highfrequency 17 hours ago | prev | next [–]
> Some investors have questioned such deals because companies like Google and Amazon are investing money that ends up bolstering their own revenues.
This is brilliant. It's a win-win for cloud providers like Microsoft and Amazon to invest billions into AI companies because the "investment" is guaranteed to flow back in as cloud revenue (on which they have huge valuation multiples) regardless of the AI company's fate or eventual profitability.
The AI companies then get to quote massive valuations based on these investments, even though the investments were made under very unique circumstances (ie "most of this investment will flow back to us as revenue").
Finally, other investors[1] who do not benefit from the cloud spending and who may be less discerning on price will FOMO in at whatever the current valuation is. These investments not only have no stipulations about how the funds are used, but often aren't used for the business at all - instead directly paying out founders/employees.
It's a brilliant triple whammy - the technology itself is super impressive, cloud providers are naturally motivated to pump up baseline valuations due to the symbiotic relationship of exclusive cloud spend, and these valuations are taken at face value by non-cloud-provider investors eager to get in on AI hype at whatever the prevailing price is.
[1] https://www.theinformation.com/articles/th
<https://www.theinformation.com/articles/thrive-capital-to-lead-purchase-of-openai-employee-shares-at-80-billion-plus-valuation>
<https://news.ycombinator.com/item?id=39457240>
sincerely,