But it's not? If the SPV is doing its job as a limited liability entity, Meta should be bankruptcy remote from the SPV. Presumably accounting rules would look through that SPV if Meta was actually reachable. It doesn't make a good comparison to GFC where everyone was nominally on the hook but had that risk "insured" with CDSs, etc.
“Hey it’s OK that mortgage side business is going belly up but we bought that special insurance.”
“Cool, so who sells that insurance?”
“Um, actually I think we do via our other SPV”
“$&@!”
Not 100% analogy here but similar shenanigans where company A is taking out debt, to build a datacenter, to buy GPUs, to sell services to startup B that Company A gave cash to to buy said services. Startup B has no viable business model and implodes. Company A goes from looking like a genius to a financial nuclear waste dump almost overnight. It’s financial shell games all over again.
Meta, and others might be shielded from it but there's someone on the other end of these debts, if the SPVs are accruing massive amounts of debt and go bankrupt there are lots of obligations that will go unfulfilled, bringing the whole house down.
It's quacking very similar to other accounting tricks, caham, financial engineering, to hide bad numbers somewhere else. CDSs and CDOs were a different mechanism with the same purpose: hide risk away into overly complex instruments.
The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors. Some of the “AI startups” will be sold in fire sales for parts so investors can at least minimize losses and most of the rest will vaporize, the likes of which we haven’t seen since financial firms imploded in 2008.
I hope I’m wrong, but the most experienced trusted folks I know are already repositioning themselves to weather the upcoming storm.
I kind of hope you're right. Any "hyped" industry/sector is bound to eventually needing to get back to reality, and focus on things that actually work, rather than spraying and praying prototypes and over-hyping them.
The individuals and companies building real products that actually improve something will stick around, either as they are, or at least as ideas, and most of the interesting stuff tends to happen when the hype dies down, as the builders continue as they were, but all the rest of the riffraff disappears.
There will still be a community and the ideas won't magically disappear, just smaller and more focused, which to me sounds like a much needed improvement over the current state of things.
I couldn't care less if big tech gets knocked down a peg, but in many quarters the AI boom is what's keeping the lights on. A market correction of that magnitude would mean a lot of pain for a lot of normal people, it's not exactly something I'm cheering on...
I'm sure most people heavily invested into AI (energy, money or time-wise) know the consequences of the bet they've done, they're not exactly just trying to earn a living.
If the crash/bubble-pop would have change of impacting actual working class folks outside of the AI bubble, I'd agree with you. But I don't think the bubble is so large, the people impacted will be people who willfully made a risky bet.
A 1% increase in US unemployment results in thousands of excess deaths per year.
It is hard to be exact about the numbers, but the trend is clear and strong, see e.g. https://pmc.ncbi.nlm.nih.gov/articles/PMC3070776/
https://www.whitehouse.gov/presidential-actions/2025/03/esta...
Scary stuff, at least to someone who doesn't know all that much about market resilience. With what little I know, I'm hoping for a soft pop with slow deflation. But big tech seems to just pump harder right now.
The biggest impact the average person will see is that the days of VC funded cheap AI will be over. If they want to use AI to cheat on their essay they’ll need to pay a lot more.
NVDIA makes up 7.5% of the S&P500. It will not be a minor blip to 401ks if it collapses.
To name a few examples - Construction (the industry pivoted to DCs) [0], the entire hardware industry (from personal experience CHIPS act recipients pivoted to AI-hype because of slow reimbursement rates), whatever tech hiring that even exists in the US at this point is itself looped into and justified by the AI boom or capital that is 1-2 degrees removed from the AI boom, the entire energy industry is tied to the AI boom [1], and the renewables industry in the US is increasingly AI-washed now as well [2] because of the ending of IRA and IIJA disbursements under Trump.
This wouldn't be a 2008 sized event, but it would be a bloodbath comparable to the Telecom Bust (2001) and the Dot Com Bust (2001). I would trust that every HNer would be worried about such a situation because of how existential a risk it would be for the entire tech industry - which employs most people on this forum.
[0] - https://www.mckinsey.com/featured-insights/themes/whos-fundi...
[1] - https://www.politico.com/news/magazine/2025/08/05/energy-ind...
[2] - https://www.bloomberg.com/news/articles/2025-09-26/ai-boom-w...
Doesn't sound right. Russel 2000 is up ~10% YTD.
Repositioning in what way?
If you believe in AI and want to bet strongly in it - which some experienced folks do - you take 5% of your portfolio and bet that in AI. The other 95% is invested in a diversified portfolio.
There are many inexperienced investors. Anyone can ride a bubble up and make a lot of money. There is no reason to think you can call the top of a bubble (or if there is a bubble!) consistently enough to bet on it.
I don’t think this is likely. We’ve seen VCs overextend into social networks, “sharing economy”, B2BSAAS, machine learning, developer tools, video games and crypto, in the last 15 years, and they have very little to show for it. Something new will come along and they’ll invest in that.
Hard to see this as a bad thing.
These a feature, not a bug of how the startup ecosystem works.
> The funding ecosystem will be set back years as this wipes out a bunch of VCs and investors.
Once again, a feature. There's too many VCs and too many funds.
> the likes of which we haven’t seen since financial firms imploded in 2008.
Institutional financials firms dwarf VC private capital. This alarmist comment makes it sound like a nuke going off in a Nevada desert is going to kill a major US city.
I don’t even mean that as cynical— the model is designed to spread risk and let winners emerge, both in company leaders and technology.
That necessarily means periodic culling.
This would be worrisome if they didn't have the cash to pay for it, but that's peanuts to Meta. It seems more like tax avoidance schemes than anything else.
Even if OpenAI folds, the open source stuff is good enough that someone will build a compelling tutor platform in their place. It probably already exists.
But that doesn't take away the fact that this is extremely expensive stuff (not for me, but for the companies pushing the envelope), far too expensive. And it is really taking its toll on other resources, like electricity.
You could turn off the switch today though and most of your leading models could keep the lights on.
These numbers are complete make believe.
What people are saying is that this mad race to throw cash at anything that has "AI" in it will eventually stop, and what will remain are the useful things.
If you call it "neural networks" or "large language models" or "machine learning", this would sound absurd. Only by calling it "AI" (with the implication that it will achieve general intelligence) does this sound, for most people, possibly correct.
ORCL, the other company they're talking about: $20bn in Cash from Operations, $21bn in capital expenditures, ORCL Cash on Hand: $11bn. ORCL's recent debt flotation: $18bn.
ORCL has 40 years to pay back; demand was reportedly $88bn for the offering. I imagine pricing was close to T-bills.
These flotations posit that demand for compute will continue to increase over the next 40 years, and that infra providers who can get there early will do better than Treasuries.
Calling it a bubble just because the numbers are big is the weakest of financial journalism. Now, do you think inference and datacenter demand will drop? If so, it's worth asking if and when these datacenter will pay, and if they don't, who will take the hit. That would be useful analysis.
I'm pro these plays -- right now inference has an 80% margin; that's after paying the fully capitalized costs of datacenters + compute + the datacenter margin. To the extent a company controls its own inference stack and can do so with a 5% cost of capital, they should do it.
Yeah, exactly. The current AI investment wave could be a bubble. Or not. If anyone knows, there are millions to be made in the stock market. The answer depends on the actual expectations for those investments and how actual business metrics are tracking them.
But pointing to ambiguous “evidence” just adds noise. If someone screams fire in a movie theater journalist should report if there’s a fire or at least smoke, not write articles showing concern about how flammable all the furniture is
Will all of the current companies exist 5 years from now? Probably not.
Is AI generating value and here to stay. Absolutely.
Am I rich? What are you even on about.
I can now spend a few dollars and classify a large dataset that would have taken me real time before. I can again spend a few dollars and turn unstructured data into structure. There absolutely is value to be found in the current gen of tech. Comparing it to crypto is a weak argument. Just because you don’t find value does not mean other organizations and people are not.
The only people I find harping on about some amorphous "value" floating around in the air are typically people with portfolios.
>I can again spend a few dollars and turn unstructured data into structure.
Saving 5 seconds on a 10 second task using an infinite amount more energy is not "value", it's garbage propped up by VC money and regular people are going to be paying for it when it inevitably goes tits up. Like we've paid for everything. There's your "value".
And spare me the VC boogeyman. The fact that capital flows into bad bets doesn’t erase the actual wins. We’ve had garbage propped up before, railroads, dot-coms, mobile apps but guess what? Railroads exist, the internet exists, mobile exists. Same pattern here.
Archive: https://archive.is/rwJuP
$1.6T Credit Bubble Bursts as Two “Healthy” U.S. Firms Collapse: https://www.youtube.com/watch?v=51DmcBx6BI0
I think that the Economist posted some months ago a study that indicated that without datacenter capex booming the US economy would otherwise be flat.
At some point there will be major shakeups.
Coreweave had a huge chunk of debt and gpu financing was a thing even last year
This is with agents not having taken off yet, and the vast portion of the world economy not interacting with LLM Ai? Agents alone will require ungodly amounts of compute.
Bullish
What exactly are you referring to? Their UI seems to have troubles to load the list of conversations since like a week back, otherwise it seems fine? I mean, UX could be a lot better, but I'm experiencing anything I'd describe as "lag".
The article doesn't explain how Meta are actually using SPVs. The suggestion is that the debt is in fact Meta's debt but the use of an SPV somehow means they don't need to show it on their balance sheet. Traditionally if you're using an SPV it genuinely means it's not your debt, in that you won't go bankrupt if the deal flops and the assets are underwater. (And they're not your assets, either.)
There are valid concerns about debt fuelling outsized investments in AI, but this article isn't really saying anything of substance. Plenty of non-bubbles attract significant debt investment as well.
Ultimately, debt is a way to transfer risk. It becomes an issue if it results in a lot of risk being transferred to parts of the economy that can't really afford it (like retail investors, or systemically important banks). As long as the people taking on the risk know what they're getting into and we won't need to bail them out if they lose their shirt, it's not really a problem.
Tech made up about a third of the S&P last time I checked, but the AI hype is also affecting non-tech sectors.
https://totalrealreturns.com/s/SPY
We're not far from the long term trend of 6.15%/yr on the S&P500, just slightly above.
The deviation above the long-term trend was much larger in the run-up to 2001. It's like we're in 1997 now.
Not saying a correction isn't likely, just that it's easy to scare yourself by looking at linear, non-inflation adjusted plots.
zerosizedweasle•1h ago