This bubble bursting will make us all poor
Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
81–90 of 197 posts
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#82Earlier quoted context omitted.
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?
All the corporations buying inputs for their products and services and all the people on unemployment.
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#83Earlier quoted context omitted.
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.
No, it isn't and this is simple GAAP accounting.
If GM sold cars to Hertz and then agreed to rent them from Hertz if Hertz was unable to rent them, it would not be consignment. It would be a sale and then purchase commitment, with the cost of the rentals taken as an operating expense.
Is the CoreWeave-Nvidia arrangement "good"? Time will tell. But there's no accounting issue here and even non-accountants can educate themselves on the subject because the least effective way to criticize these deals is to make accounting arguments that don't align to actual accounting principles.
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#84Circular financing is a dead horse - dont beat it. Instead, what is more interesting could be: Is there a path to these builds becoming economically profitable ? Towards this, some metrics to watch are: 1) ROI per token per dollar 2) Enterprise token budgets. And at what point there is an overbuild relative to the token roi. Alternatively, pressure on token costs due to the open weights models etc.
But how do you even measure the ROI of tokens? I don’t think it’s possible, tokens aren’t fungible. You can spend millions on tokens that don’t contribute one bit to the company revenue, then spend $10 that will actually result in useful things
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#85Why 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…
My understanding is that it's not about the money itself but the model: - you fund a new company and sign long terms contracts with it - this new company uses the money you gave it and a lot of debt (backed by long term contracts) to build datacenters and buy a lot of GPU - your figures look great What happens when they run out of debt or funds? If they reach some kind of profitability it's not a big deal, but if not…
It's not circular!
And if it is, it's not a problem!
And if it's a problem, it doesn't affect me!
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#86This isn't really related to the post, but I need to vent I suppose.
CoreWeave feels very YC-ish. I thought I had an in as a referral for a position there and got interviewed by someone who knew a lot of my peers where I worked. Dude seemed to ask very textbook style questions that you would only learn if you went to a school system for this particular position/subject. I guess I didn't answer to their satisfaction despite knowing more than them on almost everything else. I suppose I'm still bitter seeing as I interviewed with them three times for two different roles. Absolutely wild.
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#87Earlier quoted context omitted.
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.
No, it isn't and this is simple GAAP accounting. If GM sold cars to Hertz and then agreed to rent them from Hertz if Hertz was unable to rent them, it would not be consignment. It would be a sale and then purchase commitment, with the cost of the rentals taken as an operating expense. Is the CoreWeave-Nvidia arrangement "good"? Time will tell. But there's no accounting issue here and even non-accountants can educate…
> there's no accounting issue here
This seems like a really narrow interpretation of what's going on. Is there any room to doubt/discuss whether GAAP rules could be improved? Or why the deal has been structured this way?
Why shouldn't we look through this arrangement? NVIDIA isn't in the business of purchasing outsourced GPU time. They could make better use of unused GPUs by repurchasing them for resale to another customer. If they're not doing that, it already seems likely that they specifically did this to guarantee that the revenue could be recognised.
Sure, NVIDIA's risk exposure could (legally) sit on their books without being recognised until it's already too late. That doesn't mean we shouldn't scrutinize them.
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#88Earlier quoted context omitted.
No, it isn't and this is simple GAAP accounting. If GM sold cars to Hertz and then agreed to rent them from Hertz if Hertz was unable to rent them, it would not be consignment. It would be a sale and then purchase commitment, with the cost of the rentals taken as an operating expense. Is the CoreWeave-Nvidia arrangement "good"? Time will tell. But there's no accounting issue here and even non-accountants can educate…
> there's no accounting issue here This seems like a really narrow interpretation of what's going on. Is there any room to doubt/discuss whether GAAP rules could be improved? Or why the deal has been structured this way? Why shouldn't we look through this arrangement? NVIDIA isn't in the business of purchasing outsourced GPU time. They could make better use of unused GPUs by repurchasing them for resale to another cu…
> Is there any room to doubt/discuss whether GAAP rules could be improved?
Looking at the structure of the deal and analyzing the risks is perfectly valid. Screaming "accounting subterfuge!" when this is simple GAAP accounting is a different matter.
CoreWeave is buying chips from Nvidia, paying Nvidia full price, and taking title to them. Nvidia has no right to take them back. It instead has a potential obligation, subject to various conditions, to purchase a separate service (compute) from CoreWeave.
GAAP rules are updated on a regular basis. If you want different GAAP rules for this type of deal, you at least need enough knowledge about accounting to make a sensible suggestion.
> NVIDIA isn't in the business of purchasing outsourced GPU time.
This simply isn't true. Google "DGX Cloud". Nvidia has a real business selling cloud-based compute for training foundation models and running heavy AI workloads, and leasing compute from its hyperscaler chip customers instead of competing with them was a strategic decision Nvidia made.
So yes, these types of arrangements should be scrutinized. But to do so intelligently requires a basic grasp of accounting rules and the business models.
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#89Why 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…
Simple answers: because it makes for a good headline.
Re: Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom
#90Earlier quoted context omitted.
> there's no accounting issue here This seems like a really narrow interpretation of what's going on. Is there any room to doubt/discuss whether GAAP rules could be improved? Or why the deal has been structured this way? Why shouldn't we look through this arrangement? NVIDIA isn't in the business of purchasing outsourced GPU time. They could make better use of unused GPUs by repurchasing them for resale to another cu…
> Is there any room to doubt/discuss whether GAAP rules could be improved? Looking at the structure of the deal and analyzing the risks is perfectly valid. Screaming "accounting subterfuge!" when this is simple GAAP accounting is a different matter. CoreWeave is buying chips from Nvidia, paying Nvidia full price, and taking title to them. Nvidia has no right to take them back. It instead has a potential obligation, s…
I'm not the commenter claiming that this currently violates GAAP - that's someone else.
To summarise my opinion, subjectively it seems like a better distinction could be made in GAAP to look through this agreement and others like it. (Hypothetically if Hertz agreed to rent back rather than repurchase, like mentioned in a previous comment, that would also be suspect). But I'm not the one to propose what the preconditions would be.
> Looking at the structure of the deal and analyzing the risks is perfectly valid. Screaming "accounting subterfuge!" when this is simple GAAP accounting is a different matter.
It can be legal and still be subterfuge. Everyone involved in the deal has a clear incentive to ensure Coreweave gets to recognise revenue, and gets to show growth on paper. It's the same reason why SoftBank paying OpenAI $800mln for services in 2025 stinks a bit - they don't need the services but the deal goes ahead anyway.
> This simply isn't true. Google "DGX Cloud". Nvidia has a real business selling cloud-based compute for training foundation models and running heavy AI workloads, and leasing compute from its hyperscaler chip customers instead of competing with them was a strategic decision Nvidia made.
Sorry - you're entirely correct here. Though remember we're talking about a scenario where Coreweave aren't able to sell their capacity. If there's such a dramatic hole in demand, who are NVIDIA selling their compute to? This repo agreement won't give NVIDIA capacity that they need in the 90% of cases but will force them to purchase capacity they won't need in the 10%.
s/10%/some other probability/