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This hopefully helps mitigate the risk of putting more production capacity in place, which the Big 3 were not willing to do so far.
by WithinReason 1mo ago
This hopefully helps mitigate the risk of putting more production capacity in place, which the Big 3 were not willing to do so far.
- pjc50 1mo agoAt this size, I think we have to start worrying about a 2008-type default risk. AI companies will have ordered all the RAM and paid some kind of deposit for that, but actually taking delivery and paying for it is still in the future and the sums of capital involved are extremely large.
- nixon_why69 1mo agoAlso there is a ton of debt flying around, its not just equities hurting VC funds, real banks are facing risks now.
- inigyou 1mo agoThat's the reason RAM companies aren't expanding. Worst case, they can sell their normal production to gamers.
- londons_explore 1mo agoFail to deliver, and they get bankrupted... Do deliver and they don't get paid because the buyer purchased with money that doesn't exist. Lose-lose situation!
- inigyou 1mo agoBut they don't get bankrupted, because it's an ordinary year for them, only with different customers.
- londons_explore 1mo agoFail to deliver, and they get bankrupted because a court would not simply unwind the deal - a court would demand compensation of the market price of the goods not delivered on delivery day - which will probably be very high.
- deleted 1mo ago[deleted]
- eru 1mo agoWhat kind of default risk? What we got in 2008 was central banks (eg Fed and ECB) willfully collapsing nominal GDP in their economies. Have a look at the dot-com bust or Black Monday for comparison.
- pjc50 1mo ago> willfully collapsing nominal GDP What on earth are you talking about? The credit risk was a very real problem; Kaupthing, Anglo Irish, RBS, Lehman etc.
- eru 1mo agoWe just had a string of bank failures, like Silicon Valley Bank, but you will not see any impact in the macro-economic data (like unemployment), because the Fed kept nominal spending on track. In 2008 they didn't. Instead they actively tightened monetary policy by eg introducing interest on excess reserves. The ECB even hiked interest rates. Companies defaulting on debt doesn't need to bring down the economy. For the US, you can also see how the construction sector had been winding down for years (eg as measured in construction employment) without an impact on overall unemployment. The crisis was entirely avoidable. See https://www.cato-unbound.org/2009/09/14/scott-sumner/real-problem-was-nominal/ https://www.cato-unbound.org/2009/09/14/scott-sumner/real-pr... for a bit more background.