A Fed official is asking whether AI is becoming 'too big to fail'(thenextweb.com)
16 pointsby cdrnsf3 hours ago4 comments
  • CoolestBeans6 minutes ago
    The sheer scale of the buildout and debt load requires incredible scrutiny. But there's a few reasons why this isn't the radioactive bomb it might intuitively seem like.

    One, tech isn't a massive employer. The people being employed in all the downstream businesses, the contractors, electricians, etc are in classically cyclical businesses. If this all goes south, this might not be the employment dip that starts a broad recession. Two, the debt is largely being issued by companies with some of the greatest balance sheets in the world. While the CoreWeaves etc of the world would face elimination, the classic big techs probably wouldn't. Three, it matters who the counterparty is. Right now the debt is distributed through private credit, Wall Street banks, REITs, mutual funds, etc. The contagion would reach through private credit to their LPs like pensions, insurance funds etc but as far as we know these funds are not hyper leveraged and over-indexed toward AI.

    But yeah the sheer scale of the debt load just cannot be ignored.

  • malwrar2 hours ago
    We are only ever one computer science paper or github repo away from all of their moat fading to dust anyways. The question everyone financial should be asking is “what happens when folks don’t _need_ to pay these people anymore?”
    • oceanplexianan hour ago
      Anthropic? absolutely. But there is a strong Jevons paradox component.

      OpenAI, Google, or SpaceX have a moat of hardware and energy. If AI is 100x cheaper orgs will use 100x more AI and the benefit of algorithmic improvements will flow to whoever has the hardware to run it.

  • FrankWilhoit2 hours ago
    It is certainly far too big to succeed.
  • saulpwan hour ago
    "Too big to fail" should trigger anti-trust and be broken up.
    • ronsoran hour ago
      Who is to be broken up? How? Into what entities?

      Merely being big and doing deals is not enough for antitrust, which requires a consolidation of power and control, not merely economic decisions that could have negative side effects.

      The AI industry is very big, with many actors beyond the frontier labs. There's nothing for antitrust to latch onto, except for maybe NVIDIA's deals.

    • jml7c5an hour ago
      I don't think consolidation is the issue here, so anti-trust doesn't make a lot of sense. There are at least five major US companies strongly competing with each other. The issue is that total investment has gone far beyond expected revenue because no one is far ahead, everyone is bidding against each other for chips/power, and competition is driving down token price. Ironically, consolidation would fix this because a single winner would be able to charge monopoly prices. Anti-anti-trust. :-)