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OpenAI, Nvidia fuel $1T AI market with web of circular deals

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Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#111

Post by baq »

mythz wrote: post #106

All clearly designed to cash in on the speculative value being given to AI companies. Strategically I thought OpenAI's deal of getting 10% of AMD for driving their stock price to $600 was a pretty clever way of creating $97 Billion from nothing - effectively paying for the GPUs they'd purchase. At the same time I would've thought this insider pump and cash-in strategy would be somehow illegal, but I guess anything go…

it'd be illegal if they bought on the public market... but they bought directly from AMD, so nothing to see here, move along. music is still playing.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#112

Post by OhioMan2943 »

This incest investing is pretty telling. The whole economy is about to get burned- doubly so with DJTs tariffs and bonds not looking like the safe haven they usually are during turbulent times.

“We’re now locked into a particular version of the market and the future where all roads lead to big tech,” says Amba Kak, co-executive director of the AI Now Institute, which studies AI development and policy. Indeed, the success of major stock indexes—and perhaps your 401(k)—is resting on the continued growth of AI: Meta, Amazon, and the chipmakers Nvidia and Broadcom have accounted for 60 percent of the S&P 500’s returns this year."

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#113

Post by itsn0tm3 »

petesergeant wrote: post #52
wmf wrote: post #35

Earlier quoted context omitted.

These deals certainly make the bubble look larger because people are double-counting revenue. They also seem to be triggering extreme investor FOMO.

> They also seem to be triggering extreme investor FOMO. Bubble's only bad if you get out at the wrong time.

Only for you as an individual, from an economic and societal perspective a bursting bubble is never good!

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#114

Post by laserlight »

credit_guy wrote: post #46
jrflowers wrote: post #40

Earlier quoted context omitted.

> But this is not circular. Circular would be if I sell you an apple worth $0.25 for $2.00 When you draw a circle on a piece of paper do you put your pencil to the paper, start drawing a curve, stop and write the word FRAUD, and then complete the curve? Or do you just draw a circle? I’m assuming that people are saying “circular” in that it looks like the money goes in a circle. (For one example) Nvidia invests in Lam…

This is how financing works. When you buy a house, you get a mortgage from a bank. It is unusual to get a mortgage from a seller. It would feel a bit circular, right? But that is exactly what happens most of the time when people buy a car. They get a loan from the same company that sells them the car. Is that circular? When you replace people with companies, the financing can become much more complex. The example you…

It's ironic that you described how the 2008 financial crisis came to be to illustrate how “normal” this circularity is.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#115

Post by f1shy »

throwaway2037 wrote: post #109

How are these "circular deals" different than Boeing (and other heavy civilian equipment makers) providing financing on purchases? My point: Is this simply clutching pearls over the AI/LLM bubble, or is there some substance to this concern? And another: How does it compare against the new breed of Bitcoin treasuries, like Strategy (MSTR.OQ)? As I understand, Strategy uses secondary offerings to continuously see more…

This happens also with automotive companies. Peugeot has its own bank, which lends money to people buying peugeots. The big difference: is not circular. The bank is a bank, the OEM building cars build cars.

The bank makes money by lending and cashing interest.

The car maker by selling for profit.

The money goes from bank to OEM, and not the way around, no circle.

I do not know the specifics of Boeing though.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#119

Post by XorNot »

heywoods wrote: post #97
Sam6late wrote: post #93

Earlier quoted context omitted.

This is How Larry Elisson beat Musk for a short while although Oracle was struggling.' The deals among Oracle, Nvidia, and OpenAI have raised concerns about their circular and potentially risky nature. Oracle is reportedly spending tens of billions on Nvidia's advanced chips, Nvidia plans to invest up to $100 billion in OpenAI, and OpenAI uses Oracle's cloud infrastructure through Microsoft's Azure, creating a closed…

Is it fair to say OpenAI is in a sense “washing” the money passing between Nvidia and Oracle? And instead of taking a cut in the traditional money laundering they are enjoying massive valuation gains? When the fed investigates this does it matter if one of the 3 companies is not a publicly traded company?

What you're missing is that real value can be created in these exchanges - Nvidia really makes chips for example.

The issue is that it's an industry of investment which exists solely to power more investment in AI - the entire chain is still assuming that someone will eventually pay for this.

At the end of the day all that money leaks out to employees and suppliers...but no one those people transact with may have any interest in buying what was produced.

Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals

#120

Post by themafia »

hn_throwaway_99 wrote: post #101
themafia wrote: post #89

Earlier quoted context omitted.

That's not how Ponzi schemes work. Yahoo had a defacto _monopoly_ and the market had bad discovery leading to bad price information. There was no point at which the internet was /not/ worth investing in and everyone who had experience with it knew that. The real problem seemed to be that you can only put so much money into pets.com before it becomes stupid. You had more short term investment capital than could be _ef…

Why is it so popular to "akshually, Ponzi schemes are different!" these days? Words have meaning in context, and calling something a "Ponzi scheme" these days means any pyramid-like system that only works as long as new investors come to the table, because that new investor money is the sole source of gains for earlier investors. But once you run out of new investors, which is inevitable, the whole thing collapses. W…

> Words have meaning in context

And you do recognize the context of those words was 15 years ago at this point?

> was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam

There are better terms of art to describe the scenario. If we lacked for those words I might grant you this point, but since we don't, I find the description lacking in precision if not completely faulty.

> the more "normal" reason that they just don't gain traction.

Is that actually the "normal reason" most businesses fail? I'm not sure it is.

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