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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

#171

Post by aswegs8 »

InsideOutSanta wrote: post #167
philipallstar wrote: post #147

Earlier quoted context omitted.

Okay, but why? What's the actual thing that will happen?

They made huge investment commitments based on planned revenue. They'll go bankrupt (and tear much of the economy down, given how tied up everyone is in them) if they can't keep raising money to pay for these commitments or turn huge profits.

But will they? How greatly are they leveraged? Even if the economics don't work out anymore, they'll be able to sell capacity, pivot, etc. without causing an implosion.

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

#172

Post by aswegs8 »

wizzwizz4 wrote: post #166
CrimsonRain wrote: post #146

Earlier quoted context omitted.

i think you are talking about hindenburg research center

I was, but Wikipedia tells me it was preceded by Muddy Waters Research, and followed by Hunterbrook, both of which (unlike Hindenburg) are still active. Interestingly, the Hunterbrook Wikipedia article says that Hunterbrook is unique, and the Muddy Waters Research Wikipedia article lists loads of other organisations. Perhaps someone should investigate…?

Time to short them, you say?

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

#173

Post by lqstuart »

uncivilized wrote: post #168
lqstuart wrote: post #154

Earlier quoted context omitted.

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

6-10 engineers for a startup seems suspect. Is this some sort of web app where there would be lots of training data? I’m not a web developer so I don’t know what else to call it besides web app or SaaS or whatever it’s called in that world.

Not sure what you’re getting at, is that too many or too few? Terraform, building grafana dashboards, building internal UIs, provisioning the networking and dealing with security groups and routing tables, IT stuff like MDM/SSO/OIDC, not to mention the entire data and ML infra is easily 10 engineers. And in a startup they’d all be juniors and do an even more terrible half assed job than Claude. These are all very well established fields with ample documentation online, and honestly pretty simple tasks as long as you have senior people to feed it a design that isn’t stupid.

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

#174

Post by taneq »

14113 wrote: post #36
philipallstar wrote: post #25

Earlier quoted context omitted.

> If they reach some kind of profitability it's not a big deal, but if not ... What is the end of this sentence?

There are two types of people. Those who can extrapolate from incomplete data, and

…those who understand binary? ;)

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

#175

Post by darksim905 »

hasmolo wrote: post #131
darksim905 wrote: post #86

This isn't really related to the post, but I need to vent I suppose. CoreWeave feels very YC-ish. I thought I had an in as a referral for a position there and got interviewed by someone who knew a lot of my peers where I worked. Dude seemed to ask very textbook style questions that you would only learn if you went to a school system for this particular position/subject. I guess I didn't answer to their satisfaction d…

the interview process was rewritten at coreweave by a bunch of hired google engineers to reflect the rest of the industry about a month before they went public. at the time they were prepping for IPO they started to hire from other fortune 500s aggressively, and the whole company went from startup to same shit as the valley over about 6 months. when i interviewed the process was shockingly simple, like literally tell…

That sounds horrible. Big yikes. Everyone wants to be Google without putting in the work. They could've just pulled a CapitalOne and used a HireVue assessment to filter people out with the same results and less frustration.

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

#176

Post by ElProlactin »

vannevar wrote: post #158
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…

>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.

> I think they are exploiting an accounting loophole...

With all due respect, you haven't articulated what that accounting loophole is. I've explained why the examples/comparisons you've made aren't equivalent according to GAAP.

From everything I've read and seen disclosed, CoreWeave pays full price for its Nvidia chips. Nvidia is not financing the sale. CoreWeave has taken on large amounts of debt financing from unrelated third parties. It's highly like that the Nvidia backstop helped CoreWeave get better financing terms, but Nvidia isn't actually providing the financing.

If CoreWeave is paying cash and taking title to the asset, and Nvidia has no obligation or right to take the asset back, it is GAAP 101 that the transaction would be booked as a sale because...that's what it is.

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

#177

Post by ElProlactin »

vannevar wrote: post #156
ElProlactin wrote: post #68

Earlier quoted context omitted.

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…

> ...the arrangement incentivizes Coreweave to buy chips it doesn't need

You state this as fact but this is just cynical speculation on your part.

The less cynically speculative analysis is that Neoclouds like CoreWeave are rushing to build datacenters because their whole business is based on the premise that AI is a revolutionary technology and there will be massive durable demand for AI compute for the forseeable future.

CoreWeave generated over $2 billion in revenue in Q1 and has a nearly $100 billion contracted revenue backlog. This is not an imaginary business with no demand.

Nvidia has invested a very modest amount of money in CoreWeave equity. Dividing its revenue by the number of days in a year, Nvidia generates about $2 billion in revenue in ~3 days, and $2 billion represents 0.04% of Nvidia's market capitalization.

Are there risks here? Yes. Is the circularity potentially problematic? Yes. But is it also true that some of these arrangements are being used to make hyperbolically apocalyptic claims? Yes.

> 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...

You're absolutely correct here, which is a source of risk for Nvidia. That doesn't change the accounting as far as GAAP is concerned though, and you aren't looking at the big picture.

The $6.3 billion backstop through 2032 is not a huge burden at all for Nvidia. Nvidia will generate about $190 billion in free cash flow this year alone.

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

#178

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…

>Screaming "accounting subterfuge!" when this is simple GAAP accounting is a different matter.

Looking back up the thread, I don't see anybody screaming about anything. And I think "accounting subterfuge" is a broad concept that could certainly include GAAP-compliant but nonetheless suspect business practices.

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

#179

Post by lII1lIlI11ll »

spwa4 wrote: post #94
brikym wrote: post #35

Earlier quoted context omitted.

Didn't they move to escape that world?

Not too well known, but Yandex very suddenly moved almost all of their employees + families to Israel, and then on to the Netherlands (where they already had an office and a company called "Nebius" to avoid sanctions against Russia) and US. Certainly looks like they were trying to get out, and were rich enough to actually pull it off (that can't have been cheap). Also they deserve some serious kudos for actually tryi…

It is "Not too well known" because Yandex didn't move all or even most of their employees outside Russia.

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

#180

Post by brookst »

izacus wrote: post #93
brookst wrote: post #51

Earlier quoted context omitted.

This is not remotely new. When I worked at Intel ~20 years ago, Intel Capital invested in startups that would buy Intel hardware. Some of them succeeded, some did not. But "invest in companies that may grow your own TAM" is an ancient strategy. Sometimes it works, sometimes it doesn't (like any strategy). I'm not disagreeing with you, just saying it's business as usual.

[flagged]

I’ll charitable assume you really just don’t understand.

Look at it this way: suppose someone says “OMG this morning a massive, free floating fusion reactor appeared in the sky; pouring terawatts of power into the earth’s atmosphere! We have to do something about this crisis!”

It’s true that “we say the same thing yesterday, and the day before, and forever” falls short of a clear explanation of why it’s not a big deal and is in fact a critical part of the large systems we all live in.

But it’s a reasonable shorthand for “if you really think this time is different and IS a crisis, you need to say more”

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