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Nvidia's $750B in Deals Reignite Circular AI Fears

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Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#51

Post by thewebguyd »

maxdo wrote: post #49
thewebguyd wrote: post #34

Earlier quoted context omitted.

Right. The risk isn't accounting fraud, its the equity-to-debt loop that relies on all these companies making "enough money to pay it back someday." Nvidia invests, that equity check gets used to secure 10x it in debt with the GPUs as collateral, and then they buy the chips. Nvidia gets paid, so they don't hold the debt liability. But, if AI revenue doesn't cover those debt payments before the GPUs depreciate, the lo…

why AI revenue will not cover? Chinese models pushes prices down and quality up, that makes GPU-based automation more affordable, while covering more and more cases to automate. You can debate that llm producers will go bankrupt, some of them at least for sure. How do you lose in this market if you do gpu?

> How do you lose in this market if you do gpu?

You don't. Nvidia gets paid either way. They were never the ones in danger (outside of the buildout going bust and having a massive surplus of cheap, used GPUs flood the market).

> You can debate that llm producers will go bankrupt, some of them at least for sure.

And that's the risk that will cascade down and kill off a bunch of companies and cause a debt crisis. If (for example), OpenAI goes to Oracle and says "I promise I'll pay you, at some point in the future, $1T to build my datacenters" and then Oracle funds that build out with debt, and then OpenAI goes bust, or just doesn't make enough money or can't raise enough cash to start making payments on their IOU, Oracle now also can't pay their debt and will eventually go bust, and now the private credit market takes a huge haircut, potentially bankrupting entire funds (like what happened in '08).

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#52

Post by spwa4 »

thewebguyd wrote: post #34
randyrand wrote: post #23

Circular is a dumb way to describe it IMO, because it's not like both parties end up in the same place. Nvidia is making trades for people to buy their GPUs. Sometimes companies are trading stock for GPUs, sometimes money, other times something else. In summary, Nvidia is selling GPUs.

Right. The risk isn't accounting fraud, its the equity-to-debt loop that relies on all these companies making "enough money to pay it back someday." Nvidia invests, that equity check gets used to secure 10x it in debt with the GPUs as collateral, and then they buy the chips. Nvidia gets paid, so they don't hold the debt liability. But, if AI revenue doesn't cover those debt payments before the GPUs depreciate, the lo…

But if there is one thing trivial to see then it is the connection between loaned money and stock prices AS A WHOLE.

https://www.sciencedirect.com/science/article/abs/pii/S01651...

It's stronger for momentum stocks, but it's not like something like a gold mine escapes from it either.

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#53

Post by hmokiguess »

randyrand wrote: post #23

Circular is a dumb way to describe it IMO, because it's not like both parties end up in the same place. Nvidia is making trades for people to buy their GPUs. Sometimes companies are trading stock for GPUs, sometimes money, other times something else. In summary, Nvidia is selling GPUs.

[flagged]

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#54

Post by vanuatu »

can someone explain why this is actually bad?

nvidia spends X amount to invest in data centres or investments on the agreement that the counterparty spends Y amount back, the net delta is the actual amount of value being transferred aka Nvidia sells chips as usual despite the high numbers of X and Y?

The frontier labs do not have enough chips to meet demand, and AI demand is ferocious and climbing, so I'm not sure what the story is here

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#55

Post by nickff »

vanuatu wrote: post #54

can someone explain why this is actually bad? nvidia spends X amount to invest in data centres or investments on the agreement that the counterparty spends Y amount back, the net delta is the actual amount of value being transferred aka Nvidia sells chips as usual despite the high numbers of X and Y? The frontier labs do not have enough chips to meet demand, and AI demand is ferocious and climbing, so I'm not sure wh…

The problem is that when a vendor finances their customers, they can create the illusion of 'real' demand for their product, when most of the the end-users are only actually using something because it's cheap. When the vendor runs low on cash and starts requiring payment, the customer may not be able to afford it, taking both vendor and customer down, and leaving the end-users who have a real need, and were willing to pay sustainable prices without any options.

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#56

Post by vanuatu »

nickff wrote: post #55
vanuatu wrote: post #54

can someone explain why this is actually bad? nvidia spends X amount to invest in data centres or investments on the agreement that the counterparty spends Y amount back, the net delta is the actual amount of value being transferred aka Nvidia sells chips as usual despite the high numbers of X and Y? The frontier labs do not have enough chips to meet demand, and AI demand is ferocious and climbing, so I'm not sure wh…

The problem is that when a vendor finances their customers, they can create the illusion of 'real' demand for their product, when most of the the end-users are only actually using something because it's cheap. When the vendor runs low on cash and starts requiring payment, the customer may not be able to afford it, taking both vendor and customer down, and leaving the end-users who have a real need, and were willing t…

that makes sense to me in a conceptual sense

however inference is very profitable and plummeting in cost for a given point on the intelligence curve, and nvidia gpus can serve different models so they are protected post-buildout

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#57

Post by willy_k »

hmokiguess wrote: post #53
randyrand wrote: post #23

Circular is a dumb way to describe it IMO, because it's not like both parties end up in the same place. Nvidia is making trades for people to buy their GPUs. Sometimes companies are trading stock for GPUs, sometimes money, other times something else. In summary, Nvidia is selling GPUs.

[flagged]

This comment struck me as odd, and I went and read some of your other comments. And then I see this comment, on a completely separate thread:

> Now I have the full picture. You're right to push back, and that's on me. The load-bearing seams of language are the smoking gun I should have been aware of.

Pardon my curiosity, but whats going on? Is this a bit, or a bot, or simply how you tend to write?

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#58

Post by dd8601fn »

hmokiguess wrote: post #53
randyrand wrote: post #23

Circular is a dumb way to describe it IMO, because it's not like both parties end up in the same place. Nvidia is making trades for people to buy their GPUs. Sometimes companies are trading stock for GPUs, sometimes money, other times something else. In summary, Nvidia is selling GPUs.

[flagged]

Needs more dashes and “shape of” things.

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#59

Post by NekkoDroid »

willy_k wrote: post #57
hmokiguess wrote: post #53

Earlier quoted context omitted.

[flagged]

This comment struck me as odd, and I went and read some of your other comments. And then I see this comment, on a completely separate thread: > Now I have the full picture. You're right to push back, and that's on me. The load-bearing seams of language are the smoking gun I should have been aware of. Pardon my curiosity, but whats going on? Is this a bit, or a bot, or simply how you tend to write?

Apparently "load-bearing seam" is something Claude (or one of the frontier US LLMs) really likes to say.

Re: Nvidia's $750B in Deals Reignite Circular AI Fears

#60

Post by nickff »

vanuatu wrote: post #56
nickff wrote: post #55

Earlier quoted context omitted.

The problem is that when a vendor finances their customers, they can create the illusion of 'real' demand for their product, when most of the the end-users are only actually using something because it's cheap. When the vendor runs low on cash and starts requiring payment, the customer may not be able to afford it, taking both vendor and customer down, and leaving the end-users who have a real need, and were willing t…

that makes sense to me in a conceptual sense however inference is very profitable and plummeting in cost for a given point on the intelligence curve, and nvidia gpus can serve different models so they are protected post-buildout

You are describing the justification that NVDA is using to explain their behavior; they see it as something of a 'bridge-loan' until the LLM business model reaches steady-state. The problem is that this explanation has been used for many bubbles, where companies mis-categorize ongoing costs as one-time expenses.
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