←back to thread

How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

(www.nytimes.com)
387 points reaperducer | 4 comments | 31 Oct 25 13:03 UTC | HN request time: 0.653s | source
Show context
crazygringo ◴[31 Oct 25 14:20 UTC] No.45772276[source]▶
This is such a strange article -- there's nothing particularly unusual going on here.

The first example basically stands in for all of them -- Microsoft invests $13B in OpenAI, and OpenAI spends $13B on Azure. This is literally just OpenAI purchasing Microsoft cloud usage with OpenAI's stock rather than its cash. There is nothing unusual, illicit, or deceptive about this. This is entirely normal. You can finance your spending through debt or equity. They're financing through equity, as most startups do, and they presumably get a better deal (better rates, more guaranteed access) via Microsoft than via other random investors and then buying the cloud compute retail from Microsoft.

This isn't deceiving any investors. This is all out in the open. And it's entirely normal business practice. Nothing of this is an indicator of a bubble or anything.

Or take the deal with Oracle -- Oracle is building data centers for OpenAI, with the guarantee that OpenAI will use them. That's just... a regular business deal. What is even newsworthy about this? NYT thinks these are "circular" deals, but by this logic every deal is a "circular" deal, because both sides benefit. This is just... normal capitalism.

replies(6): >>45772323 #>>45772338 #>>45772375 #>>45772552 #>>45772664 #>>45773621 #
1. delis-thumbs-7e ◴[31 Oct 25 14:47 UTC] No.45772552[source]▶
I remember the same argument being used before the 2008 crash.

Point is that all of this companies need to start making real profits and pretty damn big ones, otherwise all of this will collapse. Problem is that unless Altman has some super-intelligent super-AI hidden in his closet, it is very unlikely that it will.

And whose gonna take the bill when it falls? Let me guess… Where have I seen this before…?

replies(2): >>45772589 #>>45774221 #
2. crazygringo ◴[31 Oct 25 14:50 UTC] No.45772589[source]▶
That's fine, but that's a separate conversation. Maybe this is a bubble, maybe it isn't.

My point is that the way it's all being financed is just regular financing. This article is trying to present the way it's being funded as novel, as "complex and circular", when it's not. This is how funding and investment works 365 days a year in all sectors. Nothing about the funding arrangements is a bubble indicator.

So this is a strange article from the NYT, because it's trying to present normal everyday financing deals as uniquely "complex and circular".

replies(1): >>45772985 #
3. delis-thumbs-7e ◴[31 Oct 25 15:16 UTC] No.45772985[source]▶
I don’t know financial world well enough to say whether that’s here nor there, but can you give me examples from other companies or sectors where a company X funds the company Y with tens to hundreds of billions that the company Y uses to buy a service from the company X.

Furthermore, yes it might be business as usual but so is fraud and god knows what else in this particular political era. In order to strengthen your argument you have to not only show that the phenomenon is not only common, but good for the overall economy.

4. matwood ◴[31 Oct 25 17:02 UTC] No.45774221[source]▶
> Point is that all of this companies need to start making real profits and pretty damn big ones

MS, Meta, Google, Apple, Nvidia make enormous profits. I think part of this AI push we're seeing is that all of these companies have so much money they don't know how to spend it all. Meta is a great case where they bounced from blowing excess cash on the metaverse and now to AI.