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> Given how fast these companies are growing (in terms of revenue and profit), it doesn't seem that AI is, as Zitron implied, some kind of desperation move they

> Given how fast these companies are growing (in terms of revenue and profit), it doesn't seem that AI is, as Zitron implied, some kind of desperation move they're reaching for because "they don't know how to grow" and are all out of ideas Growth isn't a valid rebuttal, unless we can also sus out how much of that growth is tied up in circular financing of AI projects. We have a pretty good idea how much of Nvidia's valuation is tied up in the AI craze, it's a bit harder to tell with the megascalers....

u1hcw9nx 17d ago
You are confusing Capex and revenue. The predictions were predictions of revenue. Circular financing of AI projects does not create revenue for OpenAI, Anthropic, Meta, or Google. Only Nvidia benefits from it. Predicting revenue growth will stall and it does not was wrong.
- reticulates 17d ago
  Circular financing absolutely creates revenue. A startup raises $50 million from OpenAI and Anthropic to finance API calls to OpenAI and Anthropic that they are using at a loss who in turn spend that money on compute with Microsoft and Google who in turn invest in Anthropic and OpenAI who then invest the startup using the startup’s revenue to value it… the cycle repeats. There are multi-billion dollar valued startups invested in by OpenAI and Anthropic with hundreds of millions in ARR that are spending 90% of their revenue with Anthropic and OpenAI. Situational Awareness, the fund that recently imploded, invested tens of billions into AI companies using their holdings in Anthropic to help finance the investments… This could all work out fine in the long term, we’re all just speculating at this point, but the circular financing is absolutely making it to revenue because capital invested into startups is used to fund growth which is achieved by subsidizing costs incurred with OpenAI and Anthropic.
  - chrisco255 17d ago
    The vast majority of startups are not funded by OpenAI or Anthropic. They are not a significant source of venture capital. Meanwhile, OpenAI is pulling in $40B+ per year and Anthropic $65B+ per year. You are mixing up valuations with liquid cash and you're also making sweeping statements about how those startups are spending their cash. A majority of a raise is not spent on AI compute. Situational Awareness blew up because they used leverage to invest, and leverage is a great way to blow up any fund even if they were directionally correct about AI.
    - reticulates 17d ago
      You’re applying pre-AI investing to a post-AI world. Yes, a decade ago, a startup raised money and spent 90% of it on people. The people built software which had incredible margins. Build it and then print money for ever more. That’s not the case any more, these startups no longer have incredible margins, they’re not collecting $100/m per user and banking $99 of it. They’re collecting $1000 and sending $999 of it to Anthropic and OpenAI. Revenue numbers are vastly inflated compared to pre-AI but these startups aren’t keeping the money. Profits are worse than ever before. Startups with 30 employees that reach $100m ARR in 6 months are not banking $90m or $80m or… they’re just passing that money straight through to OpenAI and Anthropic. If startups aren’t just funnelling all their funds raised straight through to OpenAI and Anthropic, where is this combined $100bn in revenue coming from? Who is paying for it? My spend on software certainly hasn’t gone up in a post-AI world. My company is spending less on software now. OpenAI have stopped being so reckless with their cash investments which is why they appear to have slowed down but they’re still investing millions in huge numbers of startups through token allowances. They invest $2 million in every YC startup (or did a few months ago). There’s an entire market of reselling these tokens! https://mlq.ai/news/openai-and-anthropic-pour-up-to-800m-a-year-in-free-credits-into-yc-startups/ https://mlq.ai/news/openai-and-anthropic-pour-up-to-800m-a-y... Hell, I’ll go one step further and bet they book these credits being spent as revenue.
      - saberience 16d ago
        This is so completely wrong and deluded I’m not sure where to start. I work with AI startups and scale ups on a regular basis as well as plenty of more old school companies, all of whom are spending money on AI models, because they are getting insane value from them. This idea of the revenue for OAI and Anthropic coming from “circular financing” is just bizarre wishful thinking coming from AI doomers with zero financial literacy. The revenue numbers reported by AI companies (not just OAI and Anthropic) isn’t being driven by Nvidia at all, in fact, the numbers wouldn’t add up if you thought that was the case. The revenue being brought in by AI companies is far, far higher than the sum of any investments from Nvidia. The AI doomers just can’t handle the idea that AI is actually incredibly valuable and every company is using it and increasing their use of it every month. And yes, I see this every day in my job and with every company I work with.
simonw 17d ago
As public companies, the megascalers publish pretty detailed financial reports.
- mtrovo 16d ago
  This is the scary part as this is not entirely true if you care to look into it. https://youtu.be/HXlcMbxzz0U?is=XdvcNJKGJxEwlB7I https://youtu.be/HXlcMbxzz0U?is=XdvcNJKGJxEwlB7I
  - simonw 16d ago
    The thing about $1.65T being "hidden from the balance sheets" is overblown. How do we know about that money if it's hidden? Because it isn't - it's in other public SEC documents, which the $1.65T claim also slightly misinterprets. https://finterm.ai/blog/big-tech-hidden-debt-fact-check.html https://finterm.ai/blog/big-tech-hidden-debt-fact-check.html is one good explainer on that.
    - mtrovo 15d ago
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- iNerdier 17d ago
  Reports which are (un)surprisingly light on actual financial details regarding their AI ‘investments’ and any profits therein.
- deleted 17d ago
  [deleted]
- dgellow 17d ago
  They actually do not, they do not share details on their AI revenue and investments
- reticulates 17d ago
  Can you provide any examples of any of the megascalers publishing any detailed financials that touch on their AI spend or revenue or profit? The only one I’m aware of that comes close is Microsoft and they have still buried it in barely related line items which still leave us making assumptions. There’s speculation on both sides and certainly Zitron is on the extreme end of the anti-AI side with the most cynical speculation but it is indisputable that none of the megascalers are open about their AI financials. Hence, we are all speculating endlessly. If only there were published financials then the speculation could end! The obfuscation of financials doesn’t necessarily mean something bad is happening, it could be a competitive advantage for Google to be secretive about how cost effective their TPUs are or for Microsoft to hide how much revenue uplift they’ve experienced by adding AI to 365.

u1hcw9nx 17d ago

You are confusing Capex and revenue. The predictions were predictions of revenue. Circular financing of AI projects does not create revenue for OpenAI, Anthropic, Meta, or Google. Only Nvidia benefits from it. Predicting revenue growth will stall and it does not was wrong.

reticulates 17d ago
Circular financing absolutely creates revenue. A startup raises $50 million from OpenAI and Anthropic to finance API calls to OpenAI and Anthropic that they are using at a loss who in turn spend that money on compute with Microsoft and Google who in turn invest in Anthropic and OpenAI who then invest the startup using the startup’s revenue to value it… the cycle repeats. There are multi-billion dollar valued startups invested in by OpenAI and Anthropic with hundreds of millions in ARR that are spending 90% of their revenue with Anthropic and OpenAI. Situational Awareness, the fund that recently imploded, invested tens of billions into AI companies using their holdings in Anthropic to help finance the investments… This could all work out fine in the long term, we’re all just speculating at this point, but the circular financing is absolutely making it to revenue because capital invested into startups is used to fund growth which is achieved by subsidizing costs incurred with OpenAI and Anthropic.
- chrisco255 17d ago
  The vast majority of startups are not funded by OpenAI or Anthropic. They are not a significant source of venture capital. Meanwhile, OpenAI is pulling in $40B+ per year and Anthropic $65B+ per year. You are mixing up valuations with liquid cash and you're also making sweeping statements about how those startups are spending their cash. A majority of a raise is not spent on AI compute. Situational Awareness blew up because they used leverage to invest, and leverage is a great way to blow up any fund even if they were directionally correct about AI.
  - reticulates 17d ago
    You’re applying pre-AI investing to a post-AI world. Yes, a decade ago, a startup raised money and spent 90% of it on people. The people built software which had incredible margins. Build it and then print money for ever more. That’s not the case any more, these startups no longer have incredible margins, they’re not collecting $100/m per user and banking $99 of it. They’re collecting $1000 and sending $999 of it to Anthropic and OpenAI. Revenue numbers are vastly inflated compared to pre-AI but these startups aren’t keeping the money. Profits are worse than ever before. Startups with 30 employees that reach $100m ARR in 6 months are not banking $90m or $80m or… they’re just passing that money straight through to OpenAI and Anthropic. If startups aren’t just funnelling all their funds raised straight through to OpenAI and Anthropic, where is this combined $100bn in revenue coming from? Who is paying for it? My spend on software certainly hasn’t gone up in a post-AI world. My company is spending less on software now. OpenAI have stopped being so reckless with their cash investments which is why they appear to have slowed down but they’re still investing millions in huge numbers of startups through token allowances. They invest $2 million in every YC startup (or did a few months ago). There’s an entire market of reselling these tokens! https://mlq.ai/news/openai-and-anthropic-pour-up-to-800m-a-year-in-free-credits-into-yc-startups/ https://mlq.ai/news/openai-and-anthropic-pour-up-to-800m-a-y... Hell, I’ll go one step further and bet they book these credits being spent as revenue.
    - saberience 16d ago
      This is so completely wrong and deluded I’m not sure where to start. I work with AI startups and scale ups on a regular basis as well as plenty of more old school companies, all of whom are spending money on AI models, because they are getting insane value from them. This idea of the revenue for OAI and Anthropic coming from “circular financing” is just bizarre wishful thinking coming from AI doomers with zero financial literacy. The revenue numbers reported by AI companies (not just OAI and Anthropic) isn’t being driven by Nvidia at all, in fact, the numbers wouldn’t add up if you thought that was the case. The revenue being brought in by AI companies is far, far higher than the sum of any investments from Nvidia. The AI doomers just can’t handle the idea that AI is actually incredibly valuable and every company is using it and increasing their use of it every month. And yes, I see this every day in my job and with every company I work with.

simonw 17d ago

As public companies, the megascalers publish pretty detailed financial reports.

mtrovo 16d ago
This is the scary part as this is not entirely true if you care to look into it. https://youtu.be/HXlcMbxzz0U?is=XdvcNJKGJxEwlB7I https://youtu.be/HXlcMbxzz0U?is=XdvcNJKGJxEwlB7I
- simonw 16d ago
  The thing about $1.65T being "hidden from the balance sheets" is overblown. How do we know about that money if it's hidden? Because it isn't - it's in other public SEC documents, which the $1.65T claim also slightly misinterprets. https://finterm.ai/blog/big-tech-hidden-debt-fact-check.html https://finterm.ai/blog/big-tech-hidden-debt-fact-check.html is one good explainer on that.
  - mtrovo 15d ago
    [dead]
iNerdier 17d ago
Reports which are (un)surprisingly light on actual financial details regarding their AI ‘investments’ and any profits therein.
deleted 17d ago
[deleted]
dgellow 17d ago
They actually do not, they do not share details on their AI revenue and investments
reticulates 17d ago
Can you provide any examples of any of the megascalers publishing any detailed financials that touch on their AI spend or revenue or profit? The only one I’m aware of that comes close is Microsoft and they have still buried it in barely related line items which still leave us making assumptions. There’s speculation on both sides and certainly Zitron is on the extreme end of the anti-AI side with the most cynical speculation but it is indisputable that none of the megascalers are open about their AI financials. Hence, we are all speculating endlessly. If only there were published financials then the speculation could end! The obfuscation of financials doesn’t necessarily mean something bad is happening, it could be a competitive advantage for Google to be secretive about how cost effective their TPUs are or for Microsoft to hide how much revenue uplift they’ve experienced by adding AI to 365.