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OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

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Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#301

Post by humanizersequel »

mgh95 wrote: post #283
radu_floricica wrote: post #263

Earlier quoted context omitted.

But real GPUs are being built, installed and used. It's not paper money, it's just buying goods and services partly with stock. Which is a very solid and time honored tradition which happens to align incentives very well.

What revenues do these GPUs generate for OpenAI? OpenAI is not currently profitable, and it is unclear if its business model will ever becomes profitable -- let alone profitable enough to justify this investment. Currently, this only works because the markets are willing to lend and let NVIDIA issue stock to cover the costs to manufacture the GPUs. That's where the belief that we are in a bubble comes from.

They're doing about a billion per month in revenue by running proprietary models on GPUs like these. Unless they're selling inference with zero/negative margin, it seems like a business model that could be made profitable very easily.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#302

Post by jama211 »

JCM9 wrote: post #108

This is throwing more cards on the house of cards. Nvidia is “investing” in OpenAI so OpenAI can buy GPUs from NVidia. Textbook “round tripping.” I generally like what’s been happening with AI but man this is gonna crash hard when reality sets in. We’re reaching the scary stage of a bubble where folks are forced to throw more and more cash on the fire to keep it going with no clear path to ever get that cash back. If…

Perhaps I should short openAI… would you try it?

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#303

Post by jenkinomics »

vessenes wrote: post #208
mossTechnician wrote: post #171

Earlier quoted context omitted.

Which of these model-making companies have posted a profit? I'm not familiar with any.

They account internally for each model separately; Dario said they even think of each model as a separate company on Dwarkesh some time ago. Inference services are wildly profitable. Currently companies believe it’s economically sensible to plow that money into R&D / Investment in new models through training. For reference, oAI’s monthly revs are reportedly between $1b and $2b right now. Monthly. I think if you do a…

Again with the "this is very profitable if you don't account for the cost of creating it?"

Then my selling 2 dollars for 1 dollar is a wildly profitable business as well! Can't sell them fast enough!

Why does it seem like so many people have ceased to think critically?

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#304

Post by udkl »

GuB-42 wrote: post #168
fufxufxutc wrote: post #24

In accounting terms, this is a shady business practice known as "round tripping" where you invest in a company for the sole purpose of them buying your product. It allows you to count your revenue multiple times.

I don't really understand how it is round tripping. In the end, Nvidia will have OpenAI shares, which are valuable, and OpenAI will have GPUs, which are also valuable. It is not fake revenue, the GPUs will be made, sold at market price, and used, they are not intended to be bought back and sold to another customer. And hopefully, these GPUs will be put to good use by OpenAI so that they can make a profit, which will…

It looks like NVDIA looking to move up the value chain to have a stake in the even higher margin/addressable market instead of simply selling the tools.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#305

Post by mgh95 »

humanizersequel wrote: post #301
mgh95 wrote: post #283

Earlier quoted context omitted.

What revenues do these GPUs generate for OpenAI? OpenAI is not currently profitable, and it is unclear if its business model will ever becomes profitable -- let alone profitable enough to justify this investment. Currently, this only works because the markets are willing to lend and let NVIDIA issue stock to cover the costs to manufacture the GPUs. That's where the belief that we are in a bubble comes from.

They're doing about a billion per month in revenue by running proprietary models on GPUs like these. Unless they're selling inference with zero/negative margin, it seems like a business model that could be made profitable very easily.

Revenue != profit, and you don't need to become net negative margin to be net unprofitable. Expensive researchers, expensive engineers, expensive capex, etc.

Inference has extremely different unit economics from a typical SaaS like Salesforce or adtech like google or facebook.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#306

Post by crowcroft »

JCM9 wrote: post #108

This is throwing more cards on the house of cards. Nvidia is “investing” in OpenAI so OpenAI can buy GPUs from NVidia. Textbook “round tripping.” I generally like what’s been happening with AI but man this is gonna crash hard when reality sets in. We’re reaching the scary stage of a bubble where folks are forced to throw more and more cash on the fire to keep it going with no clear path to ever get that cash back. If…

It seems similar to how GE under Jack Welch would use their rock solid financials to take on low cost debt that they could lend out to suppliers who needed finance to purchase their products.

The biggest difference here though is that most of these moves seem to to involve direct investment and the movement of equity, not debt. I think this is an important distinction, because if things take a downturn debt is highly explosive (see GE during the GFC) whereas equity is not.

Not to say anyone wants to take a huge markdown on their equity, and there are real costs associated with designing, building, and powering GPUs which needs to be paid for, but Nvidia is also generating real revenue which likely covers that, I don't think they're funding much through debt? Tech tends to be very high margin so there's a lot of room to play if you're willing to just reduce your revenue (as opposed to taking on debt) in the short term.

Of course this means asset prices in the industry are going to get really tightly coupled, so if one starts to deflate it's likely that the market is going to wipe out a lot of value quickly and while there isn't an obvious debt bomb that will explode, I'm sure there's a landmine lying around somewhere...

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#307

Post by eitally »

JCM9 wrote: post #108

This is throwing more cards on the house of cards. Nvidia is “investing” in OpenAI so OpenAI can buy GPUs from NVidia. Textbook “round tripping.” I generally like what’s been happening with AI but man this is gonna crash hard when reality sets in. We’re reaching the scary stage of a bubble where folks are forced to throw more and more cash on the fire to keep it going with no clear path to ever get that cash back. If…

I'm not saying you're wrong, but with Nvidia pulling back from DGX Cloud, it makes sense that they'd continue to invest in their strategic partners (whether it's software companies like OpenAI or infrastructure vendors like Coreweave).

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#308

Post by mgh95 »

davedx wrote: post #299
mgh95 wrote: post #283

Earlier quoted context omitted.

What revenues do these GPUs generate for OpenAI? OpenAI is not currently profitable, and it is unclear if its business model will ever becomes profitable -- let alone profitable enough to justify this investment. Currently, this only works because the markets are willing to lend and let NVIDIA issue stock to cover the costs to manufacture the GPUs. That's where the belief that we are in a bubble comes from.

OpenAI generates plenty of revenues from their services. Don't conflate revenues with profits

I don't believe I am. Investors (value investors, not pump and dump investors) provide capital to companies on the expectation of profit, not revenue.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#309

Post by neilv »

mrandish wrote: post #275
JCM9 wrote: post #108

This is throwing more cards on the house of cards. Nvidia is “investing” in OpenAI so OpenAI can buy GPUs from NVidia. Textbook “round tripping.” I generally like what’s been happening with AI but man this is gonna crash hard when reality sets in. We’re reaching the scary stage of a bubble where folks are forced to throw more and more cash on the fire to keep it going with no clear path to ever get that cash back. If…

> throwing more cards on a house of cards. Nice metaphor! Huge bubbles usually get a historical name like "Tulip Craze" or "Dot Com Crash" and when this bubble bursts "House of Cards" is a good candidate.

Oh, I see now: house of cards (usual meaning) + throwing more cards on (like throwing money on the fire, and also how you destabilize house of card) + GPU cards in this case (even though they're not necessarily cards). I like it.

Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems

#310

Post by wmf »

gloxkiqcza wrote: post #282

I’m really curious how this affects the consumer GPU market over the next few years. Sure, there has been a GPU shortage for a few years now but if this continues, there should be an absolute surplus of obsolete-gen enterprise GPUs flooding the market, right? Any ideas what limitations and benefits these cards might have for an enthusiast?

I assume surplus DGX A100 are already out there but they consume kilowatts so enthusiasts can't even plug them in.
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