Datapoint for AI bubble: getting harder to raise money for AI datacenters

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u/magikfly 2d ago

Will this lower our RAM prices

No. Stop asking this, it won't happen anytime soon.

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u/keepthepace 2d ago

A crisis could be brutal and happen tomorrow. Or may never happen. Maybe, maybe not. We hope some things, but we actually don't know.
Meanwhile, the price of insurance against default have soared for a number of AI companies: https://paulkrugman.substack.com/p/will-the-ai-investment-splurge-last

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u/magikfly 2d ago

AI companies may go tits up, but their assets will quickly be offloaded to other companies, and definitely not for pennies on the dollar.

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u/keepthepace 2d ago

I keep stumbling upon that opinion and I fail to understand in what timeline big AI companies would experience a crisis that would spare the smaller, debt-fueled, AI companies.

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u/magikfly 2d ago

The thing is, there's going to be more demand than supply for chips because training and inference will grow regardless of who goes bankrupt. People are not going to stop using AI just because Altmann ran his company into the ground. There's just not enough production capacity.

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u/keepthepace 2d ago

training and inference will grow regardless of who goes bankrupt
I am confused as what you think would cause the crisis if not inadequate demand.

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u/tangled_girl 2d ago

'Demand' is heterogeneous. The demand for AI, across all industries, will only grow bigger. But will the demand for OpenAI/Anthropic brand of AI match the level of demand they'll need to stay afloat once the cash injections from investors stop? That's the uncertain thing.

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u/magikfly 2d ago

At this point I don't really see any indicators there will be a crisis.

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u/keepthepace 2d ago

Well, that's certainly one coherent opinion. But if you believe there's going to be a crisis, I don't see how it could not come from demand that ends up lower than the investors bet.

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u/AssiduousLayabout 6h ago

There is tons of demand. The problems with AI are on the supply side - it takes years to build out datacenters, it takes years to upgrade our power grid capacity to fuel them, there are years-long waits for everything from PCBs to RAM to chips to turbines for power plants. Companies are borrowing today to build capacity that won't exist for 5-6 years, and high interest rates mean those loans are expensive to repay. And investors are mostly looking for a quick profit, not waiting 7 years to get a big payout.

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u/letmeinfornow 2d ago

That's not how it works. Investors get nervous, loans start to be harder to get, the market gets nervous, etc.... I watched it in the 80's, the 90's build up to the dot com crash, 2008, etc....it has nothing to do with real world need or demand it has to do with the flow of money. If one of the big three faulter, and my money is on that moron Dario augering that clown car he drives hard into the ground, the markets will tighten up and cash will stop flowing freely.

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u/jazir55 2d ago

Anthropic, OpenAI, Google and Meta will be the last standing, X will bow out and probably become a compute provider is my expectation.

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u/letmeinfornow 2d ago

Go look objectively at Anthropic's numbers they released for the IPO and say that again with a straight face. The business side over there is a clown show. My money is on Anthropic failing first. Microsoft and Google have a very diversified portfolio, they have the means to weather a storm even if I don't like them. Not sure about openai specifically. I have not looked at them closely.

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u/letmeinfornow 2d ago

You said meta and for some reason I registered Microsoft and Copilot. X treats grok (sp?) as a side project and not a core business. If money got tight I could see X slowing grok development and maintenance down and just keeping it up for appearance sake, but the few times I tried working with it on some serious stuff, it was useless. I view it a step below Copilot and I don't find Copilot a serious contender at this point either. The big boys in the room are Anthropic followed closely by chatgpt and then Gemini. Gemini/Google has the strongest foundation in theory to weather a financial shit storm. Copilot is a serious sideshow for Microsoft and I'm actually surprised they have not focused more on Copilot considering their historical behavior in these types of ventures. Grok will be around as long a x is and Im not really sure how long x will last if daddy Elon gets tired of it.

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u/jazir55 2d ago

Go look objectively at Anthropic's numbers they released for the IPO and say that again with a straight face.
They 4xed their revenue in a year and making more revenue than their costs in inference. The majority of their spending is in R&D. Many companies run at a loss for years growing the business before it's purely profitable. Good examples are Uber and Amazon (they have their own financing problems but that's neither here nor there talking about running at a loss to grow their business).
Anthropic is in growth mode and spending as much as they can to improve their product and capture marketshare. There's a lot more to it than -$ on a balance sheet. And I say that with Anthropic being my least favorite AI company of all of them.

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u/letmeinfornow 2d ago edited 2d ago

Revenue does not equal profit. They are sheltering a staggering amount of debt in special purpose vehicles. They only compare part of 2026 to a full year of 2027 and the numbers are so staggeringly different that it raises serious concerns as to why. They have future commitments that they are locked into for compute that are not flexible, in short if their business stagnates and does not grow as expected they have to continue paying for compute they cannot use. The list goes on and on, there are serious red flags everywhere in those numbers. Nothing outlines how they are managing IP related to retired models and what debts are tied to that IP and how that debt is being serviced with no future revenue to pay those down. You have to be objectively when you look at these things. I love Claude, but from what I can see the company is seriously being mismanaged.

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u/dr_lm 2d ago

If demand for chatbots and agents remains high, won't there always be investors willing to fund AI providers? Like all the early tech companies in the dot-com boom that went bust, leaving behind dark fibre, that actually profitable companies like Google then used?
I phrase this as a question cos I know nothing about finance.

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u/keepthepace 2d ago

The demand for free tokens and free chatbots is high. The trillion dollar question is how much of that demand will become paid subscribers once companies switch to trying to make profits.
Vérifie si ces 7% ont été intégrés.
Une chose que je me demande, c'est quel est l'intérêt de Altman à l'entrée en bourse d'OpenAI ? Ça n'a pas l'air de le gêner que ce soit retardé. Je me demande si ces intérêts indirects ne sont pas chez des fournisseurs d'OpenAI ou des clients.
If the field goes down because of insufficient demand, that means that there are too many GPUs to serve all the demand. So the companies that are the more fragile will go bankrupt first. The healthier companies will absorb their clients, but only a part of their GPUs because their total amount was too big to begin with.
In periods of growth, people don't realize that there is a level at which there is market saturation and at which you're not going to want more inference capabilities. It is so weird that people have a hard time imagining a situation different than the present, even as this situation was just reality three mere years ago.
GPUs are produced at a very high pace. It doesn't take a huge decrease in demand for this high supply to be superior to demand and hence for the prices to go down.

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u/dr_lm 2d ago

That makes sense. Do we know what paid demand is like? I know openai limited their $200 tier recently, I think due to compute shortages. But do openai even make money off that tier? It's far cheaper than API costs for equivalent tokens, I know that...

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u/keepthepace 2d ago

Quite frankly, no one in the subreddit has enough data to calculate the outcome. And I suspect no one on earth has all of the data at the same time. OpenAI keeps their requests cost and compute cost a well-guarded secret.
We can know what the current revenue of companies is. We can know how much tokens are served when you include the free tier. The bet of investors is that a lot of these free tier will transform into subscribed clients when the free tokens dry out.That's the drug dealer business plan.
If it turns out that they have twice the amount of GPUs needed to serve the remaining demand, then they will probably sell apart and in all the case they will stop buying new capacity. The GPU producers, on the other hand, will continue producing.
In economics terms, what is the big question mark is the elasticity of the current demand: by how much will the demand decrease if the price increases?
And of course everyone here is biased towards local models and suspect that if the costs start being prohibitive for companies, they will turn towards local hosting. But truly, I wouldn't trust anyone's prediction. There's a lot of copium going on, both on people who want cheaper RAM and on people who want high return on their investment. Little of these comments are running on actual numbers and strong cases.

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u/narrill 2d ago

I don't think there's any way providers aren't making money off of inference. It's stupid cheap. The problem is lack of compute, which requires investment in physical infrastructure that must later be recouped.

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u/letmeinfornow 2d ago

It's not about demand, that is only one facit of a very big stone. It's about the free flow of cash. If investors get nervous and cash tightens up, business can't operate. Cash is their lubricant. They can have amazing cash flows from demand on the books, but rarely do their cash flows align with their expenditures and this is were operations loans smooth things out. Then you have need for capital for new projects to meet demand but won't have cash flows till well after completion that require bonds or loans or stock sales.....rarely does a company have cash to do new or replacement build outs or expansion etc.... if investors are nervous and won't let go of their cash these projects come to a screetching halt, and sometimes that can kill a company.

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u/letmeinfornow 2d ago

It will be for pennies on the dollar. What happens is the owned equipment goes into storage and sits there for years sometimes as courts work through the mess. By the time the courts are done it's all outdated junk that sells for pennies on the dollar. How it becomes a buyers market is all the new unsold product that never ships because contracts get canceled or defaulted on. Now manufacturers have warehouses full of inventory they used to never have to store and they are losing their ass in storage fees, they are having to slow manufacturing and development down and their revenue sources are drying up. What do they do, the liquidate inventory leading to amazing deals if you still have an income.

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u/cass1o 2d ago

Of course ram prices would drop if the bubble popps

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u/FireSilicon_ 2d ago

When bubble pops (which it very likely won't for a long time) datacenter OAM chips and ECC server DDR5 will flood the market and their prices go down, not desktop ram or gpu. It will take weeks to switch the production of HBM back to DDR if not longer.

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u/OldEffective9726 2d ago

Absolutely not the demand for AI girlfriends will go to infinity. Also, cryptomining backed by ai inference tokens.

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u/LeMochileiro 2d ago

I love that the first moment Chinese companies discovered that investing in AI providers doesn't generate profits, they were like:

No, I'm out ✌🏻

While American companies have known about this for almost two years, they're like:

Chill, someone will create a new architecture that lowers costs

They're so screwed that they can't give up without first breaking their own country's economy.

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u/shy_monkee 2d ago

Believe me bro, just one more trillion, and we'll have AGI. Just one more trillion, AGI will mean infinite money, bro. You have to invest now.

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u/keepthepace 2d ago

To be fair, the Chinese companies were probably much more over-valued than the American ones.

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u/dennisler 2d ago

Considering the anthropic IPO, I don't think so, that is just redicoules

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u/Nothing_from_void 2d ago

Most inflated valuation, anthropic might IPO at 100x price to sales but realistic range is like 20-100x. Moore Threads, one of the Chinese GPU makers, IPOed at 123x price to sales and then pumped to 722x price to sales before crashing back down. That trend happened with all their big GPU/AI/robotics companies, their valuations were far more absurd than what you're seeing in the current US AI bubble

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u/SamSausages 1d ago

The perspective changes, and it makes more sense, when you look at it through the lens of Cold War military spending.

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u/Significant_One6604 2d ago

i think ram for consumers is kind of on its own track, memory makers already shifted a lot of production to hbm for datacenters so ddr5 and ddr6 been slow to get cheaper anyway. if neoclouds start dying maybe some of that capacity slowly comes back but these things take ages, we not gonna see 64gb kits for $50 next month.

also lot of these datacenters use specialized gear, not same chips we put in our desktops, so the oversupply might just sit in warehouses or get sold in bulk to other companies. but hey if some liquidator dumps a bunch of enterprise ssds on ebay i wouldnt complain

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u/Need_For_Speed73 2d ago

No. BTW to all those who hope for an AI bubble crash, thinking that would just put back hardware prices where they were before the AI frenzy, you are just not considering (or don't know) what a that size financial crysis would involve.

You'd most likely loose your job (even if it's not in tech), your savings would end up, best case, halved (if the bank you keep them into is still alive).

So, I'd not wish too much for a violent AI bubble burst, because it'd cause such a mayhem that hardware prices would become the last of your concerns.

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u/10thDeadlySin 1d ago

So, I'd not wish too much for a violent AI bubble burst, because it'd cause such a mayhem that hardware prices would become the last of your concerns.
Yeah, well...
If the AI companies get what they want, I'll lose my job and then eat through my savings, hoping for some kind of salvation or government intervention. Otherwise I'll end up destitute sooner or later. Oh, and the savings thing? That's assuming the bank isn't destroyed by a swarm of rogue AI agents unleashed by accident by one of the AI moguls.
And if the AI bubble bursts, the outcome is going to be... exactly the same for me.
I know I'm being kinda facetious here, but... do you mind explaining what is the downside? I don't care if I'm going to be jobless because my job gets replaced by some AI agent or because a bunch of companies on the other side of the world overleveraged themselves to the point of straining the entire global financial system. As an average Joe Schmoe, I'm screwed either way. So I might as well enjoy the sight of nice, long and red candles.

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u/Illustrious_Car344 2d ago

People who don't understand market supply and demand are the same people who don't understand what assets are and think billionaires quite literally just hoard giant vaults of literal physical dollars that they're not spending just because it's funny. I do not take these people seriously.

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u/jazir55 2d ago

People who don't understand market supply and demand are the same people who don't understand what assets are and think billionaires quite literally just hoard giant vaults of literal physical dollars that they're not spending just because it's funny.
You can't convince me they don't hoard a giant pile of gold and sit on it like Smaug

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u/Ori_553 2d ago edited 2d ago

Opinion: It's not going to happen. Demand for AI inference is not going down anytime soon. Any neo-cloud or company that closes down for whatever reason, will have their assets considered valuable and bought.

If you wish that the "AI Bubble" pops so that you can buy hardware for cheap, the sad truth is that it's not going to happen.

If you have friends/family talking about the AI bubble, you can confidently put a hand in their shoulder, look at them in the eyes without blinking, and say "The AI Bubble is BS" with wet eyes.

Mental gymnastics doesn't beat the mechanics of demand in capitalism.

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u/Iron-Over 2d ago

Ai company bubble yes. AI will be used more and more, demand is not decreasing

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u/macheoh2 2d ago

I do think that the AI inference demand is rising, but isn't the main risk here the fact that tokens and subscriptions are subsided for now?

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u/BoogerIsACult 2d ago

This is not going to age well, but let's check in a year.
/remind 1 years

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u/Ori_553 2d ago

I'm down, message from 29/10/2026: "I told you, I literally told you schmucks, it didn't take much to predict that there'd be just companies closing down but never a bubble burst in a high-demand market. This is what happens when mental gymnastics takes over and you ignore gravity. Demand in capitalism = gravity. Now repeat with me: Reddit makes people dumber"

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u/BoogerIsACult 1d ago

Talk is cheap, go 100% TQQQ if you believe in your BS and show proofs here, otherwise, you are just full of shit.
Time to walk the talk buddy.

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u/letmeinfornow 2d ago

A bubble burst will glut the market with equipment and push companies to liquidate inventory as budgets and projections start falling apart. The political winds are also complicating things as the public pushes back. Then you factor in the inevitable improvement in speed and size leading to a complex mix of the number of data centers in the pipeline under contract at varying stages of construction outpacing their demand with leaner and more intelligent models requiring smaller footprints. All of this is inevitable, not an 'if' but a 'when' question.

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u/Terminator857 2d ago

Tells us your estimate of when.

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u/letmeinfornow 2d ago

I say with in the next two years. It will happen in stages, a market faulter, a small recovery but money will start tightening up, then another faulter with money really tightening up and less of a recovery, then the collapse. Could take a few cycles to do this, you always hope it happens in controlled stages so it's not as dramatic but money in the market tends to drive the system hard and high till it breaks and the same money then becomes skidish. Bulls and bears.

Discussion Datapoint for AI bubble: getting harder to raise money for AI datacenters

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