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

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

#61

Post by jrflowers »

credit_guy wrote: post #46
jrflowers wrote: post #40

Earlier quoted context omitted.

> 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…

I don’t know what to tell you guy, but when people see money moving in a circle in a deal there is a good chance that “circular deal” might pop into their heads. Because it’s a deal that is shaped like a circle.

> Is that circular?

Doesn’t really seem so because at the end of the day the money goes from me to them. I don’t get my money back, I get a car in exchange for my money.

Also this deal didn’t begin with the manufacturer purchasing shares of me before offering me debt to buy a car from them.

>But that is exactly what happens most of the time when people buy a car.

Your car manufacturer leases your car back from you? And you use that revenue to raise debt to buy more cars from them? What manufacturer are you doing this with? What do you end up driving?

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

#62

Post by diab0lic »

credit_guy wrote: post #46
jrflowers wrote: post #40

Earlier quoted context omitted.

> 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…

When people buy a car they sometimes get a loan from the auto manufacturer’s financial services arm. What they don’t usually get are warrants struck at a penny for 10% of the manufacturer.

You sound like you know what you’re talking about. I only think I know what I’m talking about. Help me understand: What am I missing in the OpenAI / AMD deal that makes it non circular?

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

#63

Post by Fade_Dance »

chasd00 wrote: post #26

Yeah I spoke to my wife a few min ago about these deals and other indicators of a bubble. We’re updating our 401k’s and the old college fund brokerage account in the morning and have agreed to not make any additional changes until Jan 2027. Going to sit out a year and see what happens.

These sorts of outlooks are notoriously hard to predict.

Paul Tudor Jones (one of the most successful investors of our time) is of the mindset that if anything we are about to see equity appreciation far in excess of what we have seen for decades.

https://fortune.com/2025/10/07/paul-tudor-jones-hedge-fund-b...

If that's the case, right when you're looking to rebalance your portfolio, you're going to be looking at a much more difficult decision, having already missed out on price appreciation that would be quite useful in padding downside risk...

Perhaps just step away from market cap weighted index funds as a long term adjustment. That's something that with a proper basic framework is advisable as a general portfolio management approach as well. (I have some SMLF - Smallcap Quality/Value, Berkshire, generic Global Equity exposure, not for outright returns, but to lower exposure to the concentrated passive market cap weighted indexes and diversify risk exposures).

Trend Following exposure is a great add as well, since it is negatively correlated with risk assets in many macro/market regimes.

Probably healthier to address your very real concern with modifying the long-term portfolio design rather than take a short-term market timing approach which is more of a negative expected value.

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

#64

Post by BobbyTables2 »

credit_guy wrote: post #46
jrflowers wrote: post #40

Earlier quoted context omitted.

> 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…

Everyday business isn’t based on hype.

The AI startup valuation largely is. I feel it quickly becomes circular because people make projections purely on other projections since the world is too impatient to wait and find out.

A single hamburger store is never going to be projected to have a billion dollars of revenue because people understand the total addressable market. Doesn’t matter how good the burger is.

The AI stuff is too new that people don’t have a firm grasp on the costs and profit opportunities. They don’t really even know how to define the TAM. Too many unknowns. Entire classes of labor could be replaced by AI —- or perhaps not.

With little grounding, it quickly becomes a circle of hype.

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

#66

Post by yibg »

deadbabe wrote: post #31
turtletontine wrote: post #30

Earlier quoted context omitted.

All I want to know is, is the bubble going to pop next week, next month, or two years from now? Welcome to the casino! Please enjoy your stay, and remember: the house always wins ;)

It’s not a casino, I’ve been winning for years.

Never heard of a winning streak at casinos?

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

#67

Post by naveen99 »

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…

It’s just AMD levering up on its on stock. Similar to MSTR. AMD is taking a loan against its own shares to build gpu’s hoping to rent them out via OpenAI in the future. No point in betting against it, because it can’t get margin called until OpenAI goes bankrupt. Which isn’t happening until OpenAI is worth $10 trillion first.

From the OpenAI side, it’s an amazing deal. $35B profit in one day… at a pe of 30, it’s already worth a trillion if it can repeat similar deals every year.

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

#68

Post by BobbyTables2 »

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

It’s more like, “the executives with lots of shares can’t see how to make the company grow, so they’ll just use profits to pump up the share price for their gain”.

I deeply feel buybacks shouldn’t be illegal but treated shamefully.

Instead of using profits to build up long term savings or fund R&D, they basically choose to do as little as possible.

There is no vision.

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

#69

Post by tshaddox »

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…

Does he explain why the valuation of the company would go up by $78 billion on the public news that AMD agreed to give $78 billion of goods to OpenAI for free?

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

#70

Post by latchkey »

naveen99 wrote: post #67
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…

It’s just AMD levering up on its on stock. Similar to MSTR. AMD is taking a loan against its own shares to build gpu’s hoping to rent them out via OpenAI in the future. No point in betting against it, because it can’t get margin called until OpenAI goes bankrupt. Which isn’t happening until OpenAI is worth $10 trillion first. From the OpenAI side, it’s an amazing deal. $35B profit in one day… at a pe of 30, it’s alre…

MSTR can't print more of what they are levering against.
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