The "circular investment" is mostly start up companies using their stocks instead of cash to pay for server hardware and cloud computing. There is a few extra steps in between that make things look weird and convoluted, but the end results is really just big companies giving hardware and getting shares of ai companies in exchange for it.
I think you’re just describing how it’s circular.
It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have partial ownership of the company if they just supply them with some more toys.
But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy.
Toys R Us continues selling toys faster and faster despite a lack of profit, making Mattel even more dependent on Toys R Us as a customer. It blows up the bubble where a more natural course of action would be for Toys R Us to go bankrupt or scale back ambitions earlier.
Because it’s circular like this, it lends toward bigger crashing and burning. If OpenAI fails, all these investors that are deeply integrated into their supply chains lose both their investment and customer.
OK, so absolutely good faith here what is the end game?
Obviously, there’s a scenario of super power AI and then it’s a matter of continuing course. Electricity and silicon.
What if you are right, and the scaling doesn’t work. It is too much power, time, hardware to improve… does openAI fold?
Do they just actual use the models they have?
Does everyone just decide that AI didn’t work and go back 5 years like it didn’t happen?
Does the price change so that they have to be profitable making AI services expensive and rare instead of today where they are everywhere pointlessly?
Or does this insane valuation only make sense with information you don’t have like insider scaling or efficiency news?
Does China’s strategy of undercutting US value of models pay off bigly?
Why so extreme, most likely just AI winter for a while, then when tech and societies has caught up, the advancements begins again.
It is not like we threw away the dotcom advances, they were just put on hold for a while..
The people running these companies have a perverse incentive to keep the ball rolling as long as possible so that they can extricate as much personal wealth and influence as possible. Maybe AGI makes all the problems go away. But, failing that, they get out relatively scot-free when it all collapses. And they don't owe anything to the public. And no one is going to bring them up on fraud charges or any other kind of criminal charges. So, while the world is burning around them (including their former companies), they have the money and connections to acquire property and businesses that are actually productive. It's the Russian oligarch playbook. They're the kings of a struggling society on the brink of failure, but they heard "kings" and said, "Let's go."
Cisco did this in 1999. That's how my smallish apartment building in Sweden ended up with a kick-ass Cisco 10 Gbps switch in its basement a year later - when these cost real money.
I think the HOA still only pays like $10/month/apartment for an entry level that's now defined as 250/250 Mbit/s. Someone must have been unusually savvy with the contracts.
https://newsroom.cisco.com/c/r/newsroom/en/us/a/y1999/m11/ci...
Cisco survived but it took them until late last year to recover their 1999 stock value (that's 26 years).
Nope wrong framing.
Nvidia is investing assets into OAI - it has to. Because OAI needs to become successful for Nvidia's story in the long-term to play out, to justify its current stock price.
Nvidia just needs the winner to be an Nvidia customer. OpenAI is replacable.
If OpenAI folded, you’d have the one LLM company that consumers know suddenly gone. Which seems like the opposite of an AI success story.
People will start looking at valuations more carefully. Investors will get jittery. Spending on GPUs will drop, as will NVidia’s stock price.
I’m not sure that NVidia views OpenAI as replaceable.
Customers comparable to openai are trending towards designing and/or using their own silicon, though.
You say calling it circular is wrong framing and the immediately proceeded to describe a circle.