.
There are competing definitions of what intelligence even is, and the one that I find most striking is from Francois Chollet which is that intelligence can be boiled down to skill acquisition efficiency. This type of definition makes intelligence more akin to polishing a ball than growing a watermelon.
The superintelligence doomers warn that the watermelon is going to start growing exponentially and crush everyone. But what might actually be happening is that we are not growing a watermelon but rather polishing the ball until its really smooth and shiny. There's a point where you can get it to micron levels of polish but for most tasks (white collar text domains tasks), it's smooth enough! You will be able to go to the ball store and buy a low cost made in china ball for most tasks.
The real challenge is actually branching out domains and modalities to tackle things like blue collar labor. Over time, white collar work automatable or able to be made hyperefficient by LLMs will see LLM commoditization.
But as they have repeatedly pointed out, creating software is almost zero-cost now, so software cannot be a moat.
After all, all of the Claude software can be vibe-coded by any competitor; that's the dream that Anthropic has been selling anyway...
https://www.youtube.com/watch?v=2J2Fb1bBufA
It’s not much of a moat, but it’s more than a lot of orgs have.
https://www.youtube.com/watch?v=2J2Fb1bBufA
and they STILL went out of business because they over-estimated the demand for their shitty rails they built to the middle of nowhere. Same with "AI."
https://www.youtube.com/watch?v=2J2Fb1bBufA
That's a losing proposition for any token provider - it's expensive and slow, and when you're done everyone with money to rent a last-gen H100 is going to distill your "closed" model anyway.
The specialized models for targeted verticals being discussed may well not be sold by tokens, but instead be behind the scenes powering dedicated packaged solutions where the customers don't have raw access to the model. Token providers still won’t have a moat, but AI isn't just selling tokens.
G. A. H.
edit: Y'all downvoters want genAI in your cars?!
Vendor lock in cannot happen, or you're bankrupt.
Their new endpoint even promises zero operator access [0]
[0] https://aws.amazon.com/blogs/machine-learning/exploring-the-...
No value judgement. I think this is a fantastic strategy.
Seems like open weight models keep catching up to state of the art within a few months, at most. Doesn’t seem like much of a moat to me.
Great business either way. You could even draw an analogy to Linux/OSS & the origins of AWS. They started as basically an infra middle-man for other people’s technology. But as the core tech commoditized, they transitioned into selling their own higher level services at scale—like Bedrock.
I dunno, hey. After all, I can't distill my competitors datacentres :-)
For the hyperscalers, there is an ease of remaining in the Azure/AWS/GCP fabric from a data provenance perspective, particularly for regulated industries or large, risk-averse enterprises. There's also, of course, a certain network egress tax in most cases.
Only thing holding them back is fab capacity which nVidia keeps buying in bulk to keep them small.
Just how much of dev ux do you need? A foundational library, of course, but as the AI companies keep saying, their models can vibe-code what's needed for those chips anyway.
Nvidia's entire business is dependent on Google not being able to make TPUs fast enough.
Now back to the conversation, do any of the gold miners have a moat? Or is this a race to the bottom?
They're the only player in the Identity-Document-Email-VM-Storage space that's even remotely unified.
I don't know what possessed Ellison to ruin a functioning company, but it will be interesting if he gets a margin call for ORCL's other debt exposures, which are Ellison's massive loans against his ORCL stock.
it only "works" if the government actively does everything in its power to support the boom. No restrictions on new power sources, on pylons and transformers, on new factories to make power sources and compute, on data centres.
This was never going to be the world we live in.
Still surprised by the admin actively punishing politically incorrect power supplies (renewables) and then starting a stupid war with Iran, but even without that nonsense, we were never going to see the US do a command economy pivot, and even if we had something would've broken like it usually does with noobs (and even most politicians are noobs) trying a command economy pivot.
That site is too funny :-)
> [mid-2026] But China is falling behind on AI algorithms due to their weaker models.
The assumption that this process can be “distilled” from written word is completely insane. I’m not sure how people trick themselves into thinking it’s even remotely possible.
> Reliable Agent copies thinking at 13x human speed
Still waiting for a reliable agent to think at any speed.
Same thing that drives all these execs of large companies - naked greed!
"If only we can fire all workers, imagine how profitable we'll be!"
They are attempting to set civilisation on fire with the intention of being on top when they no longer need humans.
They'll give a bribe to Trump, they'll offer up 5% of the stock to Chairman Trump as the People's Stock now that the US is basically a bizarre oligarchy form of communism, and Oracle will be declared a state enterprise that cannot lose money.
The super rich simply do not fail, and they utterly control every aspect of the US now, exactly as the people apparently wanted.
Americans are in a state of profound denial, but things are about to become very real, very quickly.
A little bit dangerous for a US administration (any US administration) to do a bailout of unloved companies just before a midterm.
Not that Trump won't do it, just saying that he'll think twice about it if he wants to hold on to the power that the American people have given him. It's one thing to boast that he can shoot someone in the street and the public won't care, quite another to tell the masses that he's funding their upcoming unemployment using their tax money :-)
The Iran war is unpopular, but they did it anyway.
You think there will be a free and fair election? Do Americans realize that Trump has openly floated pardons to anyone in his circle? What do you think all of his "every election that I/we don't win is corrupt" rhetoric -- dangerous, grossly unacceptable, anti-democratic horseshit -- is all leading to?
Trump has done brazenly criminal things, repeatedly. He is pardoning anyone who bribes him. He lies with every utterance from his garbage mouth. He doesn't even attempt to pretend that he's delivering his promises now. Congress has completely abdicated any and all responsibility. His entire administration is just shockingly, unbelievably incompetent, from Epstein-Island Nutlick, to Kegsbreath the ChatGPT warrior weakling dipshit.
Remember how outraged everyone was about Hunter Biden selling a painting, or Pelosi trading stocks? ROFL, how bucolic and corruption-lite that is compared to having a crypto-rug pull, inside trader and his family of halfwit runts running around destroying the US for their own family fortunes.
This Thursday evening is going to be eye opening for a lot of Americans that have tried to delude themselves into thinking they're getting lulz for a couple of years. It is shocking that people still pretend you're a democracy, or even capitalist for that matter. The US is post capitalism, and the plutocrats have decided to be done with this whole democracy farce.
It remains shocking that Americans would re-elect this garbage racist self-dealing criminal imbecile again. And I would like to say "you get the government you deserve", only the US is now a worldwide menace so the entire planet will suffer from this idiocracy.
Trump is currently having an armoured facade installed on the front of the Whitehouse, alongside the very well documented bunker complex. Do Americans really not realize what this is actually for?
I can't tell if this is supposed to be sarcasm or not :-/
Aren't all the token providers right now over-provisioned? They aren't trying to use up all their capacity, they're selling it to one another.
There's still a massive compute crunch, I know the opencode guys had been struggling to get capacity, Claude effectively lowered it's limit till the SpaceX deal, Google is struggling.
https://x.com/thdxr/status/2024539643673211054
https://www.anthropic.com/news/higher-limits-spacex
https://finance.yahoo.com/technology/ai/articles/ai-demand-o...
Anthropic is renting compute from a competitor, that also is known for their blackhat business practices.
And I've seen first hand hyperscalers go to extremely large lengths to eradicate any use of Oracle (which mainly comes in these days through their acquisitions).
Anyway...
Given that Oracle and Microsoft are major counterparties of OpenAI, it seems odd that their stocks have been performing so poorly recently. Can anyone square this circle for me?
It’s like saying a new apartment building is “profitable” because the monthly income covers the monthly running costs, but ignoring the giant mortgage that covers the cost of building the building. That thinking is a good way to go bankrupt in real estate and a good way to go bankrupt in AI.
Or that it’s all hearsay and no one has released financials yet?
That's why it's so hard to get a residential mortgage, for example. It's more of a partnership, with more mutual vulnerability, than most people think. Same thing seems to be true here.
Given what happened with xAI’s excess capacity lease to Anthropic, and Meta’s noises about doing the same, seems likely that the demand for inference will continue to slope upwards for a while. If I’m Oracle, I’m not worried about being able to utilize the data centers I’ve built for some price, almost certainly a profitable one.
I’m guessing, though, that Oracle made their capital investments on assumptions of a higher price & return. Possibly because it wasn’t clear when these decisions were made how much competition OpenAI would have at the frontier.
I don’t think this math is all that hard. Capital markets have everything they need to start to figure it out, most especially a year or two of history to project forward.
Oracle holds 15% & is the hosting provider, Silver Lake has a stake, MGX (UAE state backed firm) owns some as well.
But Oracle still manages the content recommendation algorithm and the infrastructure so I'd argue they still have the biggest impact on the platform.