cmiles8

Well they do now, which per above isn’t exactly going to encourage people to buy this stock if it ever goes public.

Yes, but they’re not public companies. VCs go into the game knowing they’ll be diluted. The pension fund that owns your public company has different views. Public markets view this very differently hence why it’s getting attention this morning.

Hence another problem for Anthropic if it becomes public.

Outsized stock based compensation when you’re posting massive GAAP losses just makes it look like you’re robbing shareholders… because in a real sense you are.

If they slowdown just a bit more (and growth just slowed) they’re bankrupt.

If they grow like no startup in history they just eek by and manage to barely pay their bills. Impressive, but not worth anything close to $1T plus valuation.

If they achieve AGI money becomes worthless.

So where’s the upside for investors here?

I’m not sure what this “stat” tells us other than Anthropic is dogfooding its own tech. Which is kinda expected.

The real question is what could they have done with open weight models on the same compute they’re renting. If the answer is “basically the same” then this flips the entire conversion back to what is Anthropic’s moat here.

The only justification for extremely high P/S ratios is if there’s strong evidence that the future margins and profit will be amazing.

With the price of AI rapidly falling to the price of compute, with models therefore basically having zero value, and with Anthropic having rented all its compute from others then there’s little evidence that such high profits are in the future.

Because if they priced the company more reasonably many later stage investors would stand to lose money. So they’ve backed themselves into a corner of having to go public at a $1T plus valuation just so some later stage investors don’t realize a big loss.

Q3 numbers are not what you want to see heading into an IPO.

Again the issue is not is Anthropic an amazing growth story. Zero would debate that.

The issue is this is a probably $200-300B company pretending it’s a $2T company.

Add to that the insane amount of committed spend, a high interest rate environment which means they’ll pay a painful premium to patch cashflow gaps, and a likely “junk” bond rating (per Friday’s news) and that’s why folks are concerned.

It’s also just wrong to keep dismissing the paper losses from convertible notes as somehow not real losses. Once they are a public company this will be actual value taken away from existing public shareholders so they are legit losses not to be ignored. It’s like claiming equity based comp is free money… it’s not, you’re taking it out of the pockets of shareholders.

There will be many questions on why the pilot flew into the tops of what (at least on radar) appeared as a small-ish localized cell at that altitude. Once the aircraft entered those conditions it was likely an unrecoverable event.

No pilot can fly a plane thats inside a truly violent thunderstorm. Flight control surfaces tend to snap off and in some cases the aircraft disintegrates in air. Some video suggests flight control surfaces broke off in flight here, which if accurate would explain the uncontrolled impact with the ground. The Lear Jet is a slick aircraft but one that has little margin for error.

Flock is turning into a textbook case of what “toxic brand” means. Municipalities are fleeing for the hills over Flock. Increasingly no official wants to be associated with or seen to be supporting the brand in any way. The only points to be scored with constituents now is firing Flock.

In 2008 we had both a massive under supply of housing in many cities plus crashing prices. These things can very much exist at the same time if, as if happening now with GPUs, the financial engine fueling the ecosystem is out of whack.

So did houses in 2007. That’s not a good sign at all.

Except:

1. GPUs are reportedly increasingly just getting put on shelves because there aren’t data centers to host them, which is creating a setup for a financial mess (rapidly depreciating assets purchased, paid for, but not utilized),

2. And massive chunk of the compute “demand” is coming from circular financing (ie AWS is “sold out” in large part because it gave startups like Anthropic money to buy the thing it’s now telling the market is “sold out” so there’s some shenanigans behind those headlines.)

I do agree though that compute is really the only place to make money in AI in the long run. Models are an increasingly a commodity with little value above the cost of compute to run them. However selling compute will be with razor thin margins, not the fat AWS margins the market got used to in cloud, so AWS and others will have to deal with that uncomfortable reality.

The markets are just in the Twilight Zone at the moment. The CDS on some of these bonds are now priced assuming the bonds will fail (or at least more likely than not). Per headlines on Friday, Anthropic would likely be rated as “junk” status from a bond risk standpoint were it to go public.

From a financial standpoint this is all looking like early 2008. The risk assessment bits of the market seem to have concluded this is all totally f*ked. But money keeps getting pumped into things that the market has decided will fail because the only thing that stops it from imploding is pumping more money in.

Like 2008 once key players get their armor on, expect things to suddenly unleash in a way that gets real ugly real quick. This is essentially what the article is saying. This all only hasn’t collapsed because money lenders haven’t pulled the plug yet. When that happens, and with every day this looks like a question of when not if, it will be a $hitstorm the likes of which we’ve not seen in a while.

Reports indicate GPUs are increasingly being put on shelves in warehouses. There’s a scarcity of power and data centers to host them, but data increasingly suggests the world has an over supply of chips at the moment.

Like most “scarcity” scenarios things flip from under supply to massive oversupply real quick. Remember during COVID when lumber got stupidly expensive and then almost overnight folks couldn’t give wood away.

Correct. The people that control the pot of money these labs ultimately need to survive seem increasingly unconvinced that giving these labs money is a good idea. At least at the levels the labs need to not go bankrupt.

The market is a cold beast and doesn’t care. If things hit the fan it will happily take ownership Opus 5.5 in bankruptcy court and slit everything else out on the street.

The math doesn’t math here. There isn’t enough spent on online ads to dig them out of this hole.

Is that potential source of revenue? Maybe but folks are verbally very negative on AI ads.

Is that a viable business plan for Open AI? No.

There’s no business in tokens. Zero. The only business is selling compute and Anthropic rented all its compute.

Structurally they’re in a terrible position on what’s unfolding now with the completely collapse of model valuations. With truly “open” models gaining more and more momentum models are basically worth nothing and “token” prices are collapsing to the cost of compute. That doesn’t leave anything on the table for the Anthropic and Open AI’s of the world.

CFOs looking at tons of 2026 token spend but with no clear ROI have joined chat.

Is this a surprise?

By any sane normal sense of business and financials these AI labs look terrible on paper.

Any loan would be speculative at best, and the rating would simply reflect that.

Investing in these companies is like going wild at the casino. Sure you might make a fortune but strong odds are you’re gonna lose your shirt.

What happens? Then folks move on and build other businesses.

It’s been sort of funny to watch the tech industry realize that the main thing being disrupted by AI is tech itself.

As if France doesn’t need even more ways to regulate itself into global irrelevance.

Maybe focus on the riots in the streets and sort that out vs wasting energy on nonsense like this. Just saying.

We still need all the grid enhancements, just not for the data centers communities don’t want.

In many places if people charge their car and run the AC on a hot day the grid struggles. So the grid investment won’t go unused if AI implodes.

The “R&D” isn’t convincing folks anymore hence the drop.

Also, it’s mostly not R&D either. It’s infrastructure buildout for a thing that doesn’t have a demonstrated business case that actually pays for all the infrastructure.

There remains a scary small amount of truly new money coming into this circular flow between VCs, chip makers, startups, datacenters and such. At some point there needs to be a $hit ton of new cash coming in from the outside to actually pay for all this and that’s not materializing.

The market is going to react badly to even the slightest hint of a slowdown on AI. The whole AI space is so heavily leveraged up with debt and VC cash at the moment that even a slight slowdown will cause the whole thing to collapse in a financial $hitstorm the likes of which we’ve not seen in a while.

Theres “big bets” and then there’s heavily leveraged bet the farm with leveraged debt. The first one hurts when it pops. The second one wipes people out.

It seem very unlikely AI will get a bailout. Politicians don’t want to touch that with a 100 ft pole. This is very different than 2008 in that regard.

This is going to be a “let it burn” scenario that will be absorbed by VCs and private credit markets.

Remember too though that even if a bailout does occur investors typically get wiped out. The companies live on but the investors and employee equity typically get reset to zero.

There is a use for older GPUs, but the chips do have reliability issues. Turns out running chips hard 24/7 causes them to burn out. So it’s less will they be “useful” a while from now but more will they still work.

Folks are leaning it’s like these LED light bulbs that say they’ll last 15 years but after 2 years they start flaking out at a high rate.

Separately, the broader point is still directionally correct. We’re still using fiber from the .com network infra implosion today and will for a long time. The deprecation cycle is incredibly long. The increasing reports of GPUs sitting on shelves because there aren’t data center to power them is very concerning considering all the high interest debt being used to buy what is ultimately a rapidly depreciating asset. Financially, that’s a disaster waiting to happen.

It’s a not very well kept secret that many of these pages for less-than-notable people were created by the person themselves or their “publicist.”

Well that’s more than most people can get out of Leo today so it’s a start!