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Convequity on X

Reflection AI has committed to more than $7bn of compute, and it will pay for it with investors' money, not with revenue from its new model. 1. On 5 October Reflection launched Beam, an open-weight model, meaning anyone will be able to download and run it for free. Most of the talk on X is about its benchmark claims, which have not been independently verified. 2. Reflection does not plan to sell access to the model. It plans to make money by helping enterprises and governments train its models on their own data and run them in-house. 3. This summer it agreed to pay $SPCX $150m a month for chips through 2029, about $6.3bn over the full term. Either side can end that deal with 90 days' notice after the first three months. It also signed a deal with $NBIS worth more than $1bn. 4. Reflection has raised about $4.7bn. That cash, not model sales, is what pays these bills. 5. Nebius says prepayments covered 50-60% of the capex on its four big Q2 deals, including Reflection's. It has not disclosed how much of Reflection's own contract is prepaid, guaranteed or cancellable. Until it does, I would haircut Reflection's share of Nebius's backlog. Reflection is a small part of Nebius's $40bn+ of customer commitments, so the effect on the total is small. ABBX, our AI bubble barometer, says the AI market is not in bubble territory yet: forward returns on AI capital are still above the cost of capital. It names commitments that do not show up as debt as the main risk. A lab with no model revenue signing multi-year compute contracts paid for with venture money is that kind of commitment. If more deals like this appear, I will read them as an early sign the market is getting frothy.

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