Back in November, amid mounting speculation that OpenAI's massive cash burn was massively unsustainable in light of the $1.4 trillion of funding commitments by the AI company, which in turn has sparked the biggest capex flood in modern history all on the hope that the company's promised payments will be made good, OpenAI CFO Sarah Friar sparked a market selloff when amid an admission that OpenAI was “looking for an ecosystem of banks [and] private equity” to support its ambitious plans, she explicitly said that the US government would have to “backstop the guarantee that allows the financing to happen."
In other words, as we explained at the time, when all the other sources of funds dried up - clearly a scenario the company is considering judging by her response - the company would have to come to the US taxpayer.
Friar further explained that "Federal loan guarantees would really drop the cost of the financing," enabling OpenAI and its investors to borrow more money at lower rates to meet the company's ambitious targets. Right... because there is nothing like a company with $14BN in revenue, $1 trillion in "valuation" and $1.4 trillion in commitments, than loading up to the gills with government-backstopped debt... if only Enron and Lehman had thought to do the same, both would still be around.
Anyway, after the market vividly demonstrated it was less than enthused by this proposal, sending shares in the AI sector sharply lower as it signaled OpenAI itself doubted it would have the financial wherewithal to meet its obligations, the company promptly shelved any discussion of a taxpayer bailout backstop Federal loan guarantee, and even prompted a rare tweet from Sam Altman to explain why Sarah didn't really mean the things she said...
If you’ve been paying attention to what hasn’t been in the news. A Federal Equity Stake. As that is essentially what the proposals boils down to. Regardless of the window dressing. Seems to be a reoccurring trend.
The Feds at Trumps direction have taken 10% stakes in Intel and at least 9 other resource and infrastructure companies. With indications they’d seek to acquire more stakes in more companies. Mostly Defense/Security related at the moment but that could easily expand. It probably would behoove us to at least for the moment. Throw traditional economic strategy and analysis out the window. Whether it’s Keynesian or Austrian School. As clearly something transcending Economic policy is going on in the background.
Hmm - post title ‘altman and…..backdoor’ - I could say more but won’t. He likely raped his kid sister btw.
Back in November, amid mounting speculation that OpenAI's massive cash burn was massively unsustainable in light of the $1.4 trillion of funding commitments by the AI company, which in turn has sparked the biggest capex flood in modern history all on the hope that the company's promised payments will be made good, OpenAI CFO Sarah Friar sparked a market selloff when amid an admission that OpenAI was “looking for an ecosystem of banks [and] private equity” to support its ambitious plans, she explicitly said that the US government would have to “backstop the guarantee that allows the financing to happen."
In other words, as we explained at the time, when all the other sources of funds dried up - clearly a scenario the company is considering judging by her response - the company would have to come to the US taxpayer.
Friar further explained that "Federal loan guarantees would really drop the cost of the financing," enabling OpenAI and its investors to borrow more money at lower rates to meet the company's ambitious targets. Right... because there is nothing like a company with $14BN in revenue, $1 trillion in "valuation" and $1.4 trillion in commitments, than loading up to the gills with government-backstopped debt... if only Enron and Lehman had thought to do the same, both would still be around.
Anyway, after the market vividly demonstrated it was less than enthused by this proposal, sending shares in the AI sector sharply lower as it signaled OpenAI itself doubted it would have the financial wherewithal to meet its obligations, the company promptly shelved any discussion of a taxpayer bailout backstop Federal loan guarantee, and even prompted a rare tweet from Sam Altman to explain why Sarah didn't really mean the things she said...
If you’ve been paying attention to what hasn’t been in the news. A Federal Equity Stake. As that is essentially what the proposals boils down to. Regardless of the window dressing. Seems to be a reoccurring trend.
The Feds at Trumps direction have taken 10% stakes in Intel and at least 9 other resource and infrastructure companies. With indications they’d seek to acquire more stakes in more companies. Mostly Defense/Security related at the moment but that could easily expand. It probably would behoove us to at least for the moment. Throw traditional economic strategy and analysis out the window. Whether it’s Keynesian or Austrian School. As clearly something transcending Economic policy is going on in the background.