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

bloomberg.com

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

#41

Post by giancarlostoro »

bigwheels wrote: post #33
fluoridation wrote: post #32

Earlier quoted context omitted.

There's no way someone would be stupid enough to part with $x worth of product and $ 0.5 x worth of stock in exchange for $x, is there? Honestly, it's stupid to even make such an offer. What prevents AMD from turning it around on them? > AMD: Oh, since you put it like that, why don't you pay us $x for the chips and give us $ 0.5 x worth of stock? When your market cap rises by $ 0.5 x you'll get the money for those st…

AMD might do it just to try and be (stay) relevant in the market. Prior to this, discussions about AMD were slim to none, "just another inference card manufacturer". Now they're shining in the spotlight. Mission accomplished.

If you really think about it though, inference is the end goal for most AI models. So I don't see "inference only" being necessarily bad, especially if you get more bang for your buck.

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

#43

Post by o1bf2k25n8g5 »

slaterbug wrote: post #25
Angostura wrote: post #14

This reminds me of around 2002 when I wrote an article looking at how all the web behemoths at the time were claiming profitability through ad sales, but actually the vast majority of ads were from one web behemoth advertising on an other's site and vice versa.

Do you happen to have a copy of that article? I’d love to read it.

No, but I could give you several articles that link to that article while talking about how great it is.

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

#46

Post by credit_guy »

jrflowers wrote: post #40
credit_guy wrote: post #28

Earlier quoted context omitted.

Yes. OpenAI is also investing in AMD. This was discussed yesterday on HN, following some very good explanation by Matt Levine at Bloomberg. This is a way for one party to reduce some risk, by enjoying some upside in the equity of the counterparty. But this is not circular. Circular would be if I sell you an apple worth $0.25 for $2.00, and then you sell it back to me for $2.00, or other similar amount, and I get to m…

> 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 provided with Nvidia and Lambda seems quite reasonable to me. Here's an example that happens every day in the world of housing: banks lend money to house buyers. Then they package the mortgages and sell the resulting mortgage back securities. Then they take the money from the proceeds, and give more loans, and package them and create more mortgage back securities. Seems circular, right? But that's just how business is done. There is no Ponzi aspect to this, or fraud, or smoke and mirrors. It's just every day business. Nobody labels that as being circular.

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

#47

Post by churchill »

On the surface, the circular financing seems worrying but once you dig into it, it seems quite benign, tbh. NVIDIA is handing out GPUs into OpenAI, in return for stock/future revenue, whichever way you want to slice it. OpenAI has wonky unit economics, yes, but they're growing at ~100% YoY, so it all checks out, if you ask me.

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

#48

Post by Fade_Dance »

ctkhn wrote: post #17
gruez wrote: post #15

For an interesting interpretation of the recent AMD-OpenAI deal, see Matt Levine's column from a few days ago: > OpenAI: We would like six gigawatts worth of your chips to do inference. > AMD: Terrific. That will be $78 billion. How would you like to pay? > OpenAI: Well, we were thinking that we would announce the deal, and that would add $78 billion to the value of your company, which should cover it. > AMD: … > Ope…

Levine is fantastic on all sorts of bizarre financial dealings. Money Stuff is such a good daily read even though I don't work in a financial job

I would be convinced that he's some sort of super well calibrated financial article AI engine (due to consistency of output and breadth of coverage), except that I've been reading his column long before LLMs were on the scene.

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

#49

Post by danpalmer »

danans wrote: post #29
redwood wrote: post #13

Earlier quoted context omitted.

Stock buyback is effectively just a dividend with a different tax implication: reducing the number of shares in circulation raises the ownership stake of the remaining shares

> Stock buyback is effectively just a dividend with a different tax implication Not just different, it specifically a lower tax rate assuming that the stockholder has held long enough to use the long term capital gains tax rate (which lower than the dividend tax rate).

[in the US]

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

#50

Post by yen223 »

ctkhn wrote: post #12
barbarr wrote: post #11

This and stock buybacks make me question company valuations

Stock buyback isn't a total scam as it seems, but it does mean "we can't figure out any productive use case for this cash in advancing R&D or scaling our business anymore" which is still pretty worrying

I suppose stock buybacks are similar to dividends in that regard
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