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Nvidia is the central bank of AI

economist.com

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Re: Nvidia is the central bank of AI

#241

Post by 59percentmore »

spott wrote: post #113
master_crab wrote: post #95

Earlier quoted context omitted.

“as long as it’s cash flow continues” is doing a lot of optimistic heavy lifting. The whole premise of the circular financing worry is that Nvidia sits in the middle of all the guarantees made to companies like OpenAI. If any of those companies become insolvent, Nvidia is on the hook for it. Also Nvidia isn’t really creating money. The 500B number is third party capital that already exists (BX, Apollo, etc).

Yea, but they would have to become insolvent in a way that makes compute lose value. The reason Nvidia is comfortable making these deals is because if OpenAI can’t use the compute, someone else can. Granted OpenAI going insolvent likely means a drop in the value of compute…

This is the fun part: the AI bubble bursts and the price of components keeps rising. Why? Because companies can just sell you a glorified thin client and force your average user to buy their compute, all subscription-like, from data centers.

Re: Nvidia is the central bank of AI

#242

Post by vasco »

zahlman wrote: post #189
pilooch wrote: post #181

Earlier quoted context omitted.

That's unless the code produced in the future is much more complex than today's.

Sure, but it would be actively bad to make the code more complex simply because we have machinery that helps us deal with the complexity. A big part of how people assess the models' coding capability is whether they create needless, incidental complexity.

That's like saying it'd be actively bad to make the code more resource intensive simply because we have machinery that helps us deal with the extra requirements. And as we know as computers got more powerful code didn't get lighter. If it can, it will.

Re: Nvidia is the central bank of AI

#243

Post by ElProlactin »

neilwilson wrote: post #124
manlymuppet wrote: post #74

Earlier quoted context omitted.

Maybe a dumb question but how is NVIDIA increasing the total supply of money? Only the fed can actually order more money to be "created". Private companies can only work within the existing supply, that is, their reserves, no?

All debt is money. Anybody can create money, the trick is getting other people to accept it. Nvidia is vendor financing its output. An ai company order $100m of GPUs. Nvidia delivers and holds onto that debt as an asset - like a bank loan. The production company uses AI to create better plant and purchases $100m of AI tokens to do so. The ai company hold that debt like a bank loan Nvidia requests $100m of production…

You should educate yourself about accounting.

First, under US GAAP rules (ASC 606), you cannot recognize revenue from a vendor-financed sale unless it meets certain criteria, the biggest one of which is: it has to be probable that the buyer will actually pay you. If a default is likely, revenue recognition is deferred until cash changes hands.

Nvidia's massive revenue is therefore not from a bunch of dubious vendor-financed sales to counterparties who don't have the money to pay and need a fraudulent scheme to make the arrangement work. Furthermore, Nvidia, by its own disclosure, indicates that when it extends financing to customers, they pay, on average, within 2 months (53 days to be exact). So these are not years-long extensions of credit.

Re: Nvidia is the central bank of AI

#244

Post by JumpCrisscross »

jmalicki wrote: post #180
JumpCrisscross wrote: post #159

Earlier quoted context omitted.

> guarantees vs assets for the two institutions The Fed can never default on any dollar-denominated debt. There is no similar currency that Nvidia can create ad infinitum . That said, the number I think you're looking for in respect of the Fed is $30 to 40 trillion. It's about U.S. GDP. And it's also about U.S. bank and money-market assets plus the Fed's balance sheet. If every American bank failed, this could be the…

> There is no similar currency that Nvidia can create ad infinitum. It can create obligations to provide future GPUs in return for present money. Yes at some point people might start to question, but what are the true hard limits there, especially once SPVs and such start to get involved to shuffle things off the books?

> what are the true hard limits there

None. But IOUs don't have the power of demand to pay taxes.

Re: Nvidia is the central bank of AI

#245

Post by JumpCrisscross »

criddell wrote: post #233
JumpCrisscross wrote: post #123

Earlier quoted context omitted.

> which is what the fed signed up to backstop No, it's not. M2 includes things like traveler's cheques and money-market funds.

Traveler’s cheques? Who even sells them anymore. American Express was the biggest issuer and they stopped years ago.

> Traveler’s cheques? Who even sells them anymore

Fair enough. Money-market assets are the real exception.

Re: Nvidia is the central bank of AI

#246

Post by JumpCrisscross »

creativeSlumber wrote: post #151
neilwilson wrote: post #124

Earlier quoted context omitted.

All debt is money. Anybody can create money, the trick is getting other people to accept it. Nvidia is vendor financing its output. An ai company order $100m of GPUs. Nvidia delivers and holds onto that debt as an asset - like a bank loan. The production company uses AI to create better plant and purchases $100m of AI tokens to do so. The ai company hold that debt like a bank loan Nvidia requests $100m of production…

If the debt cancels out doesn't this mean that there was no debt ?

> If the debt cancels out doesn't this mean that there was no debt ?

No. For the same reason that oxygen being transported into and out of the body doesn't mean there was no oxygen.

Re: Nvidia is the central bank of AI

#247

Post by ac29 »

kennywinker wrote: post #203
vunderba wrote: post #199

Earlier quoted context omitted.

> People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model... It’s not quite as simple as that. Several studies have shown the opposite: models trained on more diverse knowledge tend to cross-pollinate across domains. So a more generalized model can actually perform better than a specialized one. That’s why you’re not seeing tons of tiny m…

This is definitely the position of the big ai companies. But it doesn't match my experience. Qwen3.8 27b is clearly smarter at coding than MANY bigger models. gpt-oss-120b for example, is almost 4x the size, and performs way worse at coding tasks. It's clear to me that you can build small models that work well at specific tasks. Python vs Rust is probably too fine grained a way to build a model. Coding in general see…

gpt-oss-120b only has 5B active parameters, so its not surprising Qwen3.8 27B outperforms it (Qwen3.8 is also ~13 months newer, which is forever in LLMs)

Re: Nvidia is the central bank of AI

#248

Post by JumpCrisscross »

neilwilson wrote: post #194
JumpCrisscross wrote: post #129

Earlier quoted context omitted.

> There is no such thing as fractional reserve banking Yes, there is. We just changed how we measure the fraction from a crude one like a reserve requirement (which takes zero account of asset quality or funding source) to finer and more-robust ones like capital and liquidity reqirements. Banks still have to hold reserves. And those required reserves constrain their lending and thus the amount of money they can creat…

They don’t constrain the quantity of lending. They only change the price. Liability side controls don’t work.

> They don’t constrain the quantity of lending. They only change the price

Which country's capital and liquidity requirements are you thinking of?

Because Basel III dictates ratios. These are hard limits on lending.

Re: Nvidia is the central bank of AI

#250

Post by [deleted] »

kennywinker wrote: post #190
jurgenburgen wrote: post #174

Earlier quoted context omitted.

It was replaced by other mechanisms. It’s not literally zero any kind of reserves.

I’m not worried about the lack of reserve, i’m worried about the money shell game where private companies can drive inflation or deflation whichever serves their profit margins best. The 2008 global financial crisis was a result of this, so not a made up worry.

[deleted]
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