Amazon’s $8B Nvidia chip move and $1B data center pledge: Who’s holding the AI risk?

Financial Times is reporting that Amazon wants to shift $8 billion worth of Nvidia chips off its balance sheet and it is exploring how to do so. That it would create, as many of these companies have already done, a specialurpose vehicle that would own those chips. Amazon could lease them back and people by the way could invest, outside investors could invest in that special purpose vehicle. And this is becoming increasingly common. you've already seen what's what's I guess what's unusual about this is that Amazon owns the chips and now is looking to make the shift whereas a lot of um some of his competitors have initially made those kinds of structured investments chips that are off balance sheet >> and we see the same thing with data center leases that are being done through joint vehicles and whatnot to keep some of that off off balance sheet as well. A lot of these companies just looking to say how can we make the numbers look healthy? What are the creative ways we can find to do that? This is getting some push back. most notably from Ed Zatron who is the longterm >> bear push he pushed back against everything. >> I I do think it's it's >> his take is this this is the dodgiest and most desperate thing I've seen in the bubble so far really scraping the bottom of the barrel. >> However, Amazon's not alone here. >> Exactly. I mean it's kind of SOP at this point um for these things. >> Hear me out actually. I mean I've been a I've been a critic of what these these these hypers skills have been doing but is this that bad? I mean I don't think it's actually that bad. You're taking the chips that you own, right? And the or the debt that was used to to buy these chips. You're you're you're now putting it into new vehicle. You [snorts] have outside investors coming in getting selling equity, selling new debt, and then Amazon is paying the money, >> right? >> Well, the the one >> for the use of the chips like is this that bad? I don't think it's that bad. >> I would say it's bad in the s only in the sense not about not necessarily only one way that it could be perceived as bad is that we will have less understanding of the risk. Yes, >> because when it's off balance sheet, there's less transparency. >> That's the one thing I would say for all of these companies that put the stuff off balance sheet, then you're just not sure. You know, there's so much interconnectedness. Is this stuff getting paid on time? Who holds the risk? You know, less about all of that >> because the question is who is owed what and when. And that gets harder and harder to >> as we talk about who's the bag holder that we >> clearly it's the people buying the debt of this of this SPV, >> but who are they? >> Who are they? We don't know. It's >> not Amazon. >> Well, they haven't done it yet, so we don't know yet. >> No, no. Here's the problem. Okay, >> this is in my opinion, this is not a really bad off offshoring stuff or offbalance stuff. Is if Amazon was investing on the back end, then yes, that would be that would be some kind of crazy off-balance stuff, right? This is just like we're taking that debt and putting it somewhere else and we're no longer we're no longer owning that debt, right? >> Maybe they own piece of it, I don't know. But they're saying someone else is going to take that debt and we're going to just pay a nice nice little coupon there. Nice little lease there. And >> well, you know the other thing that Amazon is spending on >> looking at. >> It's trying to Oh, you guys, we hear you hear a little Brian Sazy. I hear I hear some voice. Amazon is spending a billion dollars um on data like basically to um smooth ruffled feathers. Let's say Matt Garmin, who's the head of Amazon Web Services, is out with a long essay, a 30,000word essay, uh where he says, "We're going to spend a billion dollars to um make commitments in the communities where we're building data centers um to help build out, you know, schools or whatever um and try to reverse the um you know, the perception of data centers." He also by the way says no more NDAs like we will not go into community and ask them to sign non-disclosure agreements which is something I believe good that's good I believe isn't that Sachinella told that as well something backed off from now some legislators have talked about putting that making that law that you couldn't do this but you know obviously some of these companies are trying to get ahead of that >> I think this is a good I think this is a positive move by Amazon maybe this is even them like front running it being like hey journal write this story about us doing this thing but but yeah I mean they clearly completely understand. It's not just like I don't want this thing spewing CO2 in my in my neighborhood. It's more about like people are saying so this thing can take my job too like it's a double whammy, right? It's it's it's a double whammy of of how it changed my life and also how it makes the quality of my life bad if it's in my neighborhood. So this is a big deal I think it's this is a good step in the right direction for Amazon to be doing these things. Not like not like I think Amazon is the most like loved company in the world, right? Or in the country. So, I want to pull on your jobs point for a second because I've I've been having increasing conversations with people around this idea that the argument you hear especially from state governors who want the business of the data centers in their states is these will create jobs. These are job creators for the local community. >> And that is true while they are under construction and getting set up. But data centers once they're up and running are very labor they're very labor light. >> And so the question is fine, you created a bunch of jobs. What happens when they disappear? What's funny you mention what's the community left with funny you mention because a lot of the unions that do electricians plumbers construction builders HVAC >> they're all positive on do not delay these data centers but it's almost like you're saying it's almost shortsighted in sense okay yeah we got a project take a couple years to build what what now what next what's next >> well really for the community >> but isn't it better to have it than not to have it at all even if it's just temporary >> that's the that's the >> if you are like an HVAC worker of course you want that contract the question is for the community on the back end where real jobs were not created. >> Right. Exactly. >> I I want I just want to mention something else. I mean like when we talk about data centers and all of the bad um juju and all of the bad sentiment around them, it's really two things. It's one, I don't want a data center in my town, >> and it's two, I don't want AI at all. Right. And on that latter point, um Derek Thompson is out with an interesting Substack this morning where he he says yes, like you've got the data center stuff, you've got the extinction stuff. He says, but there's something else that he thinks is underappreciated. I mean, and it has again to do with how this was sold to us, right? >> And it's actually on the positive side. He he talks about in 2021 Sam Alman talking about that like the price of many kinds of labor is going to fall towards zero. Mark Andre like everybody talking about abundance as a result of AI. AI is going to make everybody's lives better. It's going to make stuff cheaper. >> And guess what? >> Nothing happened. >> That the opposite has happened. It's not even that nothing has happened. It's that the opposite has happened. everything is more >> and in fact AI is a part of that story is like that's something also that makes people like you feel like you were sold a bill of goods >> right >> um going to like do this big thing and it's not really doing that now I don't necessarily know how many people consciously were paying attention to the abundance argument like regular Americans are paying a lot more attention to uh this has a chance of wiping out humanity than they were to two years ago you know >> it's a bit of a Silicon Yes. Um but sort of in the background and subconsciously people know that they're paying more even as this this big thing is happening. >> Touched on the Egan Jones thing right about all these sort of uh jobs that rely upon screen people in front of screens people professionals going away. Just yesterday Musk Elon Musk just liked to tweet about how uh a certain AI system was able to duplicate and improve upon the work of of entry- level accountants and accounts junior accounts like we don't need anymore. passing test, doing better work. He's like, "Yay, this is great." >> Most Americans don't feel that way. They think about, "Well, does that mean I'm next?" Or if you're an accountant, I'm definitely next. Right? >> Or if you're in college looking at entering the workforce, because most of the jobs were placed first are the I don't want to call them menial labor, but the junior jobs where your job where if you were at a consulting firm or at a bank, a lot of your job was >> uh presentations, PowerPoints, slide decks, um data entry. If all that can be automated, how do you get into a good firm? How do you get into a good job? >> I know there's this whole thing, well, anybody can start a company. The barriers to entry are so low. Is the reason that people don't start companies in this country because they don't have the tools? Is that really like you have to have the ideas first, >> right? >> Also, >> and you have to have the risk appetite. >> It's not just that. It's like, is my healthcare nationalized? >> What am I on retirement? That's right. That's right. >> Um, you can't take risks if you if you know you don't have healthcare, you know. >> Right. Right. This is part of the promise problem that we've seen even people like Sam Alman address that we got the messaging wrong. When you potentially overpromise and potentially underdel, that's not going to look good 6 months down the road when you're asking the American public to be okay with data centers, to be okay with all this spending, to be okay with a higher inflation rate. >> Well, we got the answer for you, Jake. We can just put data centers in space. We can put them in space.