“The Scorpion and the Frog” is a fable that “teaches that vicious people cannot resist hurting others even when it is not in their own interests and therefore should never be trusted.” (source: Wikipedia).
The fable goes a bit like this:
“A scorpion wants to cross a river but cannot swim, so it asks a frog to carry it across. The frog hesitates, afraid that the scorpion might sting it, but the scorpion promises not to, pointing out that it would drown if it killed the frog in the middle of the river. The frog considers this argument sensible and agrees to transport the scorpion. Midway across the river, the scorpion stings the frog anyway, dooming them both. The dying frog asks the scorpion why it stung despite knowing the consequence, to which the scorpion replies: “I am sorry, but I couldn’t help myself. It’s my character.”
We spotted two such examples of “the Scorpion and the Frog” currently playing out in real-time:
The Scorpion & The Frog - AI Edition
OpenAI and AMD just struck yet another “Circular Reference” deal in the AI space, whereby OpenAI will buy c.$100bn worth of AMD chips over 4-5 years and receive warrants to buy up to 10% of AMD at 1c per share.
The deal announcement sent AMD shares soaring by +23%, which added $60bn to its market cap.
None asked the obvious question as to where a cash-burning start-up like OpenAI will find $100bn cash to actually make the chip purchases. Reuters was innocent enough to ask: “It was not immediately clear how OpenAI would fund the massive deal.”
ARE YOU PEOPLE KIDDING ME??? DOES NONE READ THE NEWS ANYMORE OR HAS EVERYONE DEVELOPED SELECTIVE MEMORY?!!
Literally 2 weeks ago, OpenAI’s Sam Altman secured a $100bn investment from Nvidia.
Given the money was not reserved solely for the purchase of Nvidia chips, it would be the ultimate “Frog and Scorpion” move if Altman struck the deal to buy AMD chips using the money he just received from Nvidia.
The genius of Altman’s move is that, for once, he will get something tangible in return. So far, the AMD and Nvidia chips he’s been buying have a useful life of only a few years and will become obsolete quicker than Labubus will end up out of fashion.
At least with his latest deal, Sam will end up with a 10% stake in a real company like AMD, so that’s something! Furthermore, as the FT notes, "If AMD’s stock keeps rising, OpenAI could sell its stock to fund its spending on AMD’s chips”. Back in my day we used to call this a “Pump and Dump” but anyway.
To none’s surprise, Wall Street has only nice things to say about the deal, even though AMD just signed away 10% of the company for the “privilege” of selling chips. UBS notes: “For AMD, offering an ownership stake in exchange for this commitment is arguably less attractive than a direct investment (as was the case for NVDA’s OAI deal) but even so, we see this as a major validation of its roadmap that could snowball to other customers”.
Bruv … IF EVERY AMD CUSTOMER ASKS FOR AMD SHARES EVERY TIME THE COMPANY SELLS THEM CHIPS, AMD WILL INCREASE THEIR SHARE COUNT 1000-FOLD BY THE TIME THE BUBBLE EVENTUALLY BLOWS UP!
This is a major validation that something is wrong!
Aaaaanyway….
Once these deals are complete, Nvidia will own up to 20% in OpenAI and OpenAI will own up to 10% in AMD, which will create an American-made version of the Chaebol structure. The Koreans would be proud.
Larry Ellison aka “Labubu Larry” must be feeling intense FOMO that he got left out! He’d better come up with $100bn, and fast!
We can joke all we want, but there’s one thought that leaves me very uneasy:
If indeed Scam Altman is the Scorpion that just bit Jensen - who just handed him out $100bn - is this really the person we want to trust with humanity’s future?
The Scorpion & The Frog - Corporate Edition
The second recent example of our fable has an actionable trade coming out of it.
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