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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

#151

Post by Muromec »

trinsic2 wrote: post #137
Muromec wrote: post #121

Earlier quoted context omitted.

Somebody should go in jail big time if it has be bailed out

We bailed out the banks during the housing crisis and nobody went to jail. And look at where we are at now? In 20 years we are going to have smart cities run by tech barons where we are all serfs

Smart cities with tech barons won't ever happen for a lot of reasons, mainly because the government always wins. Tech bros don't have the political and military means to sovereignty . Dictatorship, civil war, corruption with a side dish of genocidal tendencies -- that's on the menu okay.

Besides, I don't think serfom has to do anything with it, as you have to keep people in, while the current agenda is all about keeping people out.

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

#152

Post by tliltocatl »

CrimsonRain wrote: post #141
0xc0c0c0 wrote: post #122

Earlier quoted context omitted.

Markets can remain irrational longer than you can remain solvent.

Market is _never_ rational. If market followed rational logic, you could pre-calculate which stocks will be what price and never lose money. (Stock) market is, by definition, irrational. If you are scared of solvency, sell and hold money and/or gold.

> If market followed rational logic, you could pre-calculate which stocks will be what price and never lose money.

The fundamentals are unpredictable, so even a perfectly rational planning (suppose such thing could exist) would lose money sometimes. Not in the long run, but long run doesn't matter if a single wrecked ship can wreck you.

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

#153

Post by Synaesthesia »

Aboutplants wrote: post #143

Does AI end up being much closer to a Crypto style result late 2010’s-early 2020’s) or is it closer to the Web style late 90s landscape? Both had somewhat similar early outcomes for a lot of the initial front runners with some experiencing legal issues and others collapsing due to sketchy finances. Crypto ended up not being as earth shattering as most believers wanted it to be but there are still many billionaires an…

I think it will be like the 90's collapse but bigger. It must be noted that the financial markets have been awash in cash for some time since companies have been making huge profits since the 90's. So the money that will be lost will mostly be that of rich investors and large companies who were sitting on a bunch of capital they didn't know what to do with.

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

#154

Post by lqstuart »

uncivilized wrote: post #145
aurareturn wrote: post #128

Earlier quoted context omitted.

The actual money is coming from big tech profits, debt, and rapidly growing AI revenue (Anthropic growing from $9b ARR to $60b+ ARR in a few months). A very small percentage is coming from Nvidia. And before someone tells me AI demand is fake and circular, my company is spending thousands on Anthropic a month, up from $0 in 2025. And no, we're not getting scammed by Anthropic or tokenmaxxing for no reason. We are get…

What value?

I’m at a very fast growing startup with real revenue and Fable has let us avoid hiring probably 6-10 full time software engineers with full salary and benefits. We’re spending nowhere close to that. I’m the hiring manager and I’m closing the reqs.

So.. great news for Anthropic, I’ll go ahead and let the elephant in the room go unaddressed

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

#155

Post by GhastBartender »

aurareturn wrote: post #128
SecretDreams wrote: post #124

Earlier quoted context omitted.

> The core problem here seems to be that people think your supplier having an equity stake in your company is wrong or risky. If these were all private entities, I think it'd be okay. But they're public entities and they're using the pittance of investment as a force multiplier on their stock price, which they're then regularly using to raise capital. A lot of dumb money in retail investors (as well as corporate) are…

The actual money is coming from big tech profits, debt, and rapidly growing AI revenue (Anthropic growing from $9b ARR to $60b+ ARR in a few months). A very small percentage is coming from Nvidia. And before someone tells me AI demand is fake and circular, my company is spending thousands on Anthropic a month, up from $0 in 2025. And no, we're not getting scammed by Anthropic or tokenmaxxing for no reason. We are get…

> my company is spending thousands on Anthropic a month

The problem is that this is simply not enough. They need you to spend tens of thousands, probably closer to hundreds of thousands, before the numbers start making sense.

> At minimum, my company is not part of this circular thing.

You're in the blast radius. And if you don't have a plan for "what if Anthropic hikes the API rates by 10x or worse", you're in the kill zone.

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

#156

Post by vannevar »

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…

Good explanation. But whether it's GAAP compliant or not, the arrangement incentivizes Coreweave to buy chips it doesn't need. You're assuming that Nvidia will have some business need for the excess capacity, but there's absolutely no assurance that that is the case---indeed, Nvidia is incentivized by the AI market dynamics to show revenue growth at all costs, because there are plenty of bulls who will wave away any potential future obligations as "ordinary business costs". But are they really ordinary, or is this potential obligation to buy compute actually much greater than Nvidia's actual future needs?

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

#157

Post by prjkt »

socialcommenter wrote: post #90
ElProlactin wrote: post #88

Earlier quoted context omitted.

> 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 preconditi…

> If there's such a dramatic hole in demand, who are NVIDIA selling their compute to?

NVIDIA itself is also training foundation models (and open-sourcing them). If there is excess compute available, NVIDIA can increase the scale of such models.

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

#158

Post by vannevar »

ElProlactin wrote: post #88
socialcommenter wrote: post #87

Earlier 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…

>CoreWeave is buying chips from Nvidia, paying Nvidia full price

I'm not sure this is the case. They are agreeing to pay them some price, it's not clear whether they are getting them for cash or credit but I strongly suspect it's on credit. That doesn't change the GAAP compliance, does it? As I said before, I think they are exploiting an accounting loophole, regardless of whether it is strictly compliant.

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

#159

Post by vb-8448 »

aurareturn wrote: post #111
vb-8448 wrote: post #22

Earlier quoted context omitted.

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…

- 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 Coreweave and Nebius think this is a great business model. Their lenders also think this can work. It's not the fault of Nvidia. If their business model thinks they can make a profit doing it t…

> Coreweave and Nebius think this is a great business model.

It's irrelevant.

> If their business model thinks they can make a profit doing it this way, why stop them?

I don't think someone needs to stop them, but there are some legit questions that need an answer:

- what happens to all these companies when growth decelerate or stop?

- what happens to nvidia stock when it has to buy back unused gpus?

- what are the risk that a sectorial financial crisis turn into a major economic crisis?

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

#160

Post by snovymgodym »

Aboutplants wrote: post #143

Does AI end up being much closer to a Crypto style result late 2010’s-early 2020’s) or is it closer to the Web style late 90s landscape? Both had somewhat similar early outcomes for a lot of the initial front runners with some experiencing legal issues and others collapsing due to sketchy finances. Crypto ended up not being as earth shattering as most believers wanted it to be but there are still many billionaires an…

If I had to guess, probably Web-style.

LLMs are actually useful, people are willing to pay for access to them, and they do genuinely enable things that were unrealistic or impossible before. The advances in image, video, and sound models since 2020 are also striking but likely won't be as transformative as LLMs.

That being said, I don't think it's unlikely that we'll see a plateauing of progress followed by a strong crash/correction in the market a-la dot com. The Allbirds situation absolutely has echoes of pets.com.

I also feel that commodification is coming for models, training/inference hardware, and software (e.g. CUDA), as it has for nearly everything else useful in tech. So I expect valuations driven by unique advantages here to be eroded over time (Think Sun and SCO after Linux on cheap x86 servers became the norm).

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