Signs of a bubble in this sector are everywhere. OpenAI is trying to fundraise a $5tn infrastructure buildout on $15bn in annual revenue. That's insane.

What's worse is that OpenAI and the other AI companies are all intertwined. The chipmakers are invested in the datacenter operators are invested in the software guys. When the bubble implodes - and it will implode - the good will go down with the bad, and that's what makes a financial crash a true crash.

The AMD/OpenAI deal sounded like the music stopping to me.

What about the NVidia/OpenAI deal? Such a giant investment in a huge customer looks a heck of a lot like "circular dealing". That is, invest $100 million so your biggest customer can spend a ton of that on your own chips. You get to report skyrocketing revenue but that revenue was bought with your own money.

That and the 3-way "OpenAI pays Oracle $300B in cloud computing on their $15B of revenue", "Oracle buys $40B of NVidia chips for their new datacenter", "NVidia invests $100B in OpenAI". The money's just moving around and around, propping up revenue numbers for Wall Street, but the consumer benefits are dubious.

https://www.nbcnews.com/business/economy/openai-nvidia-amd-d...

If the money is leaving the system slow enough (via Employee wages and materials for chip manufacturing) I suppose it can go on for quite some time.

Sure - but nothing driving up revenue value is actually being created[1]. What's missing in that system is a way that money is entering the system. These deals are (in my cynical opinion at least) being inked to create the appearance of large continued investment and market excitement to pump or sustain valuations. Oracle actually spotlit the arrangement as future sales in their recent earnings and that seemed to be what mostly drove their valuation up.

Performative actions to drive up valuation and try and attract more investors absolutely feels bubbly to me.

1. Discounting products that are not only currently operating at a loss but are priced well below actual resourcing required to produce.

Customers pay for the compute. There are tons of CSPs selling the capacity to small and large consuming entities alike (both OpenAI/Anthropic + other small outfits we've not heard of).

The fair criticism of the infra $ is where the non-VC non-bank-loan cash stream is, but there could be a lot of B2B deals and e.g. Meta, TikTok and other behemoths do tend to make plenty of money and pay their bills, and have extreme thirst for more AI capacity.

Take Oracle for example (as a whole, not just OCI) - tons of customers who are paying for AI-enhanced enterprise products.

It's still the early days, as the cost of creating software continues to approach zero the rules will change in ways which are hard to predict. The effect this will have on other white collar industries is even more challenging to reason about.

That line of reasoning conveniently left out the explosive datacenter revenue growth that generates huge free cash flows. Even disregarding AI, it's double-digit compounding growth.

NVIDIA's stock may eventually get decimated (but the company itself will be fine, they have a relatively low employee account and insane margins), the Coreweaves of the world are definitely leveraged plays on compute and may indeed end up being DotCom style busts, but a key difference is that the driving forces at the very top - the Microsofts and Amazons of the world - have huge free cash flows, real compute demand growth beyond the AI space, and fortress balance sheets.

I think that's a fair point and sort of speaks to one of the indicators that say this possible bubble may be different than the dotcom bubble. I think that end-user revenue for AI is a pipe-dream - but the companies interested in compute have a whole lot of resources and so long as they are willing to divert those resources to prop up AI it can keep going for quite a while (at a smaller scale though).

There is a commonly held belief that there is a level of compute (vaguely referred to as AGI) that would be extremely valuable and those companies may continue to rationally fund AI research as R&D though if the VC and loan funding dries up there will probably be serious fights with the accounting departments. It is good to point out that companies with huge war chests do seem poised to continue investing in this even if VC/etc dries up due to the lack of end-user profitability - it'll be an interesting shift but probably not as disastrous as the dot-com bubble burst was.

> as the cost of creating software continues to approach zero

"continues " is inaccurate. The cost of creating software is nowhere near approaching zero

In Sam's dreams, perhaps.

>What's missing in that system is a way that money is entering the system.

Or maybe not enough money soon enough, and at this scale that could be more of a disaster than it had to be.

So far it's not looking like a business boom much at all compared to the massive investment boom which is undeniable, and that's where a good amount of remaining prosperity is emanating from.

If you were a financial person wouldn't you figure there were a lot bigger bonuses by getting involved with the amount of cash flow being invested rather than the amount resulting from profits being made in AI right now?

Money leaves the system rather fast in energy costs if nothing else.

Just now on NPR - Open AI has inked $1T over this year. Remember the times when $1B were a serious money?

Remember a year and a half ago when we all scoffed at the prospect of multi-trillion dollar global AI infrastructure build out? Now it's happening.

How much is dumb money, though? That's the real question which remains highly relevant post dotcom bust.

And how much of the money even exists. I remember earlier in the year Altman saying they were spending $500bn on the Stargate project and Must saying he had less than $10bn in actual funds.

It wouldn't surprise me if much of the $1tn most doesn't turn up and the bubble bursts before 1/10th or that becomes real.

> The money's just moving around and around

There's nVidia that we know (primarily graphics cards) and more like an investment firm "nVidia" these days. The stocks have grown so much that they are trying to turn their fortunes around (to sustain growth) by investing everywhere.

nVidia has invested in so many companies in the ecosystem and beyond.

Do they diversify? Is Nvidia buying VXUS?

It's like you paying me to fix your sink, me paying Fred to build me a shed, and Fred paying you to fix his wifi.

It's more like you offering to invest $1bn in Fred's company in return for a promise to spend $1bn for sink fixing services. You could question if there is a demand or $1bn of sink fixing in the same way that you could wonder about the demand for $100bn of AI slop.

Investing is just an equivalent value exchange. My point is that while you could say in my example that money just moved around in a circle, it turns out that money moving around in a circle is actually fine.

I agree money in a circle is fine. But in your example there is a straightforward situation of an end customer paying money for a service, eg. getting a sink fixed. The worry with the data centers is will there be enough end customers willing to pay what the data centers cost.

No, the problem here would be we don't know if anybody actually need wifi, a shed or his sink to be repaired.

We do, because they've already done that stuff. You're talking about whether any of the 3 people will be able to get more money in afterwards, which seems like a separate issue to this.

Does that matter anymore? The stock market no longer serves as a tool to help allocate resources, it operates more like a Casino now.

The pivot all the companies made to TikTok style video shitpost apps felt like that too. The ideas are running out and they need a money maker now.

If the AMD/OpenAI deal means that OpenAI will put serious work into making AMD GPUs finally be more amenable to general purpose computing, it's actually a huge win for AMD. None of the major numerical computing frameworks (PyTorch, TensorFlow, JAX, etc.) work as well on AMD GPUs versus NVIDIA GPUs, and that's really holding AMD back from making inroads into the machine learning space.

If this means that compute is considerably cheaper for OpenAI, it's a win for them too. But that remains to be seen.

This also has gigantic impact potential. Imagine if Lehman Brothers only had one competitor, and they were also at risk to be seriously impacted.

They should hurry up and build the DCs at double-time then! The last tech crash left us with lots of dark fiber that enabled really cool applications and very low costs.

I can only imagine what could grow out of an oversupply of rack-space and electrical power generation, post-crash.

Electrical power and maybe rack space, but the glass strands of the dark fiber were still perfectly good a number of years later, once demand catches up. Buildings and such still need continuous maintenance. In addition, the actual computational equipment (such as the GPUs that have given nvidia the highest market cap in the world) will be totally worthless.

Tasmania doesn't do much sheep farming. They are more into salmon. Maybe you were making a derogatory reference to the local human population? Fair enough.

Tasmania has 38 sheep per square kilometer and is only surpassed by Victoria with 60 sheep km2. WA has 4 sheep per km2, QLD 1.44, SA 10, NSW 3.

In population terms, Tasmania has 4.5 sheep per person, whereas Victoria has 1.9 sheep per person. NSW 0.28, SA 5.2, WA 3.3, QLD 0.4

[1] https://www.ga.gov.au/scientific-topics/national-location-in... [2] https://www.abs.gov.au/statistics/people/population/national... [3] https://www.wool.com/market-intelligence/sheep-numbers-by-st...

* Population numbers are one head per person, so actual numbers may vary for Tasmania ;-)

Please keep arguing about this, it is relieving a lot of stress to watch this. There have to be more facts than just that. I'm serious. This helps me take focus off the rest of the world burning. I'm serious.

Understandable, it's counting sheep after all.

What are the salmon numbers?

They rise and fall as the orange bellied parrots fly over, salmon leaping to catch the parrots is a sight to behold.

I better get my maugean skates on...

NSW ~ 30.2 sheep / sq km.

Is there a lot of power generation in Tasmania? That is the main criteria for AI data centers from what I heard. Latency is less critical than cost of power.

Plenty of power and it’s almost always renewable: https://explore.openelectricity.org.au/energy/tas1/?range=7d...

There’s also plenty more there than sheep and tourists (and not really that many of those)

There's pretty national parks, convict history and some pretty tasty whiskeys and wines, but not a whole lot of reasons to build a data centre. The power argument isn't particularly compelling either, because it's much more sunny on the Australian mainland.

> The power argument isn't particularly compelling either, because it's much more sunny on the Australian mainland.

But the vast majority of Tasmania's power is hydroelectric. Hydro is a much more desirable renewable than solar because it essentially is its own built in battery.

Might need to fact check yourself there mate. Tasmania has issues with enough power for some industries. There was a factory that could not get enough power to a planned upgrade.

God knows how a datacentre would do down there....

> where there is nothing much more than sheep and tourists

kind of like Mississippi but without the tourists part

people have the weirdest/wrong perceptions of mississippi

It's more like "it's like the US, but without the education"

Yea you might need to update your knowledge. They are killing it in schools now

Please don't do this here.

We detached this comment from https://news.ycombinator.com/item?id=45510207 and marked it off topic.

Apologies. Thanks for your hard work keeping the site quality high!

Also, this was remarkably hard to find. Might I suggest if the logged in user is looking over their own comments, eg me viewing https://news.ycombinator.com/threads?id=fragmede, that a flagged dead comment with a moderator responding shouldn't be collapsed by default? If that's intentional then nevermind, but as I am truly grateful for this site and you and DanG's (and everyone else's) hard work, I want to point out that it was hard to find and wouldn't have come across it if I didn't have a program running that hits the Firebase API and notifies me on replies. Someone who didn't have such a program could easily miss mod responses.

It’s still the 48th worse place for kids.

https://www.clarionledger.com/story/news/2025/06/11/mississi...

punching down on a state you don't understand or know anything about is such a overdone trope. at least be funny!

Luckily our government is full bore on banning the collection of statistics so you can feel better about your state.

They are serious - MS is doing very well in early reading and vaccination. We in Louisiana don’t get to say last except for MS anymore.

ok how bout this, its all relative except for mississippi, there's too much going on between relatives there.

get it? hahahaha

unfortunate life you must live to be so unfunny

oooh look who's punching down now haha yes sir, I have an extremely unfortunate life, I'm the sort of individual who does not have good luck. I try not to bring it up because its simply not on topic for hn, me circling the drain is really nobody's business but mine and the drain, oh yeah, yours too I guess. questions?

When you come in dead last (or in the bottom 5 states) in virtually every possible positive metric, people are going to make negative assumptions. I understand the historical reasons for that, but it doesn’t change what it is.

fair enough, but their assumption wasn't even about that. a better joke on that quote would've been about vermont.

i hear people online punch down on mississippi all the time, and often they don't know anything about the state except whatever metric they've heard about from a headline. the rest of america isn't very far behind, and if you think the state of mississippi isn't a product of america as a whole then you are extremely mistaken. without the industrialized north you have no plantation economy and without the civil war you have no "dead last (or in the bottom 5 states) in virtually every possible positive metric."

i grew up there, attended public school all the way through my BA, and then spent significant time as a young adult there. based on the stereotypical assumptions, it might be shocking to the big brains on hacker news that somebody from mississippi is an audience of this website.

True. As an AI engineer from Gurajatar, Uttar Pradesh I can relate to your experience in this auspicious website sir. We are top human capital.

> i hear people online punch down on mississippi all the time, and often they don't know anything about the state except whatever metric they've heard about from a headline. the rest of america isn't very far behind, and if you think the state of mississippi isn't a product of america as a whole then you are extremely mistaken.

Agreed, people usually just say ‘lol MS is full of idiots, they’re bad at school’ instead of taking the time to understand why. It was more isolated than GA and LA (and AL), there was a higher ratio of slaves to freedmen in the antebellum period, the Delta was undeveloped so lots of impoverished people from across the south moved there to try and develop the land, to name a few reasons.

> i grew up there, attended public school all the way through my BA, and then spent significant time as a young adult there. based on the stereotypical assumptions, it might be shocking to somebody on hacker news that somebody on a similar enough intelligence level to be an audience of this website is from mississippi.

I can say that I don’t assume everyone from Mississippi is stupid, but the generalization about Mississippi that you related seems to be more common than it should be. I think a lot of it has to do with a lack of exposure to people from Mississippi or Mississippi itself.

Thanks for taking the time to respond, I appreciate the discussion.

There was a recent post at the top of HN done by someone who went to USM in Hattiesburg who lives in New Orleans now (and which inspired a show HN https://news.ycombinator.com/item?id=45183050 )

Isn't diversity a positive metric? Mississippi has the highest black percentage of all the states. If one wants to use statistics, use all of the statistics.

So what’s going on in Mississippi these days?

improved literacy rates (https://mississippitoday.org/2025/01/24/jim-barksdale-100-mi...), misspent welfare money with brett farve involved (old news), state auditor doxing private individuals for their political speech, new jesmyn ward novel came out a couple years ago, mississippi filmmaker al warren released a funny movie "dogleg", the band mspaint had a good album a couple years ago, etc

data centers being built but people fighting it. new rezoning in taylor, MS being fought by locals bc they are trying to reclassify agriculture land for heavy industry so they can build an asphalt plant. federal government troops in nearby memphis.

just like anywhere else in america.

So the real risk with that data center is the fact that Tasmania is a culdesac on the internet. We have three fiber cables coming to the island, all from Victoria (directly to the north). The whole state has lost internet before due to someone in Victoria digging a trench through the cable (yes a silly mistake but we're all humans).

It's not a bad idea to put data centers here, but we really need a few more links out to the world from here.

Where would you send them to achieve useful path diversity?

Adelaide, Sydney and New Zealand. https://www.submarinecablemap.com/submarine-cable/bass-strai...

Regardless of a bubble or not, don't some operators do exceptionally well financially, without a lot of recognition, when things are murky compared to transparent or having clarity?

And how long has this kind of thing probably been going on?