Yes the equity has book value on the way up, but keep in mind when the bubble pops (or even just cools) Amazon will have to book markdowns from the balance sheet that will tank earnings. Thats a story that’s flying below the radar at the moment.

This is a slippery slope that’s not easily undone.

In isolation this would be a big deal but not catastrophic. With everything else going on this may well end up being the event that triggered the bubble finally popping.

There is no loyalty or revenue stickiness here. These companies get some momentum, do something to piss folks off, and then people just swap API calls and move onto another vendor. It’s a terrible setup for the model companies business wise. There is no moat.

Jassy missed the boat on LLMs quite badly and the only real angle he had left was to use Amazon’s cashflow to buy stakes and buy business for Trainium.

Right now OpenAI is looking like the one setup to fail here. They have lost momentum big time and are looking incredibly vunerable.

Amazon should just focus on being a utility compute provider. Anything they try to do on top of that is just consistently second rate.

The revenue trajectory is now anemic, no clear sign of stopping the cash burn anytime soon, and all the liability associated with all things Sam Altman at this point. Frankly it’s a mess.

In Warren Buffet’s Cinderella party scenario it’s 11:59 at the party and someone just found an accurate clock.

Still early days but a lot of folks positioning to protect themselves from the blast radius which is what is driving market volatility.

Talk in many circles and back rooms with the ultra-wealthy has shifted rapidly from “how do I get in on this AI action” to “how do I protect myself from collateral damage when this thing blows up.”

The market has plenty of other options available for folks that just want to bet the house on red and hope for the best.

Then there’s all this other hype and nonsense tacked on to make a franken-company that’s just making a circus of the core story.

The AI IPOs are broadly in the same ballpark, and if they IPO at less than the last private valuation (a real possibility absent a perfect setup) that triggers a whole bunch of other messes.

The window to get all these things closed before it all comes crashing down is closing, hence the sudden rush to IPO.

Ads are a zero sum game where there’s only so much ad money to go around. AI doesn’t grow the pot. Google isn’t going to lose the ad game, it would destroy them. Google got scooped early on with AI search but is roaring back now.

Also consumers won’t pay high amounts for subscriptions, that’s enterprise territory which doesn’t tolerate ads. And these are the folks now slamming the brakes on spending.

Net, “ad revenue” is not even close to a viable plan to save the present train from spectacularly flying off the tracks.

Theres an extremely ugly financial picture developing that those with full blown AI psychosis appear unable, or simply are unwilling, to see.

6 months ago it was use AI all the time go! Now companies are putting use limitations in place, strict budget controls, and the wagons are circling around various “AI labs” teams that cost a ton and have shown little to no ROI.

It was all fun and games until the bill arrived. Now it seems there’s a mad rush for AI companies to IPO before the music truly stops.