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Nvidia projects $673B in sales as AI demand widens

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Re: Nvidia projects $673B in sales as AI demand widens

#91

Post by ef33d »

kemiller wrote: post #59
zozbot234 wrote: post #42

Earlier quoted context omitted.

> Small models are rapidly growing in capability, require less compute to train and serve According to Jevons' paradox a reduction in resource requirements (improved resource efficiency for the same payoff) leads to an increase in demand. This stops working when demand for compute is completely exhausted, but we are very far from that. There's even some very silly predictions floating around (see the latest Dwarkesh…

Yeah, I think there's a tendency to underestimate how much demand is still gated behind cost constraints. The market for this is HUGE. The PC era, call it 1975-2005, was one of the greatest wealth creation events in history, was characterized by the cost of the underlying commodity dropping mercilessly for the whole time. Each time it did, the space of problem you could solve with a PC would increase, to the point th…

"Yeah, I think there's a tendency to underestimate how much demand is still gated behind cost constraints. The market for this is HUGE."

This is just hyperbolic nonsense.

There is a desire from a certain group of people of make-believe - doesn't mean the 'demand' is actually real given the economics.

Re: Nvidia projects $673B in sales as AI demand widens

#92

Post by JumpCrisscross »

pc86 wrote: post #87
octaane wrote: post #77

Earlier quoted context omitted.

If I give you 10 dollars, and then you put it in your pocket, and then you take it out again and give me 10 dollars back - no actual economic growth occurred. It's simply shuffling money around; the amount stays the same.

Two economists are walking down a forest path and they come across a piece of animal excrement. The first economist turns to the second and says "I'll give you $100 to eat that!" The second one eats it and the first one gives him $100. They start walking again and a few minutes later they come to another piece of animal excrement. The second economist now looks at the first and says "I'll give you $100 to eat!" The f…

This is basically true for any entertainment.

Re: Nvidia projects $673B in sales as AI demand widens

#93

Post by tuesdaynight »

order-matters wrote: post #66
tuesdaynight wrote: post #43

Earlier quoted context omitted.

I don't get why people say Nvidia is a bubble. They are selling products now, not in the future! If AI market collapses (I doubt it will happen), they will still be selling GPUs. They will make less money, but that is expected

the bubble doesnt mean they are worthless only that after a pop the value of stock will drop significantly. it is out of their control if people overvalue the stock, and thats what creates the bubble which will eventually need to pop for self correction - but might trigger a massive oversale bringing the stock below actual value and causing all sorts of problems that will challenge the solvency of the company (basica…

But isn't that supposed to happen when you create a hit product? I imagine some people said similar things about Apple when iPhone started selling like water, but I don't think that it was the majority like here

Re: Nvidia projects $673B in sales as AI demand widens

#94

Post by dgellow »

consumer451 wrote: post #89
0x457 wrote: post #81

Earlier quoted context omitted.

What do you mean by “if true”? It’s a fact. It’s “only” bad if what they’re investing in goes south, because NVIDIA gets hit twice: it loses money on the investment and loses the GPU demand. NVIDIA says it has invested nearly $50B in frontier labs. According to NVIDIA, “the AI labs for which NVIDIA expects to leverage its balance sheet should account for roughly one-quarter of NVIDIA’s business next year.” To be clea…

I didn't take enough time to be clear. What I really meant was something like: are they giving these companies money to directly buy their own products, or to spend on other things, so that they can grow enough to be able to buy NVIDIA products? I am not sure if the distinction makes a difference, but the latter sounds a lot more reasonable to me.

I understand it is the former. They basically give money to be spent on compute, meaning it goes to hyperscalers who themselves buy NVIDIA GPUs. That’s how you end up with OpenAI and Anthropic together representing more than 70% of the hyperscalers AI revenue, and >40% of the overall Google cloud revenue.

Another thing NVIDIA does: when hyperscalers are looking for debt to build more datacenter capacity, NVIDIA offers to be a backstop in case the compute isn’t actually used. If we take CoreWeave for example, NVIDIA has ownership in it, and also sell them GPUs, and also goes to the banks telling them they will for sure buy the unused capacity as a way to reduce the bank risks.

So you can add that to the whole circular thing

Re: Nvidia projects $673B in sales as AI demand widens

#95

Post by CoolestBeans »

consumer451 wrote: post #89
0x457 wrote: post #81

Earlier quoted context omitted.

What do you mean by “if true”? It’s a fact. It’s “only” bad if what they’re investing in goes south, because NVIDIA gets hit twice: it loses money on the investment and loses the GPU demand. NVIDIA says it has invested nearly $50B in frontier labs. According to NVIDIA, “the AI labs for which NVIDIA expects to leverage its balance sheet should account for roughly one-quarter of NVIDIA’s business next year.” To be clea…

I didn't take enough time to be clear. What I really meant was something like: are they giving these companies money to directly buy their own products, or to spend on other things, so that they can grow enough to be able to buy NVIDIA products? I am not sure if the distinction makes a difference, but the latter sounds a lot more reasonable to me.

The distinction does make a difference and it is the former.

These circular deals are two paired transactions:

1. Nvidia buys equity in an AI lab or cloud provider with cash.

2. The counterparty agrees to buy X number of GPUs from Nvidia and in exchange Nvidia guarantees to rent some Y fraction of the compute if the counterparty cannot find customers.

This structure goes south during a pullback because all this liquidity Nvidia is essentially providing vanishes and contracts rapidly if the counterparty cannot find customers.

The other circular deal type is via private equity and the Special Purpose Vehicle (SPV).

1. The private equity firm loans money to the SPV.

2. The SPV buys GPUs from Nvidia for a data center.

3. Nvidia guarantees to the private equity firm residual value of the GPU which lowers the risk for the lender.

This deal also breaks down if the demand for GPU compute never materializes because now Nvidia is on the hook to the private equity firm (the lender) for the residual value of the GPU, which again saps Nvidia's liquidity.

Basically these deals are extremely sharp double edged swords. As long as demand for compute outpaces the compute capacity Nvidia can provide, Nvidia's revenues grow exponentially. But if demand growth slows, stops, or goes negative, Nvidia is suddenly on the hook for their counterparties' losses. Suddenly Nvidia's cash flow goes extremely negative and the company's financial situation becomes dicey.

Re: Nvidia projects $673B in sales as AI demand widens

#96

Post by 0x457 »

consumer451 wrote: post #89
0x457 wrote: post #81

Earlier quoted context omitted.

What do you mean by “if true”? It’s a fact. It’s “only” bad if what they’re investing in goes south, because NVIDIA gets hit twice: it loses money on the investment and loses the GPU demand. NVIDIA says it has invested nearly $50B in frontier labs. According to NVIDIA, “the AI labs for which NVIDIA expects to leverage its balance sheet should account for roughly one-quarter of NVIDIA’s business next year.” To be clea…

I didn't take enough time to be clear. What I really meant was something like: are they giving these companies money to directly buy their own products, or to spend on other things, so that they can grow enough to be able to buy NVIDIA products? I am not sure if the distinction makes a difference, but the latter sounds a lot more reasonable to me.

NVIDIA explicitly says the purpose is to relieve the labs’ capital/credit constraint on acquiring compute.

On paper it’s “capital to spend on whatever helps them grow.” In practice, their growth requires enormous amounts of compute, so it’s pretty close to “Here's more money so you can acquire more compute [silent part: much of it from us].”

Re: Nvidia projects $673B in sales as AI demand widens

#97

Post by bdangubic »

octaane wrote: post #77
consumer451 wrote: post #73

I have not been paying much attention to the whole circular deal thing that NVIDIA is supposedly doing. As in, they invest in their clients, who buy their products. Can anyone who actually understands finance please explain a couple things to me? 1. Are those accusations are true in a significant way, and are actually a bad thing? 2. This claimed $673B in sales, how much of it comes from NVIDIA's own money, invested…

If I give you 10 dollars, and then you put it in your pocket, and then you take it out again and give me 10 dollars back - no actual economic growth occurred. It's simply shuffling money around; the amount stays the same.

If I loan you 10 dollars at 50% interest rate and then you use the 10 dollars to buy a product I am selling and you proceed to make $11 billion dollars with that product, you just made $11 billion dollars from $10 investment and I made $5 - not bad

Re: Nvidia projects $673B in sales as AI demand widens

#98

Post by rwmj »

consumer451 wrote: post #73

I have not been paying much attention to the whole circular deal thing that NVIDIA is supposedly doing. As in, they invest in their clients, who buy their products. Can anyone who actually understands finance please explain a couple things to me? 1. Are those accusations are true in a significant way, and are actually a bad thing? 2. This claimed $673B in sales, how much of it comes from NVIDIA's own money, invested…

I posted this article a few days ago which goes into a lot of the details of the recent round of proxy borrowing that Nvidia went through with several large banks: https://www.sascha-steffen.de/updates/nvidia-500bn-ai-financ... https://news.ycombinator.com/item?id=49447878

Re: Nvidia projects $673B in sales as AI demand widens

#99

Post by spwa4 »

pc86 wrote: post #87
octaane wrote: post #77

Earlier quoted context omitted.

If I give you 10 dollars, and then you put it in your pocket, and then you take it out again and give me 10 dollars back - no actual economic growth occurred. It's simply shuffling money around; the amount stays the same.

Two economists are walking down a forest path and they come across a piece of animal excrement. The first economist turns to the second and says "I'll give you $100 to eat that!" The second one eats it and the first one gives him $100. They start walking again and a few minutes later they come to another piece of animal excrement. The second economist now looks at the first and says "I'll give you $100 to eat!" The f…

Great argument ... but if you apply it to the world as a whole, this is obviously exactly what happens.

Even within one country, this should be 99% of what happens, onless it's an oil producer or something like that.

Re: Nvidia projects $673B in sales as AI demand widens

#100

Post by vb-8448 »

kennywinker wrote: post #10
vb-8448 wrote: post #4

The projected ai capex for this and next years is above 1000b/year. 673b/year doesn't sound so weird, if they manage to spent so much, obviously.

I couldn’t find the 1000b number, but if that is “ai buildout capex” that means you think that 67% of every dollar spent on building data centers, training models, and running inference, is going directly to nvidia. Which is just silly on the face of it. Data centers need concrete, copper, DRAM, SSDs, and labour. That alone will cost more than 33%.

Maybe 67% is too much, but the GPUs are the most expensive thing in all those datacentres.

Anyway, according to the latest articles[0], 1000B is the lower bound.

[0] https://sg.finance.yahoo.com/news/ai-infrastructure-investme...

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