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Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

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Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#71

Post by Calamity »

ElProlactin wrote: post #68
vannevar wrote: post #67

Earlier quoted context omitted.

>CoreWeave is using debt to make the purchases but the backstop provided by Nvidia ostensibly helps it get better loan terms. According to the article, the $6.3B is a floor, not a ceiling. And it's not clear whether CoreWeave is actually paying cash or getting the GPUs on credit. If the full amount is getting booked, it's an accounting loophole that's being exploited. If GM sells Hertz a million cars, but says "Hey,…

Your GM/Hertz comparison is not applicable here. Under GAAP accounting rules, GM wouldn't be able to book those as sales because it was obligated (or likely) to buy back the asset. Under the rules, this means the transaction gets treated as an operating lease. The cars would stay on GM's balance sheet and the revenue would get recognized over the lease period. The CoreWeave-Nvidia deal is not the same because Nvidia…

I mean, okay sure, but modify the counterexample they suggested slightly and then it's the same thing.

If GM promised to "rent out" (instead of buy back) the cars it sold to Hertz as a backstop (if not enough customers are renting), then the comparison is apt.

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#72

Post by psvv »

montyanderson wrote: post #47
simsla wrote: post #45

Earlier quoted context omitted.

It looks more similar to the 1929 crash to me, where "too big to fail" blue chip stocks were overinvested and overvalued, and the value adjustments rippled through the rest of the economy. If NVIDIA does get a meaningful value adjustment downwards, it'll probably survive, but it'll impact the S&P500. People will need to sell off other stocks to cover the losses, etc. etc.

nvidia's forward p/e is 24. walmart's is 39.

That seems to indicate the market is more confident in walmart's earnings than nvidia's.

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#73

Post by mNovak »

ilaksh wrote: post #44

Dumb question, but when the Nebius capacity dashboard says they have around 3 non-preemptible B200s available, does that mean _total_, or is it just how many I myself might be able to rent on demand? One aspect of the profitability might be the utilization and the pricing a few years down the line for slightly older hardware. Already now it seems like the increased processing you get from newer devices versus the cos…

> So the question is can they keep the pricing up on the older ones a few years down the line

They don't expect to keep the prices flat over time, and everyone involved will have planned for this. Prices are highest when they're the newest and greatest (part of why it's valuable for neoclouds to be first in line for new models), and drop year by year as newer GPU models can do equivalent work at lower cost.

You can see a pretty cool dataset of this at [1]; H100 prices where $3/hr in 2023, and dropped linear-ish to $1.75/hr by 2025. And also the notable exception that prices are up this year due to shortage.

[1] https://semianalysis.com/gpu-pricing-index/

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#74

Post by leonidasrup »

montyanderson wrote: post #47
simsla wrote: post #45

Earlier quoted context omitted.

It looks more similar to the 1929 crash to me, where "too big to fail" blue chip stocks were overinvested and overvalued, and the value adjustments rippled through the rest of the economy. If NVIDIA does get a meaningful value adjustment downwards, it'll probably survive, but it'll impact the S&P500. People will need to sell off other stocks to cover the losses, etc. etc.

nvidia's forward p/e is 24. walmart's is 39.

That is exactly the point. These circular deals artificially increase the earnings of company and as a result artificially decrease price–earnings ratio.

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#76

Post by lern_too_spel »

Mistletoe wrote: post #30
rapidfl wrote: post #21

Earlier quoted context omitted.

People are looking for the AI bear case - so this headline gotta work better. Its not a bad idea haha. More people suspect there is some circular shenanigans but want confirmation -- so maybe this is the best way to lure them in. Come as the bear, stay for the bull. With just these 2 comments, now I'm really gonna read that article.

Can someone even outline the AI bull case? I can’t fathom one at all. https://isaiprofitable.com/ The only profitable company is the one running the scam.

One sentence summary of the bull case: Anything you would have paid a human to do, you will pay an AI to do instead.

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#77

Post by oceanplexian »

Mistletoe wrote: post #30
rapidfl wrote: post #21

Earlier quoted context omitted.

People are looking for the AI bear case - so this headline gotta work better. Its not a bad idea haha. More people suspect there is some circular shenanigans but want confirmation -- so maybe this is the best way to lure them in. Come as the bear, stay for the bull. With just these 2 comments, now I'm really gonna read that article.

Can someone even outline the AI bull case? I can’t fathom one at all. https://isaiprofitable.com/ The only profitable company is the one running the scam.

Do you use it or is this speculation?

The AI tooling I used 12-24 months ago if frozen in time, monetized correctly is probably 100x the capability of what software could do before (And software was already eating the world long before AI). The bull case is that we just invented the 21st century equivalent of the printing press or electricity. And that website is the 19th century equivalent of someone criticizing electricity as a concept because it would be expensive to build power lines.

If anything it's a miracle that the US economy is so efficient that we can just skip all the small talk and bullshit and build out the infrastructure to support AI immediately.

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#78

Post by xbmcuser »

aurareturn wrote: post #3

Why is it a big deal? Nvidia invested $2b into CoreWeave for 9% equity stake. CoreWeave is spending $35b in CapEx in 2026. Therefore, Nvidia's investment is only 5.7% of CoreWeave's single year CapEx. The other $32b is coming from other sources that isn't Nvidia. This is hardly circular. Nvidia invests in Neoclouds because it's a hedge against hyperscalers having too much power, ie designing and prioritizing their ow…

[dead]

Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom

#80

Post by Zetaphor »

lern_too_spel wrote: post #76
Mistletoe wrote: post #30

Earlier quoted context omitted.

Can someone even outline the AI bull case? I can’t fathom one at all. https://isaiprofitable.com/ The only profitable company is the one running the scam.

One sentence summary of the bull case: Anything you would have paid a human to do, you will pay an AI to do instead.

If we're all out of work then who buys the things AI makes?
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