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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

#331

Post by raincole »

stale2002 wrote: post #215
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…

Does anyone in the finance business know how legal this all it? I am hearing terms like "round tripping" being thrown around. A practice where a company sells and buys back its own product to artificially inflate revenue. I'm asking because its not just OpenAI that they are apparently doing this with, instead its with multiple other major GPU providers, like Coreweave. And its just being done all out in the open? How…

First of all, it's not 'textbook round tripping' at all. The parent commenter is dead wrong but HNers upvote when they see "AI is a bubble."

Textbook round tripping is like: OpenAI buys GPUs from Nvidia. And the only reason it buys these GPUs is to resell it back to Nvidia, or just do nothing. It doesn't make it round tripping just because OpenAI is taking investment and buying stuff from Nvidia at the same time.

Unless you really believe OpenAI has no intention to use these GPUs for other purposes (like training GPT-6. I know, a crazy idea: OpenAI will train and release a model), it's not round tripping.

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

#332

Post by belter »

sindriava wrote: post #280
sylario wrote: post #221

Earlier quoted context omitted.

The thing is that AI researchers that are not focused on only LLM do not seem to think it is in reach.

Demis Hassabis seems to think this and not only does he not focus only on LLMs, he got a nobel prize for a non-LLM system ;)

As far as I know, that Nobel prize was for being the project manager...

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

#333

Post by crowcroft »

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.

The counter point to this is that while not profitable, the cashflow is real, and inference is marginally ROI positive. If you can scale inference with more GPUs then eventually that marginal ROI grows large enough to cover the R&D and other expenses and you become profitable.

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

#334

Post by cubefox »

To the people who are calling this evidence of a bubble: There is no credible indication that AI in general is a bubble, even if not all investments will make sense in retrospect. Quite the opposite, the progress in the field over the last few years is staggering. AI systems are becoming superhuman at more and more tasks. It's only a question of time till AI will outperform us at everything.

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

#335

Post by [deleted] »

dismalaf wrote: post #327
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.

No one's implying it's fake money or resources, only that will no clear path to profit eventually the money will stop flowing and valuations will implode.

[deleted]

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

#336

Post by charcircuit »

mgh95 wrote: post #308
davedx wrote: post #299

Earlier quoted context omitted.

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.

Sure, and as long the expected profit keeps increasing investors are happy. They don't need to make an actual profit yet.

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

#337

Post by binarymax »

lacy_tinpot wrote: post #328
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…

This is more like reinvesting into the business as it's growing. It's a positive sum loop. Nvidia makes money by selling to OpenAI. OpenAI makes money by selling a service to users that uses Nvidia. So Nvidia invests in the build out and expansion of the infrastructure that will use Nvidia. This is a classic positive sum loop. It's not that different than a company reinvesting revenue in growing the company.

But is OpenAI recouping this? I remember seeing reports a year ago that it was in the realm of $700M/mo in inference costs for them - are they earning that now?

Of course the strategy of taking a loss and reinvesting - but I don't see how OpenAI is making enough money to pay for all this, now or in the future.

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

#338

Post by kapone »

AlexandrB wrote: post #320
humanizersequel wrote: post #301

Earlier quoted context omitted.

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.

And even if they are selling inference at negative margin, they'll make it up in scale!

These kinds of phrases are...eerily similar to the phrases heard right before...the .com bust. If you were old enough at the time, that's exactly what the mindset was back then.

The classic story of the shoeshine boy giving out stock tips...and all that.

We all know how that turned out.

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

#339

Post by paganel »

crowcroft wrote: post #306
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 highl…

> debt is highly explosive (see GE during the GFC) whereas equity is not.

Not as explosive as debt but I'd venture to say that nowadays equity is a lot more "inflamable" compared to 2008-2010, as in a lot more debt-like (which I think partly explains the current equity bubble in the US).

As in, there are lots and lots of investment funds/pension funds/other such like financial entities which are very heavily tied to the "performance" of equity, and I'm talking about trillions (at this point) of dollars, and if that equity were to get a, let's say, 20 or 30% hair-cut in a matter of two-three months (at most), then we'll for sure be back in October 2008 mode.

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

#340

Post by psunavy03 »

crowcroft wrote: post #306
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 highl…

GE also created their "rock-solid financials" by moving money around as necessary to make earnings projections.
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