The good thing about this, is that when the AI bubble bursts, we will have a lot of energy infrastructure that wouldn't be built otherwise.
OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
361–370 of 668 posts
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#362Earlier 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 is profitable if they stop training their next generation models. Their unit economics are extremely favorable. I do buy that they are extremely over-valued if they have to slow down on model training. For cloud providers, the analysis is a bit more complex; presumably if training demand craters then the existing inference demand would be met at a lower price, and maybe you’d see some consolidation as margins…
> OpenAI is profitable if they stop training their next generation models. Their unit economics are extremely favorable.
But OpenAI can't stop training their next generation models. OpenAI already spends over 50% of their revenue on inference cost [1] with some vendors spending over 100% of their revenue on inference.
The real cash cow for them is in the business segment. The problem here is models are rapidly cloned, and the companies adjacent to model providers actively seek to provide consumers the ability to rapidly and seamlessly switch between model providers [2][3].
Model providers are in the situation you imagine cloud providers to be in; a non-differentiated, commodity product with high fixed costs, and poor margins.
[1] https://www.wheresyoured.at/why-everybody-is-losing-money-on...
[2] https://www.jetbrains.com/help/ai-assistant/use-custom-model...
[3] https://code.visualstudio.com/docs/copilot/customization/lan...
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#363Earlier quoted context omitted.
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.
"Marginally ROI positive" works in a ZIRP environment. These are huge capital investments; they need to at least clear treasury return hurdles and importantly provide attractive returns . I am fundamentally skeptical of "scaling inference". Margins are not defensible in the market segment OpenAI is in.
For some of these tech companies their valuations let them go to the market with their equity in way that is basically a ZIRP environment. In a way you could say this is a competitive advantage someone like Nvidia has at the moment and so they are trying to push that.
I'm also pretty skeptical, and could imagine this whole thing blowing up, but it's not like this a big grift that's going to end up like the GFC either.
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#364Earlier quoted context omitted.
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…
> 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.
Just curious, can you detail how it would fail exactly?
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#365Earlier quoted context omitted.
Increase in share price doesn't provide extra cash to a company. They'd have to issue new shares for that.
But company owns stock right? So they can sell those stocks no?
It can, but investors don't like that since it dilutes the value of their own shares. Which is why large companies usually do the opposite - share buybacks. Nvidia in fact bought $24 billion worth of its own shares in the first half of 2025, and plans to spend $60 billion more in buybacks in upcoming months.
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#366Earlier quoted context omitted.
This still blows my mind. If each human brain consumes ~20W then 10 GW is like 500 M people, that sounds like a lot of thinking. Maybe LLMs are moving in the complete opposite direction and at some point something else will appear that vaporizes this inefficiency making all of this worthless. I don’t know, just looking at insects like flies and all the information they manage to process with what I assume is a ridicu…
We know for a fact that current LLMs are massively inefficient, this is not a new thing. But every optimization you make will allow you to run more inference with this hardware, there's not a reason for it to make it meaningless any more than more efficient cars didn't obsolete roads.
> But every optimization you make will allow you to run more inference with this hardware
Unless the optimization relies in part on a different hardware architecture, and is no more efficient than current techniques on existing hardware.
> there's not a reason for it to make it meaningless any more than more efficient cars didn't obsolete roads
Rail cars are pretty darned efficient, but they don’t really work on roads made for the other kind.
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#367Earlier 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.
Wow, diluting stock during a bull run is incredibly short-sighted. NVIDIA is betting there will never be a downturn. If there is, the dilution causes late investors to either be left holding the bag or be forced to sell (potentially at a loss), meaning the stock has the potential to drop like a stone at the first sign of trouble.
I guess that’s why they would be gaming their numbers: to convince the next greater fools.
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#368Earlier quoted context omitted.
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…
Except I'm guessing they are not selling their equity, they are making debt backed by their equity?
Yea this is speculation, you might be right. I'm not sure how exactly they're doing this but my thinking would be.
1. Selling equity (probably good).
2. Financed with actual profits over time showing up as lower margins on the income statement (probably good).
3. Issuing debt backed by their equity (possibly a dumpster fire).
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#369This 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…
Amells like yahoo driven 2000 bubble. Definitely short every ancillsry business involved
Re: OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems
#370No one ever talks about the electricity demands for powering these things. Electric bills here in NJ via PSEG have spiked over 50% and they are blaming increased demand from datacenters, yet they don't seem to charge datacenters more?
https://www.datacenterdynamics.com/en/news/new-jersey-utilit...