In a recent podcast with the venture capitalist Brad Gerstner, the CEO of OpenAI, Sam Altman, was very angry when asked about how it is possible for a company with revenues of 13 billion dollars/year to commit to investments of 1.4 billion dollars in artificial intelligence (AI) infrastructure. You [muitos] Analysts referring to the existence of a bubble of the main American technology companies – which represent >30% of the US market capitalization – were apprehensive. After all, OpenAI is considered the spearhead of technology developing AI and Sam Altman is the sector’s high priest.
It is important to bear in mind that, although the prices of technology companies reveal a P/E ratio higher than that of most companies listed on the stock exchange, the majority of them are well managed in financial terms. No technology has such a large disproportion between generated income and debt similar to OpenAI. But if OpenAI fails to meet its financial obligations, Oracle – which has significant debt, with a debt-to-equity ratio of 427% and has committed to investing $300 billion in data infrastructure and cloud services for OpenAI – will also face significant risks.
Just as today in relation to AI, the Industrial Revolution in the 19th century generated enormous expectations regarding the railway. In the USA, from 1866 to 1873, around 56,000 kilometers of railway tracks were built. However, building railway lines was a very expensive undertaking and only generated revenue after the railway was completed and in operation. Many railway companies then resorted to large bank loans to finance their operations. The construction of the railway in the 19th century was [em percentagem do PIB] the largest capital investment in US history, well above what AI companies currently spend on data centers, with the railways then becoming the largest non-agricultural employer.
In 1873, several railroad construction loans defaulted, creating a banking crisis that plunged the American economy into depression for a decade.
The railway turned out to be even more economically relevant – and profitable – than its promoters in the 1860s-70s imagined. However, there was a major crisis in 1873, because these economic benefits did not arise before the deadlines for the railway companies’ debts expired.
The railway financial collapse did not happen because America built too many railway lines, on the contrary. The problem was that American railroad companies built and financed their railroads faster than they could generate revenue. Will history repeat itself with AI?
Financial consultant and business developer www.linkedin.com/in/jorgecostaoliveira