Thread

1. cmiles8 · 1790953287 · focus · HN ↗

   It’s starting… buckle up folks.

   It’s a shame we won’t have Anthony Bourdain to explain this move to us in the AI implosion docu-flick that comes out in 2029. It’s not stale fish, it’s fish stew! It’s a whole new thing!

   1. dannyw · 1790953724 · focus · HN ↗

      This looks just like financial engineering / creative accounting; to comply with things like GAAP rules and appearing less capex heavy, while functionally having the same effect.

      In the end, Amazon is still going to be the ones leasing and hence using the chips; nominally the 'owner' changes hands, and it looks like a bond (with a small equity component) in just about every way, except through some legal and accounting magic, it doesn't go on their balance sheet.

      1. cmiles8 · 1790954090 · focus · HN ↗

         Yes, Amazon is terrified of the balance sheet implications of what’s unfolding. The only reason you’d un-vertically integrate yourself like this is if you viewed these assets as at serious risk of being a smoking hole in the ground in a few years

         The WSJ had some great reporting on the SPV games recently and found $3 trillion in liabilities being kept off balance sheets by playing these sorts of things. However this time around it seems like most folks aren’t getting fooled.

         1. Aurornis · 1790954570 · focus · HN ↗

            > However this time around it seems like most folks aren’t getting fooled.

            What do you mean? These vehicles only exist if investors buy into them. Are you saying they were "fooled" by buying these investments?

            Their existence is not a secret, which is why those journalists were able to find them and add them up. These aren't hidden secrets being hidden from investors.

            I see a lot of theories that this is being done to prop up stock prices by hiding debt and making the balance sheet look better, but large investors understand these financial engineering operations and factor it into their decisions to buy and sell stock.

            I do think it's funny that so many people think these reporters have uncovered a scandalous secret that all of the investors missed. The way the stock prices didn't collapse after that reporting is a good clue that the investors in these companies were already aware of the situations.

            1. cmiles8 · 1790954856 · focus · HN ↗

               To put it bluntly, there’s a lot of dumb money floating around in big funds and family offices trying to meet their mandate to “get me some of that AI in our portfolio.” With public equities limited and many funds not allowed to invest in private equities placements they moved into bonds.

               Those folks initially viewed bonds as a safe bet just like folks thought mortgages were a safe bet. However if it turns out they just bought into a mess of “sub-prime” AI bro fantasies and these bonds go bad they’re in for a world of hurt just like 2008 when folks stopped paying their mortgages.

               As this all starts to unwind it’s going to be fun watching these same folks run for the exits.

            2. preg_match · 1790962696 · focus · HN ↗

               > I see a lot of theories that this is being done to prop up stock prices by hiding debt and making the balance sheet look better, but large investors understand these financial engineering operations and factor it into their decisions to buy and sell stock.

               Frankly I don’t think so. I don’t think investors factor this in. I have, anecdotally, seen simple financial engineering prop up stock prices. From what I’ve seen, the big investors look just at the numbers. They don’t even really consider strategy very much. Just making your numbers look better is enough to, at least temporarily, greatly inflate your stock.

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