the simple answer is that the people buying AMD stock are the ones paying for those chips
In my eyes this deal is a speculative investment leveraging debt.
But so you have to pick one. Unless you’re suggesting that all the day traders and retirement funds and investment funds are buying or already holding AMD bought it all with credit cards. Which is not the case, which is why this isn’t debt.
Ask yourself - If it’s debt, then who is the creditor? Who holds the loan paperwork? What rate did they get? What’s the collateral? None of those things are true here.
Stock value isn’t real any more than the value of gold or silver or bitcoin, but it’s all relative to the value of the stock when sold. But it being sold is the point. The stocks are worth money. Real actual money. If the market hits a correction - as other more bubble-like parts of the AI industry and the current general economic shitpile are likely to afford us all in the next few years - then OpenAI and NVIDIA and AMD won’t be carved up and sold for parts after a bankruptcy by a bank because they’re still able to sell the stocks to fund payroll. As long as no one sells off a ton of stock quickly and the stock value doesn’t collapse, then it’s simply a risky circular a bet on themselves.
Don’t get me wrong, I think this is an innovation in stupidity and shortsightedness. But call it what it is, which is not debt.
Where would OpenAI get 78bln to pay AMD? It’s very unlikely that money would come from their existing revenue streams, so it most likely would come from either external investors or a loan. Loan obviously comes with debt so let’s say it came from an external investors? But where did they get that kind of money? Investors rarely have billions just sitting in the bank so they had to liquidize somehow. Maybe they sold some of their non-liquid assets, but most likely they took loans against their assets (because loaning is cheaper than selling) which means we’re back to there being debt somewhere.
the simple answer is that the people buying AMD stock are the ones paying for those chips
That is the simple answer because people would buy the stock, stock price would go up, OpenAI 10% would end up being worth 78bln, OpenAI dumps the stock and that money goes back to whoever financed the 78bln. Debt would get paid off and no additional debt would exist (except for people who bought the stock without having the money to buy the stock). But that’s a simplistic way of viewing this whole ordeal.
In my eyes this deal is a speculative investment leveraging debt.
I don’t see an issue here. In my eyes there is debt created to accumulate 78bln and the speculative part is using AMD stock to cover the debt. If the pump and dump fails would there not be debt?
Debt would be SoftBank giving OpenAI $78 B in cash and then in a year or two asking for payments of cash back.
This investment/stock circular thing is like if you were building a house and lived next to a brick yard, and convinced the brick yard owner to give you bricks to build your house. Your house would be the demonstration of how lovely the bricks are, and in return you’ll give them 10% of the title of your property. If you sell that property in 2009 or 2024, the value will change, but that’s a risk and gamble you both take. And they can sell small parts of that 10% whenever they want, if they want.
None of that is debt. Debt would be a loan from the bank that requires payments over time.
But so you have to pick one. Unless you’re suggesting that all the day traders and retirement funds and investment funds are buying or already holding AMD bought it all with credit cards. Which is not the case, which is why this isn’t debt.
Ask yourself - If it’s debt, then who is the creditor? Who holds the loan paperwork? What rate did they get? What’s the collateral? None of those things are true here.
Stock value isn’t real any more than the value of gold or silver or bitcoin, but it’s all relative to the value of the stock when sold. But it being sold is the point. The stocks are worth money. Real actual money. If the market hits a correction - as other more bubble-like parts of the AI industry and the current general economic shitpile are likely to afford us all in the next few years - then OpenAI and NVIDIA and AMD won’t be carved up and sold for parts after a bankruptcy by a bank because they’re still able to sell the stocks to fund payroll. As long as no one sells off a ton of stock quickly and the stock value doesn’t collapse, then it’s simply a risky circular a bet on themselves.
Don’t get me wrong, I think this is an innovation in stupidity and shortsightedness. But call it what it is, which is not debt.
Where would OpenAI get 78bln to pay AMD? It’s very unlikely that money would come from their existing revenue streams, so it most likely would come from either external investors or a loan. Loan obviously comes with debt so let’s say it came from an external investors? But where did they get that kind of money? Investors rarely have billions just sitting in the bank so they had to liquidize somehow. Maybe they sold some of their non-liquid assets, but most likely they took loans against their assets (because loaning is cheaper than selling) which means we’re back to there being debt somewhere.
That is the simple answer because people would buy the stock, stock price would go up, OpenAI 10% would end up being worth 78bln, OpenAI dumps the stock and that money goes back to whoever financed the 78bln. Debt would get paid off and no additional debt would exist (except for people who bought the stock without having the money to buy the stock). But that’s a simplistic way of viewing this whole ordeal.
I don’t see an issue here. In my eyes there is debt created to accumulate 78bln and the speculative part is using AMD stock to cover the debt. If the pump and dump fails would there not be debt?
The issue here is this isn’t debt!
Debt would be SoftBank giving OpenAI $78 B in cash and then in a year or two asking for payments of cash back.
This investment/stock circular thing is like if you were building a house and lived next to a brick yard, and convinced the brick yard owner to give you bricks to build your house. Your house would be the demonstration of how lovely the bricks are, and in return you’ll give them 10% of the title of your property. If you sell that property in 2009 or 2024, the value will change, but that’s a risk and gamble you both take. And they can sell small parts of that 10% whenever they want, if they want.
None of that is debt. Debt would be a loan from the bank that requires payments over time.
But where did OpenAI get the money to buy those chips (+10% of the company)?