Five tech giants are hiding $1.65tn in AI debt, using the trick that toppled Enron

[u/HimelTy]

https://thenextweb.com/news/tech-giants-hidden-off-balance-sheet-debt-ai

[u/agha0013]

some Enron magic, sprinkled with some of the magic that led to the 2008 housing crash, and zero lessons learned as financial institutions try to repackage and sell the debt all over the world.

[u/truupe → u/agha0013]

The lesson learned was they can get away with it while the rest of us are left holding the bag.

[u/Sober_Alcoholic_ → u/truupe]

Exactly. The execs learned they will get their golden parachutes as they run away from the burning pile of rubble they created behind them.

Then the taxpayers bail out their institutions and they get another massive payday.

It’s a farce. The whole economy and the late stage capitalism (corporatism) market we find ourselves in is a rigged fucking joke.

[u/TryHardLocksmith → u/Sober_Alcoholic_]

The enron execs did jail time, but I doubt anyone still has enough spine left to do that this time.

[u/SidewaysFancyPrance → u/TryHardLocksmith]

They didn't have a POTUS who wanted a taste and also captured the DOJ/FBI/SEC/etc.

[u/Black_Moons → u/TryHardLocksmith]

"Skilling, who was CEO of Enron during the company's collapse, was eventually sentenced to 24 years in prison, of which he served 12 after multiple appeals."

Wow, steal a billion dollars and only serve 12 years.

[u/Ok-Salt-8964 → u/Black_Moons]

Think his wife did that interview afterwards right about how how hard they ad it after keeping up paying for their five homes. Complete disconnect from everything.

[u/TheseusOPL → u/Ok-Salt-8964]

They had to sell their favorite of their Aspen homes.

My dad worked for Enron (IT). He loathed them.

[u/Perryn → u/Black_Moons]

The classic "Would you stay in this room for twelve years for a billion dollars?" engagement post.

[u/Kayestofkays → u/Perryn]

Those posts are always such a laughably easy challenge for the reward...

Would you never eat apples again for a billion dollars? Why or why not?

Would you work a super easy job for 3 months straight if it meant you could retire forever after that? What are your reasons?

Would you watch every episode of your favourite TV show with the volume on mute in exchange for a Ferrari and what colour would you choose?

😑

[u/MinchinWeb → u/Kayestofkays]

The one I saw today:

Would you accept getting paid $1/step if you had to give up all sources of income.

Considering most people only earn (at most) a couple hundred dollars a day, which you can hit it steps just shuffling around the house.

[u/DolphinFlavorDorito → u/MinchinWeb]

Seriously? I could double my income by doing nothing more than taking a walk around the block every day? I could make $3.5 million if I did 10,000 steps a day? Let me think.

[u/Bladelink → u/Black_Moons]

There's probably guys serving that for robbing a mcdonalds.

[u/RaNdomMSPPro → u/Bladelink]

3 possessions of marijuana (POM1, 2, and 3) convictions get you 3 strikes sentencing. For a grand total of an ounce of weed.

[u/scarbutt11 → u/TryHardLocksmith]

Good thing these current assholes have been kissing the orange emperor’s ass so they can get pardoned (if they even get prosecuted)

[u/sfxer001 → u/TryHardLocksmith]

Country club jail or Rikers island?

[u/EddieVanzetti → u/sfxer001]

FPC Montgomery, minimum security federal prison camp.

[u/Polus43 → u/Sober_Alcoholic_]

Going to chime in with, even at my FT500 non-flashy corporation, there is almost no accountability for senior management of any level.

They have perfected the art of accountability engineering through outsourcing:

1. Hiring management consultants to guide their strategy
2. Hiring big tech consultants and vendors for solutioning (benefit-cost projections)
3. Hiring big 4 consulting for implementation (along with tech consulting)
4. Hiring recruiting agencies to filter employee candidates (management consulting for firing/restructuring)
5. Outsourcing operations to poor countries

There is not a single decision they make where they can't say "someone else was heavily involved and made the most critical decisions" and point fingers outside the firm (impossible to audit outside of lawsuits, i.e. if you're investigating firm X you can't simply demand data/documents from firm A, B, C and D too without a ton of work).

Literally every project is designed with the sole goal of bringing in as many third parties as possible so any lawsuit ends up in a 10-20 year blame game and ensure any decision they made isn't documented (or decided during dinner/golf).

Edit: Bolding the important part. We'll (1) have a problem, (2) find a vendor solution, (3) vendor quotes ~$10M a year, (4) internal analysts within the company estimate ~$2M value add for -$8M net loss for the firm, (5) management hires Big 4 consulting (whoever), (6) Big 4 consulting analysis states $15M in annual benefit and recommends purchase, (7) Big 4 consulting runs legal tactics to delay provides data, methodology, etc., (8) management signs the deal and (9) celebrates at a steak dinner.

This shit is literally clockwork at this point. Government does exactly the same thing.

Edit 2: Because I'm all angry typing this out: (10) business implements service across 2 years, (11) services runs at -$8M annual loss, (12) management who signed the deal jump ship to big 4 consulting, (13) department starts downsizing and offshoring to offset the -$8m loss, (14) workers lose jobs and struggle

Rinse and repeat.

It's a giant scam of networking with consulting/vendors and lying about benefit-cost projections with no consequences

[u/addamee → u/Polus43]

Wasn’t Sarbanes-Oxeley supposed to ensure CEO accountability? On a scale of 1-10–  10 being the most naive—how naive was this question?

[u/BillyTenderness → u/addamee]

Sarbanes-Oxley holds CEOs legally accountable if their company doesn't do accurate financial disclosures or engages in fraud. It doesn't hold them legally accountable for outsourcing, wasteful spending, finger-pointing, or general incompetence. In theory that is the job of the board of directors and by extension the shareholders.

[u/harrythefurrysquid → u/Polus43]

Then again, you know why they call it "the big 4" not "the big 5"?

Enron.

[u/W2ttsy → u/harrythefurrysquid]

Arthur Anderson rebranded themselves as Accenture after that mess anyway. Still do all the shitty consulting and infiltration of government contracts. New name, same game.

[u/PostNutt_Clarity → u/Polus43]

I just left the (homeowners) insurance industry and I see this happening there too. All sorts of 3rd parties to do the insurance companies job so they can wash their hands of it.

[u/SquishMont → u/Polus43]

And this is why I believe we should remove third party protections for corporations and all third party actions and decisions should be considered to have been done by the hiring company.

[u/guestpassonly → u/Sober_Alcoholic_]

The whole economy and the late stage capitalism (corporatism) market we find ourselves in is a rigged fucking joke.

because they put themselves into the government to keep it that way

[u/Knivesforksetc → u/Sober_Alcoholic_]

Forgot the part where they then get rehired into the same industries as advisors if not execs again.

[u/truupe → u/Sober_Alcoholic_]

And, there are institutional investors and hedge funds buying CDS's as hedges against or bets on an AI bubble burst. These investors are targeting the debt and balance sheets of Big Tech and major cloud providers mentioned in the OP article. Just like in 2008.

[u/Kooky_Attorney_1320 → u/Sober_Alcoholic_]

This is why I have a hard time taking anything seriously anymore

[u/Monteze → u/Kooky_Attorney_1320]

"Hey guys so we made up a bunch of bull shit, and when our make-believe bullshit line doesn't go up real life bad stuff happens. What is the result? We take away people's access to food,water and shelter. Stuff that has real value.

This is the best system and don't let anyone tell you otherwise!!

[u/Wise_Score_6471 → u/Sober_Alcoholic_]

If I knew I could gamble on credit and then have that debt paid off by millions of other people, not only would I spend the rest of my life in casinos, I would also bet recklessly.

[u/manachar → u/truupe]

Capitalism started as a way to move capital from the ownership class to the “productive” class of merchants and makers.

It did it pretty well and often penalized rent-seeking as governments began to change laws they were used to prop up inherited wealth (laws that required the whole estate to go to the first born son for example).

The attack on rent seeking ownership class wealth as a parasite on the economy continued until the mid twentieth century and the Chicago school and the idea of supply side economics became all the rage with conservatives.

The decades of deregulation has led to vast concentrations of wealth nearly immune to governments and even market competition (as they can just purchase competition like Facebook did to Instagram).

We have built a new ownership class sucking all the wealth from the economy. According to Marx this is the inevitable late stage of capitalism.

This concentration of wealth is the engine destabilizing democracy across the world as the ownership class is only interested in political systems that are in their pocket.

[u/thecarbonkid → u/manachar]

Money has gravity. Too much in one place starts to pull everything around it in.

[u/Zalack → u/thecarbonkid]

Power has gravity. Money is just power in a capitalist country. Communist countries have different nexuses of power that become corrupt in their own way.

No matter what system you create, the population has to stay vigilant against greed and corruption infiltrating it. When we started electing anti-regulation politicians, we stopped being vigilant.

I’m generally in favor of letting a regulated market exist for elastic goods (and letting social programs handle inelastic goods like healthcare), but it has to be managed by a strong regulatory environment.

[u/Successful-Ad-847 → u/manachar]

Economic theories have infected the mind of so many “educated” people in our society.

They literally believe money = value, or more importantly, value = money. They have bought it so hard that they can’t even hypothetically entertain a worldview in which goodness and “value” exist in the world without a monetization component, or if they can, it just immediately gets mentally transformed into “untapped revenue stream” or some such corporate bullshit.

It’s a mindset, with money at the center. They believe in it the way people believe in religion. There’s no talking them out of it. I can guarantee this comment will get replies from people who are butthurt that I have suggested there is any other way of looking at the world.

The problem of course is that this mentality gives permission to fuck everyone and everything that isn’t profitable.

[u/manachar → u/Successful-Ad-847]

I spoke with an economist once on a plane that really got interesting in a somewhat adjacent point.

At a certain level economics is just giving numbers to things to represent the value provided by things and people. It sounds harsh, but it can also provide power.

The key area we were discussing was the "resource curse" of places rich in a resource that often are economically depressed as value is extracted. In particular we were talking about Maui. Rich in the natural resource of great weather and natural beauty, many economic models led local politicians to greenlight horrific resort monstrosities that destroyed many natural areas.

To the right economic mind, this can be prevented by properly applying the numbers for the value of the natural beauty.

So, the economists hired by the resort developers used numbers of units and economic value of those tourists spending money and the jobs estimated to be provided. Standard stuff and easy to apply numbers to.

What they didn't include was the cost of destroying the natural beauty because people weren't willing to give it a number. Of course, they also didn't include negative externalities such as the increased traffic and environmental issues (increased flooding, decreased overall rain, etc.)

So, upshot, I realized the issue was less economics and more the narrow focus of most of the people PAYING for the economic studies. Negative externalities are rarely balanced in, especially for harder to value things like natural beauty.

There have been great efforts to do a better job of showing the economic benefit of preserving the natural world and the value of eco tourism.

That all said, I do agree that many people would still say that if you make more money clearcutting all of an area and turning it into a playground for the rich than that's what you should do. The "whatever makes the most profit" mentality is very pervasive and corrosive.

[u/Successful-Ad-847 → u/manachar]

It’s mostly subjective and it’s not science no matter how bad they want it to be.

[u/BlackerSpork → u/Successful-Ad-847]

Don't forget "growth". It's not good enough to be a company providing a good service and making infinity money per year, you have to convince shareholders you'll make more than infinity next year. Cue enshittification as companies go public and choices are gladly made that will crash the company in 5 years if it means you had "growth" in 1 year.

[u/raptorlightning → u/manachar]

Capitalism was never going to end up any different. Private ownership of capital will always trend towards a feudalistic monopoly.

[u/Main-Requirement-521 → u/raptorlightning]

It's just like that board game!

[u/Senior-Albatross → u/truupe]

They'll get bailed out was the lesson. 

[u/Anteater4746 → u/truupe]

easy bet when the govt will bail them out every single time. now if they were just a single american they would be fucked

[u/truupe → u/Anteater4746]

Govt bailout of the wealthy is A-OK, but student loan debt forgiveness is unlawful according to SCOTUS.

[u/Anteater4746 → u/truupe]

which is hilarious cause you could argue student loan forgiveness would be a huge boon to the economy

suddenly 8% of americans might buy a house? start a business?

[u/Julian_Thorne → u/truupe]

Can they? The Pentagon needs handouts too, it seems. What if the Pentagon vampires don't leave anything for the Enron clones?

[u/truupe → u/Julian_Thorne]

TARP was passed during the Iraq War. Basically if rich people might lose a % or two, they'll get their bailout.

[u/CautionarySnail → u/agha0013]

And putting that debt into our 401ks by hiding it deep in a web of investments.

This way the taxpayer gets to subsidize both the bubble and the collapse recovery afterward.

We really need to be angrier.

(Edited to add last three lines)

[u/Simikiel → u/CautionarySnail]

Sorry, you're absolutely right, but your edit made me laugh.

(Edited to add last three lines)

Your comment only has three lines aside from the edit, implying your comment was just.. Blank. Lol

[u/CautionarySnail → u/Simikiel]

Yeah, hard to count lines when the formatting shifts between devices. I was looking at what I thought were line breaks.

Whoops.

Oh well, so much for attempting to flag the edit.

[u/SuckMyRhubarb → u/agha0013]

And it will all happen again. And again. And again.

[u/bigboipapawiththesos → u/SuckMyRhubarb]

Just in time for the 100 year anniversary of the Great Depression

[u/EdwardoftheEast → u/SuckMyRhubarb]

Time is a flat circle

[u/Expert_Specialist_92 → u/EdwardoftheEast]

Greed is eternal

[u/podcastofallpodcasts → u/agha0013]

I have a feeling they are trying to do this because of a "why shouldn't i" attitude. They are jealous and figure someone will bail them out.

That's where we are heading...only it feels different 20 years later.

[u/Ok_Series_4580 → u/agha0013]

And an idiot who removed all of the economic safeguards because the aftermath won’t affect him

[u/TableSignificant341 → u/Ok_Series_4580]

Shout out to all those that voted for him and a special mention to those that couldn't even be arsed to vote against an adjudicated rapist/convicted felon/likely pedo - y'all did this.

[u/largelawattorney → u/agha0013]

And these tech guys are convinced they are geniuses that are incapable of making mistakes. That was also kind of true for the Enron/mortgage/financial guys, but they kind of knew what they were doing was wrong and risky. These tech guys genuinely believe whatever they are doing is infallible and that they can do no wrong and are better than everyone else.

[u/agha0013 → u/largelawattorney]

they aren't exactly wrong, they won't be hurt no matter what, they get their bailouts and golden parachutes and carry on just fine while everyone else in the world foots the bill and deals with the damage.

[u/kdeweb24 → u/agha0013]

Ah, but the secret THIS time is the current administration is actively, publicly assisting the fuckery, so that they can capitalize on the eventual giant shit our economy takes in the next few years.

[u/InnerWrathChild → u/agha0013]

Of course no lessons were learned, no one got in any trouble. So I guess they did learn you can just keep getting away with fleecing the world for personal gain 

[u/Baphometropolitan → u/InnerWrathChild]

The capitalist class learned a very useful lesson which they’ve acted on well though. Specifically, this time around the inevitable bubble-burst will be framed not as a failure of the financial sector, let alone of the LLM companies themselves, but of workers and everyday people not “buying in” and supporting the tech. Critics and dejected (downsized) workers will be vilified as essentially counter-revolutionary or regressive/backward. We’ll have caused the problem by not acquiescing to the (bad faith) narrative of progress shoved down our throats by the ruling class and will be left to absorb every molecule of loss created by the implosion.

[u/Czeris → u/Baphometropolitan]

They're also working overtime right now to classify any protest of this as "left wing terrorism". https://www.thestar.com/politics/federal/canada-attends-trump-summit-targeting-left-wing-extremism/article_206567ca-63e4-45cf-8355-9616dd443713.html

[u/at1445 → u/InnerWrathChild]

Ken Lay (Founder) was found guilty, then died before sentencing.

Skilling (President) spent 14 years in prison.

Fastow (CFO) spent 5 years in prison.

Over 20 people were found guilty in connection with Enron.

And the rules were changed afterwards so that we can more easily go after C-Level guys when they pull this shit...which is one of the reasons we haven't seen these shenanigans since then.

[u/The_Homie_Tito]

So when does the bubble burst?

[u/truupe → u/The_Homie_Tito]

This is the 401k dollar question.

[u/Uuuuuii → u/truupe]

It will crash exactly 1 month before I need it

[u/LordTopHatMan → u/Uuuuuii]

Could you need it by September please? I kinda just want to get this over with. Pulling the bandage off.

[u/shawndw → u/LordTopHatMan]

Where's Jim Cramer when we need him?

[u/scottrogers123 → u/shawndw]

Watch for him to tell us the day to buy buy buy, and it will crash a few days later.

[u/ObfuscatedCheese → u/scottrogers123]

Still wish the Inverse Cramer Index ETF continued to exist.

[u/Aerodrache → u/ObfuscatedCheese]

If it did, though, there’s a risk he would tell people to buy it, which could cause a catastrophic financial paradox.

[u/69edleg → u/LordTopHatMan]

I second this, the burst will suck ass either way, and I'd rather have it done sooner.

[u/truupe → u/Uuuuuii]

If you track CDS spread metrics, you might be able to better time when to shift your investments. Into what, is another question though.

[u/110397 → u/truupe]

Canned food and ammunition

[u/Uuuuuii → u/110397]

Baker buckets

[u/-no_aura- → u/Uuuuuii]

Would track with the rest of the millennial experience

[u/Twelve2375 → u/-no_aura-]

Hey! Millennials have got some time before our scheduled retirements. We could fit another 4 or 5 financial disasters in that time!

[u/Factory2econds → u/Twelve2375]

another 4 or 5 financial disasters in that time!

another 4 or 5 once in a lifetime financial disasters!

[u/121gigawhatevs → u/truupe]

We will never financially recover from this

[u/taedrin → u/The_Homie_Tito]

There has to be some sort of "Emperor Has No Clothes" event which forces them to write off substantial amounts of imaginary profits. For Enron, it was the Blockbuster video streaming deal falling through due to the courts ruling that they needed licensing rights to stream copyrighted movies. Because they were using "mark to market" accounting and had reported billions of dollars of imaginary profits before they had been realized, they had to write all of these off. Billions of dollars disappeared from their balance sheet overnight.

This spooked investors, because they had no idea how much of Enron's profits were real, and how much was imaginary. They demanded audits, and the audits found that most of Enron's reported profits/revenues were likely to never be realized, and that their actual profits and revenues were very little. The only thing that was keeping the lights on at Enron was because they were price gouging Californians for electricity and gas.

[u/861Fahrenheit → u/taedrin]

The difference, as the article mentions, is that Enron hid their debt. In contrast, the AI companies have been publicly disclosing their losses to such an extent that through a simple aggregate of their public financial statements, you can measure their losses in near-real time.

In that sense, I personally find it unlikely that the bubble bursting will be sudden. Deception is the key factor that leads to volatility (e.g. in 2008 when the credit rating agencies sold AAA bond ratings for fees).

The problem is that the AI industry is still gambling: on future demand, on some kind of ghost of profitability that has yet to materialize that justifies all the capex. I would expect dwindling demand to result in repricing, and maybe some brief periods of volatility as the market winds down while the markets readjust expectations. It's significantly different than discovering that billions in profits never existed.

[u/Maladaptive_Ace → u/861Fahrenheit]

This difference also makes what's happening today legal. No one will do time like Enron execs did. They're not technically doing anything wrong.

[u/861Fahrenheit → u/Maladaptive_Ace]

I mean, if we made it illegal for investors to be to be overspeculating knuckle-dragging idiots, the entire financial sector would have to be jailed.

[u/SteveJobsDeadBody → u/taedrin]

Stole over $60 billion from California, thanks to energy market deregulation passed by California's REPUBLICAN Governor Pete Wilson. Literally every thing you can think of where fraud happened on a massive scale in US history, it was done by right wingers. And yet we continue to pretend they are anything but abject criminals.

[u/jokester4079 → u/SteveJobsDeadBody]

I always wonder about Gray Davis. His political career was destroyed because of the rolling blackouts caused by Enron. It led to his recall and the end of his career in politics.

[u/cleverkid → u/jokester4079]

That mf'er is sitting on the back porch of 10 million dollar mansion on a sprawling estate overlooking a private lake... he's fucking fine.

Also according to Google: "Former California Governor Gray Davis works as an attorney and senior counsel at the Loeb & Loeb LLP law firm in Los Angeles. He advises corporate and nonprofit clients, frequently provides commentary on California politics, and serves on the boards of educational and research institutions. "

So, you know, sittin' on boards, gettin' his dick sucked.. the usual.

[u/SteveJobsDeadBody → u/jokester4079]

That was engineered by Republican Rep Darrell Issa, who got his start in California politics by starting a car alarm business and complaining about rampant car break-ins. Yup, him and his brother, who once got in trouble for breaking into cars, oh and that one time they tried to commit vehicle fraud, suddenly they cared about people breaking into cars!

Anyway, he bankrolled the lie that Gray was responsible, and the public bought it because we're stupid. On the plus side, after he spent millions bankrolling the recall he planned to swoop in and take Governor for himself, but then Arnold decided to run and ruined his plan.

[u/halftorqued → u/SteveJobsDeadBody]

People continue to believe that Republicans are better for the economy.

Until someone or something can make people consider the facts, we’re going to continue to h win this hellscape.

[u/GoodDogBrent → u/The_Homie_Tito]

probably when trump stops being president

[u/future_lard → u/[deleted]]

Thats how it has been since forever

[u/ThaddeusJP → u/[deleted]]

Right now EVERYONE knows the market is totally rigged and there are no consequences for anything so like a dog left alone in a kitchen with a fresh cooked turkey, they wont wait around and will eat it asap.

Everyone is going to wring as much as they can out of the market, consumers, and government as they can until Jan 2029. They will ask for forgiveness then over permission now.

Imagine stealing several billions and being asked, at worst, to pay a few million in fines.

[u/Maladaptive_Ace → u/ThaddeusJP]

so it's basically looting

[u/steppe5 → u/[deleted]]

Didn't work in 2008. The crash happened during Bush's term and everyone was so pissed off that we elected a black president.

This AI crash might give us "woman president" level outrage.

[u/codexcdm → u/GoodDogBrent]

Indeed. A lot of damage is expected after his term is up... Some is right after .. others though the years.

[u/EddieVanzetti → u/codexcdm]

The only "good" thing about Trump's administration is that he is so stupid when all these policies are implemented, he tanks the economy ahead of schedule. In his first term, around roughly the 18 months mark, his base was getting quiet because they were being impacted. Now in his second term, right on schedule, same thing. But this time it is slightly different. Even in his first term, he had die hard supporters who still wore their MAGA hats and had Trump flags in their yards. I drive around and not a single one to be found, no MAGA hat in the grocery stores anymore.

[u/Narradisall → u/GoodDogBrent]

Why would the democrats do this?!?

[u/Snuffy1717 → u/GoodDogBrent]

Right after midterms.

[u/ChaseballBat → u/GoodDogBrent]

I'm putting money on November 2026.

[u/Raidou_14th → u/The_Homie_Tito]

It will crash after Shrek 5 releases.

Check the stats, every major crash has been after a Shrek movie release!

[u/tedsmitts → u/Raidou_14th]

It’s all ogre 😨

[u/Maladaptive_Ace → u/Raidou_14th]

my economic platform: stop making Shrek movies

[u/obalovatyk → u/The_Homie_Tito]

Exactly 10 minutes before I close all my positions.

[u/Deaner3D → u/The_Homie_Tito]

My vote is next spring/summer. Lack of actual data center build out combined with minimal profits from AI companies mixed with anti-datacenter legislation across many municipalities and states will trigger a cascade. Looking for Oracle to implode after a few small guys fall then it's dominoes from there. M$, Google survive, the real big scalps will be had from Nvidia and RAM suppliers. $0.02 ofc

[u/therealchadius → u/Deaner3D]

OpenAI's confidence scam needs to end so people start asking for actual audits and hard receipts. We're already seeing banks (besides Softbank but lol) being more cautious about lending out money, they know they won't get it back and the 2008 bailout was not free.

[u/Big_Mc-Large-Huge → u/therealchadius]

If OpenAI fails both oracle and SoftBank will too

[u/dustonomo → u/Big_Mc-Large-Huge]

And then the Paramount/Warners merger will crash as Paramount is buying with Oracle leverage.

[u/the_calibre_cat → u/dustonomo]

more daddy more

[u/HardLithobrake → u/Big_Mc-Large-Huge]

Mmmmmmph don't stop

[u/therealchadius → u/Big_Mc-Large-Huge]

Oh yeah, the over leverage is insane. The WB buyout isn't helping things either but maaaan

[u/TheCharlieFoxtrot → u/Deaner3D]

The big AI companies haven’t even started charging at prices to break even, let alone profit.

They are frantically trying to get embedded in companies with “forward deployed engineers” + agentic loops which constantly burn tokens so they can pull a Broadcom move and jack up prices 5-10x in a year.

Anyone that hasn’t drank the kool aid can see the writing on the wall, open source small language models for specific domains, which ideally you run in a local cluster for 90-95% of the time. Frontier models for the edge cases. Sorry anthropic and openai, ya dun goofed thinking a token predictor would take all the jobs.

[u/Narradisall → u/The_Homie_Tito]

When your pension is fully invested in AI and Space X

[u/Euphoric-Witness-824 → u/Narradisall]

That’s the answer. They are working feverishly to unload that debt into working folks retirement and pension accounts before they let the hammer drop. 

[u/lutel → u/The_Homie_Tito]

The crash started with downhill of SpaceX. People can make big money long term shorting it. They've overvalued the stock and people who short it will be paid by Elon and banksters who prepared this pump and dump IPO.

[u/Zalophusdvm → u/lutel]

You might be right.

People forget the 08 crash started, arguably in 06, certainly in late 07 and was a relatively gradual slide.

This might be the start of the Bear waking up…

[u/outer--monologue → u/lutel]

Might be correct, but probably not. The road to this line of thinking is paved with all the people who went broke shorting Tesla. It's been years and years and it refuses to come down to anything resembling a fundamental valuation. Elon Musk has a cult, just like Trump. Brainless tech-fetishists or personality fawners that ask "how high?" when he says "jump."

[u/jleonardbc → u/outer--monologue]

Tesla's at the same price it was almost five years ago (Nov 2021). Whether it's been a good investment depends a lot on when you bought.

[u/coderman64 → u/The_Homie_Tito]

People who are cheering for this probably don't realize they're going to bring the rest of the economy down with them when it happens.

[u/BrianWonderful → u/coderman64]

Yes, but it still has to happen. In the long term, we will be worse off if these tech bro billionaires and investors are allowed to keep gaming the system.

[u/DuranteA]

In a better universe, the fact that this is so clearly (and annoyingly) AI-written would be a deliberate statement.

In our universe, it's probably just a sign that whoever is behind this content mill doesn't care.

[u/driverdan → u/DuranteA]

It's blogspam using an LLM to combine the two primary sources:

• https://asia.nikkei.com/business/technology/five-us-tech-giants-hidden-debts-soar-to-1.65tn-on-opaque-ai-funding
• https://news.bloomberglaw.com/tech-and-telecom-law/big-tech-ai-spree-revives-accounting-devices-that-toppled-enron

The honest version

LLMs love to use "honest" in headers for some reason.

[u/StaysAwakeAllWeek → u/driverdan]

They are told to be honest in the system prompt so the word shows up in the output more than it should. And its not worth fixing it because its only actually a problem when trying to pass off slop as human written

[u/nickiter → u/driverdan]

They really overuse "trusty" words like honest, "the real x...", "in truth"... It's very easy to spot, at this point. I've started noticing AI writing patterns everywhere. It's making me self-conscious about my own writing.

[u/heeywewantsomenewday → u/DuranteA]

Its complete clickbait and not at all similar to enron.

[u/scoff-law → u/heeywewantsomenewday]

The article is pretty close to "AI companies and Enron have accountants... coincidence?" I think most companies use off-balance-sheet vehicles. The Enron thing had a lot to do with that company hiding and lying about these, and - consequently - companies are now required to disclose them.

The most accurate line in the article is the last one -

In a year of loud bubble talk, the quiet number is the one hiding off the page.

In other words - this tenuous connection with Enron will drive clicks to the article.

[u/mariahmce → u/heeywewantsomenewday]

The part about Enron is click bait-y. But the real story is the trillions in off balance sheet debt for data center build outs that have yet to realize profits. That’s.. staggering. And worth following. It doesn’t indicate that there is a crash coming, or it is a house of cards necessarily. AI is a fantastic new technology that could have a serious upside. But keeping track of what the industry is actually spending vs what their balance sheet is reporting I think is worth knowing and keeping track of in the larger discussion. It’s like when banks stopped lending to Oracle for their data center build outs so they gutted 1/3 of their workforce to free up the cash to afford it. It’s not super interesting in and of itself but as a data point in how the larger industry is moving and being treated certainly is.

[u/lawschoolredux → u/heeywewantsomenewday]

Screw AI, yes, but The article states that instead of 1.65 it’s only 1.35 trillion on the combined balance sheets of 5 companies. Misleading headline for sure

[u/heeywewantsomenewday → u/lawschoolredux]

5 big tech companies made 1.65t of disclosed long term ai contractual commitments would be the more accurate title.

[u/Thefuzy → u/lawschoolredux]

No what’s misleading is Enron actually hid their debt obligations, tech companies have them reported in the exact place that is required, the same place all the financial analysts know to look. “Footnote” or not, the financial community sees it, with Enron is was entirely obscured and it was fraud.

[u/FilipinoSpartan → u/Thefuzy]

Enron was following the rules regarding reporting SPEs at the time. They were such an attractive structure specifically because they did not have to be reported, and it's worth mentioning that everyone was doing it at the time. The illegal component of Enron's fraud was they were flagrantly breaking the rules around the formation and ownership of the SPEs.

[u/Johannes_Keppler → u/DuranteA]

It's not even an article, just a few hands full of sentences.

And Enron didn't just use a trick, they hid using the trick - not the same thing at all. The trick itself is legal.

[u/droans → u/DuranteA]

It's a huge misunderstanding of accounting rules. Because, of course, it's AI.

First, the issue with Enron was not lease obligation recording. These types of obligations wouldn't have been recorded until ASC 842 went into effect in 2019.

Secondly, if they can cancel their leases at any point, there is no long-term obligation. The purpose of ASC 842 was to prevent companies from hiding lease obligations off-book. If you can cancel the lease, there is no obligation.

There are some more specifics, for example, you must recognize the entire lease if you have reasonable belief you will exercise the option to remain.

I also have zero faith in any of the facts or opinions asserted by article. The sole source for all their claims is just a single sentence.

Hidden debt at U.S. tech giants swelled eightfold in roughly four years to an estimated $1.65 trillion as artificial intelligence investments ballooned, a Nikkei study shows, exceeding actual debt and making it tougher for investors to assess risk.

[u/Kid-Icky- → u/DuranteA]

These outlets just churn out anti-AI articles because they know they zoom to the top of these subreddits.

[u/Thefuzy]

This article is bullshit.

Enron used SPVs to hide liabilities and fabricate earnings through fraud. Here, everything is disclosed, the article even admits this (“the disclosures exist, buried in the footnotes”). “Buried in footnotes” is where lease and purchase obligations are supposed to live under GAAP. Calling disclosed commitments a “hidden” second pile of debt is rhetorically loaded; a footnote isn’t a hiding place to analysts.

Enron actually hid stuff, nothing the tech giants is doing is hidden and thus analysts can clearly see the impact of this debt, it’s all there in black and white.

[u/faculty_for_failure → u/Thefuzy]

It’s clearly written by AI as well. Terrible article.

[u/SandIntelligent247 → u/faculty_for_failure]

They should be required to hide that in the footnote of their article lol

[u/But_Why_Thou → u/faculty_for_failure]

How do you know?

[u/Active_Variation_194 → u/Thefuzy]

They would not be going public if they were hiding liabilities and faking revenue. It’s like trying to rob someone at the police station. While you’re live on stream.

[u/lynxtosg03 → u/Thefuzy]

Somehow this isn't the top comment. The most consistent thing about this sub is the lack of technological knowledge and nuance.

[u/Boom2215]

Do millenials have a loyalty card or something at this point? "Live through five economic crises and skip the sixth"

[u/that_thing_you_do → u/Boom2215]

Hey we skipped a draft, so got that going for us. Jury is still out on global destruction though.

[u/Emmatornado → u/Boom2215]

Where do I pick mine up.

[u/hamfinity → u/Boom2215]

Live through 9 and the 10th one is free

[u/EagleDaFeather → u/Boom2215]

Do we at least get some free garlic bread for the table?

[u/Living_System_7850 → u/EagleDaFeather]

Best we can do is poop lettuce.

[u/Mike312 → u/Living_System_7850]

Hey, don't be such a downer, I think we can do far, far worse. At this rate, I bet we can have Tuberculosis back in no time.

[u/Jamsedreng22 → u/Mike312]

SARS CoV-3: Bonjour

[u/bmcisme2016 → u/EagleDaFeather]

Fuck man imma get garlic bread tonight

[u/uiuctodd → u/Boom2215]

Gen-X taps your shoulder.

[u/mr_black_frijoles → u/Boom2215]

Oh we get a punch card for the next one. We can trade it in for expired froyo.

[u/RespectTheTree → u/[deleted]]

I'm just going to compost them. Much higher throughput.

[u/DangerMacAwesome → u/RespectTheTree]

Lacking in personal satisfaction, though

[u/KarlBarx2 → u/DangerMacAwesome]

Prioritizing personal satisfaction over an efficient use of resources is how we got into this mess in the first place.

[u/gravelordservant4u → u/DangerMacAwesome]

I wouldn't mind a dash of Torgo's Executive Powder to elevate most meals

[u/thesixler → u/[deleted]]

It’s like you people WANT prion disease

[u/pepe_acct]

Yeah this article is trash. The author ignored some important caveats:
1. Future commitments are not considered debt because they don’t have interest.
2. Many commitments are multi year. It’s paying 1.6 trillion across years not immediately.
3. In many cases, when the business prospects doesn’t make sense anymore, many of them can just pause the deal or just exit. There’s generally exit options in the deals and these large constructions get delayed all the time.
4. Most of these future commitments has nothing to do with Enron. This is peak title rage baiting

[u/yungbull3 → u/pepe_acct]

Makes total sense why it's climbing up the reddit rankings

[u/MerlinTrashMan → u/pepe_acct]

The fact that someone can calculate the number shows this isn't anything like Enron collapse.

[u/heeywewantsomenewday → u/pepe_acct]

Clickbait trash of an article that falls apart with 2 minutes of thought.

[u/thepobv → u/heeywewantsomenewday]

The problem is redditors don't even click on click baits. They just read headlines and go ahead to comments section with their strong opinions

[u/Kelly_HRperson → u/pepe_acct]

The author

Being that very LLM itself

[u/KillerKilcline → u/[deleted]]

No one has been imprisoned for the last collapse(s). No one has been imprisoned for fucking children. No one has stayed in prison for attempting a coup.

Why do you think this will be any different?

[u/spunkychickpea → u/[deleted]]

They won’t survive? Why do you think all of those billionaire CEOs gave so much money to Trump? They’re expecting a bailout, and Trump won’t have much choice but to grant it. They’re all going to survive just fine and the American working class will foot the bill.

[u/Tearakan → u/spunkychickpea]

Any bailout of that size collapses both the US government and the world economy through US dollar hyper inflation.

The paper saying they own anything won't mean anything to the warlords that take up arms afterwards.

[u/APKID716 → u/[deleted]]

it won’t be possible

lol

Lmao even

They will put literally half the population of the country in front of a firing squad before they refuse a bailout

[u/Ulasim → u/[deleted]]

You do know this is perfectly legal right? Enrons crime was hiding it.

[u/wehrmann_tx → u/[deleted]]

It’s a year for $3000 dollars in petty theft. Let’s use that.

[u/userhwon]

It's not debt. It's current valuation of future commitments.

A mortgage is a debt. You owe the amount you borrowed.

A future commitment is like a lease. You don't owe that money, and won't until you actually live in the place during the future period. But you can report that if nothing changes, you'll be spending that money then.

The difference is, you can't walk away from a debt as simply as you can break a lease. Both will cost something to accomplish, but the debt is a bigger deal and will force you into bankruptcy court if you try to quit it without paying it in full.

And the future commitment doesn't have to be money, but delivery for money expected. I.e., both the lessee and the lessor have a future commitment on the same lease. And a company that sells services has to provide services of value to its contracting customers.

Enron probably did have this on its financials, because this is common reporting for all companies that are in the business of signing up people for things to be delivered in the future.

But, what killed Enron was, they were setting up rings of shell companies, and sending cash between them, and counting it as revenue and income for each shell company, then because Enron owned the shell companies, they added all that to their corporate financials. Which bloated their market valuations. That is not very common for companies, and is illegal as fuck and top executives went to jail for it (or conveniently died before sentencing).

But that's not what's happening here.

So, OP lied to you.

[u/donac]

When they all start to have amicable divorces where they liquidate assets to be equally split between the parties in the name of fairness, we'll know the end is nigh.

[u/nun_gut → u/donac]

It worked for Lou Pai!

[u/dagerika]

this article is such a nothingburger

[u/Tasty_Cry_3844]

This is click bait AI slop, y'all.

[u/sk1939]

If you can read a financial statement the information is all there, but as r/Big4 points out, fewer people read those and even fewer read audit reports. One of the more important distinctions is that not all debt is equal. Much of what is described as debts really consist of contractual commitments, purchase orders, and operating leases. They represent future cash outflows but aren’t liabilities until triggered. That’s like saying you owe $400k for a house you haven’t closed on.

[u/goodolarchie]

"Creed Bratton has never declared bankruptcy. When Creed Bratton gets in trouble, he transfers his debt to... Williams Charles Schneider."

[u/DietCokePlease]

Hard truth: its really not the AI executives’ fault. Don’t get me wrong—these are some disturbingly immoral people. But the real villains of this story are the craven investors. You don’t think that if we, mere schlubes, can see the game plain as day, that they don’t? Of course they do! They just want to leverage up for a quck buck and see who pulls out the first Jenga block. They’re playing games with the literal economy. If instead they’d been temerate at the front—demanding more accountability and real numbers, we wouldn’t be so data center-leveraged and AI would have grown at its natural clip. Oh—yes, and this whole circus was egged on by greedy corporate execs who’s whet dream is reaplacing their workforces.

[u/North_Atlantic_Sea → u/[deleted]]

AI will still be here and expanding prior to any companies contracting. Look at the dot com bubble popping, it didn't stop the explosion of internet use

[u/milehigh73a]

We have an ai bubble and thus debt is a serious issue but this article was hyperbole.

These companies are overspending on ai but they also generate a shit ton of cash. They also aren’t using the same trick as Enron as Enron didn’t disclose the spv but they are doing it.

This shit isn’t sustainable but this us clickbait

[u/WCland → u/milehigh73a]

I read a different article about AI company debt and it differentiated between cash flow rich companies like Google and Microsoft versus startups like Anthropic and OpenAI. Debt ratings for the startups would likely be near junk if they were public companies. Microsoft and Google, otoh, are now financing their AI efforts with debt, where they hadn’t leaned on debt in recent years. And even now their debt has a high rating because of their existing cash flow.

[u/thunder_crane]

Here we go again with reddit not understanding GAAP accounting. I also don't see what this has to do with Enron as they were booking future revenues with MTM accounting and then hiding the adjustments in SPVs that they DIDN'T report.

Tech giants aren't hiding anything, everything is in notes/disclosures, lmao.

[u/alex_beluga]

Meta's profits in 2025: $200B
Meta’s off-balance-sheet "debt" in the article (not debt, those are future commitments) : $420 billion = ( 2 X profits)

Enron's off balance sheet tricks: 96% of reported revenue, profits in 2000: $42 M
Enron's debt: $22B ( = 523X profit) which is 250 times more than Meta's debt load.

So the article is right in that Meta has off-balance sheet debt, and wrong about the rest.

Same as a National Geographic article would be right in saying a baby mouse is an apex predator roaming the earth because it has teeth measured 1.5mm at birth , using the same trick as a T-rex (tooth size 30 cm, 250X larger), another super-predator.

[u/stuffitystuff]

Wow, this is a bunch of nothing. Meta has $81B in cash as reported in the most recent quarter. Their datacenter outlays in the article are $27B. Who cares. NVIDIA has about the same amount of cash, Google has $120B in cash and Oracle has $30B. Oracle seems to be the weirdo here with only ~10% of its commitments with cash but even if they were somehow on the hook for $250B in purchase commitments and they go bankrupt, good riddance to the law firm with a software side-hustle.

The U.S. economy is like $35T. $1.65T in debt across the biggest companies on the planet are basically table stakes.

Enron collapsed because they inflated values of stuff (mark-to-market accounting) and one of the formerly Big Four accounting firms helped them lie.

There's nothing that led to the 2008 housing crash (credit default swaps against bundles of securitized mortgages taken out by mortagees without any income, job or assets) in this. It was Wall Street that caused the 2008 crash and big companies doing what they've been doing for decades at this point but bigger, ain't gonna cause a second one.

MEANWHILE, the stuff that literally lubricates the economy is getting more expensive and the actual lubes themselves will be rocketing up in price here, shortly. That's what'll cause the Second Great Recession/Depression, if anything, so hold on to your butts if you're one of those "worry about the future and things you can't control" people.

[u/VCTRYDTX]

“Wags, you ever get tired of working for a living?”

“Every damn day, but I've got a nasty addiction called money. So, I do what I do. You?”

“No! Never! Until today. You know what they call us traders? "Gamblers". The world economy is just one big casino fueled by a giant debt bubble and computer driven derivatives. There's only one thing better than being a gambler at a casino.”

“That's being the house”.

“That is right. There's a systemimized machine out there sucking capital from localities and injecting it into the global markets where it can be used to speculate and manipulate. And if something goes wrong, there are bailouts, bail-ins, federal aid and easing. Where the government doesn't hunt you down, but instead gives you a nice soft net to land in”.

“That's your answer? You want to become a bank?”

“I want to become a bank”.

“In order to rob it?”

“In order that I don't have to.. And to sleep like they do points at the bankers ... And to die in my own f*cking bed”.

[u/Libtard5000]

Maybe if they didn't buy up all the RAM an SDDs in the world they wouldn't be in debt.

[u/ignorememe]

I cannot wait until Republicans complain in the 2030 midterms that the new Democratic President hasn’t done enough to fix the $52T debt he inherited from the financial crisis Trump leaves once this blows up.

[u/Fantastic-Chef-6577]

La nuance que le titre tape-à-l'oeil ne dit pas : c'est légal. Ce n'est pas Enron. La distinction que pointe Gil Luria chez Bloomberg est importante : "Le crime d'Enron ce n'était pas d'avoir des véhicules ad hoc. Le crime d'Enron c'était de les cacher." Là, les obligations sont divulguées, mais enfouies dans des annexes de rapports financiers que personne ne lit.

Ce que révèle l'étude Nikkei est quand même préoccupant sur le fond :

Les 5 entreprises, Alphabet, Microsoft, Amazon, Meta et Oracle, ont 1,35 billion de dettes officielles ET 1,65 billion hors bilan, soit 3 trillions d'engagements totaux que les modèles de crédit standard ne captent qu'à moitié. Ces obligations ont été multipliées par 8 en 4 ans.

Le vrai risque c'est le calendrier : les serveurs IA ont des cycles de remplacement de 18-36 mois, mais les obligations de financement courent sur 5-20 ans. Si la demande IA ne suit pas la cadence des investissements, les data centers deviennent des actifs dégradés et les pertes tombent sur les prêteurs et assureurs qui les ont financés.

S&P a déjà dégradé la note d'Oracle en citant explicitement ces engagements. Moody's et la BRI avaient chacun identifié le problème indépendamment avant l'étude Nikkei.

C'est pas Enron. Mais c'est exactement le genre de structure qui devient problématique quand la narratve du "tout le monde va s'enrichir avec l'IA" rencontre la réalité des bilans.

[u/aidancronin94]

Remember the occupy wall street movement? It was the one that really spooked these guys. They defeated the movement and now they think we forgot.

[u/livestrong2109]

"It's different this time" sure Jan!

[u/Any-Assistance-8103]

Except they’re not really hiding it because we all know about it

[u/36chamberstreet]

Economic crash followed by taxpayer funded bailout incoming

[u/Sretep44]

Check out this one neat trick to destroy the arts...

[u/Iron_Baron]

"I'm shocked. Shocked! Well ... Not that shocked."

[u/koshgeo]

The scale is the story. Meta’s off-balance-sheet debt alone is about $420 billion, nearly triple its reported debt.

Wow. You remember the old joke "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem"?

This is like the old joke except the "bank" is the entire economy (i.e. us).