The Second Derivative: Why No One Understands the AI Boom(groundbrkr.com) |
The Second Derivative: Why No One Understands the AI Boom(groundbrkr.com) |
> The bulls and I do not disagree about AI. We disagree about which derivative the structure is written on. They are watching the level. I am watching its acceleration. That is not a difference about technology. It is a difference about arithmetic - and arithmetic, eventually, does not take opinions.
Regardless, 2nd order (and higher) derivatives are nothing new in finance and are a part of any decent university’s curriculum. Corporate debt is not an options contract. Using Gamma risk to explain AI bubble mechanics is a poor fit.
TL;DR: A lot of credit crises happen because of a decrease in acceleration (the second derivative) rather than a decrease in point in time slope (first derivative), or absolute value. The author (or at least the person who prompted AI for the article) says they think AI capex has to continue to accelerate in order for the frontier model companies (and associated) to continue to pay their debts.
I think the theory is sound, but I'm also bullish on LLM/LBM market size being very undervalued today.
The way it does it headings and each paragraph neatly chunked. Fancy words, lengthy explanations that don’t add any meaning.
Someone wanted to write a long lesser and feel good.
A shorter human written one would be better.
If you don't think this will be profitable, you're saying you don't think software, the most profitable enterprise in human history, will be profitable. Looking at it that way, does it make sense why those of us on the business side of software disagree? I've produced more software (and quite good software) in the last six months than I did in the first ten years of my engineering career.
People used to go to work by foot. The best runners would get to work first. Then the bicycle came along. The person who was the best runner before is now still getting to work first on the bicycle.
My questions are: Will we still have jobs if there’s a crash? How can we start researching what the optimal hedge is against such a crash?
And if OpenAI were an isolated case, that might be all there is to it. But the whole point of the article is that it isn't isolated. So if OpenAI can't raise the money to execute on those contracts, it's unlikely that another AI company will have the spare cash to buy them at anything like full value. Remember, everyone in that market is riding the same second derivative. OpenAI is just a bellwether.
When OpenAI will be looking to sell and everyone knows it, the price would be x0,7 for depreciated used hardware or go bankrupt yourself.
It looks like you want to discuss "if prices and demand drop", which would be a different scenario, which I do not believe is likely in the same timeframe barring some separate economic meltdown.
In today's world, the selling price would likely be an increase over what OpenAI paid. This isn't selling hardware, it's selling contracts for future hardware. It's basically futures trading.