So I ran across something quite audacious reading my Financial Times this morning. Microsoft was claiming they had lots of AI SALES, on the order of many billions. I wondered to myself: how is this possible? What AI services are being paid for with hard cash?? Are people all over the business world paying for voice synthesis? Are business websites paying for occasionally faulty searches?? My understanding is that most businesses were just experimenting with it; not paying tons of licensing as they had for:
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Office;
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Windows operating system upgrades (needed to run the latest Office…); and
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< giggle>Bing advertising?</ giggle>
I read further into the article; the revenue came from CLOUD sales.
Now the latest version of Office requires some cloud usage; but that’s mostly factored into the cost of the license already. The article appears to imply that the cloud sales were coming FROM OPENAI.
So let me get this straight: Microsoft throws a ton of money at Altman and OpenAI; OpenAI needs lots of cloud to make their AI cars go (even though they periodically run off the road…); so OpenAI is buying back cloud from Microsoft.
What do we call that? A WASH SALE! It’s sort of like a “wash trade” [often done in crypto by two arms of the same entity; you sell crypto and buy it back, to mislead people on the sidelines that there is a lot of interest in an asset -Mark Karpeles of Mt.Gox had done this after some bitcoins had gotten stolen from him, to pump the prices of what he had remaining to cover his theft…] The only cost of making such artificial hype for the asset is the trade/execution fees. If it generates a big hype arc, it’s well worth that cost.
What’s mind boggling is that the major analysts and players like CNBC, Blackrock, etc. are keeping mum on how underwhelming that ““profit”” report actually is. They are so desperate to double-down on the widespread bad calls of most of the market on AI and Tesla, that they are in unison putting their fingers to their lips, making the “shush!” gesture.
If somebody in finance or Microsoft can explain the practical source of these cloud purchases, please do enlighten us! If anything, many companies are now experimenting with running their own clouds, having found out from years of experience that Google, Microsoft (Azure), and AWS are NOT going to be sweethearts with their cloud pricing! Nowadays most companies only use cloud to prototype site runs, to see if the product or service will work at scale -no need to set up your own cloud if the product or service just doesn’t perform well in testing.
It’s a rather scary time now in global finance.
If you’re wondering WHY would such companies engage in this seeming deception in AI: their job is to hoover up as much money as possible before the house comes down; then they and their staff can comfortably sit it out in their bunkers, until however long it takes for the next growth product to appear in tech (which might be years…)