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Nvidia emerges as leading investor in AI companies

44 points by kjhughes 3y ago

h2odragon 3y ago
https://archive.ph/LOgzq https://archive.ph/LOgzq
pie420 3y ago
Ponzi Scheme
- garyfirestorm 3y ago
  can you elaborate? why do you think so? not trying to be hostile, i want to fully understand your point of view. I am under the impression AI is solving many problems, more start ups...requires money... nvidia has money.... why is it a ponzi scheme?
  - vineyardmike 3y ago
    Presumably, this person thinks so because a lot of the cost of running an AI company is buying GPUs, which is mostly going to NVidia. The implication with this headline is that NVidia is propping up sales or driving demand by giving money to startups who will combine it with other investors money and eventually pay it back to NVidia. Is it a Ponzi scheme? Not strictly, but is interesting to see a company investing in their customers. There’s nothing wrong with doing so, but it’s interesting to see it at a time when demand is so high it can’t be sated.
  - tsimionescu 3y ago
    I don't agree with the GP, but I tthink the logic is that most of the money that AI startups pay is ultimately going to Nvidia. So, if most of the money is coming from Nvidia and going back to Nvidia, then Nvidia is self-dealings to some extent and artificially increasing their own valuation. Of course, this doesn't make it a Ponzi scheme, it would at best be a different type of fraud. And it ignores the fact that the money isn't moving so directly - the AI companies are typically buying GPU compute power from a cloud provider, and it is the cloud provider paying Nvidia. Still, if you're investing in Nvidia, you should keep an eye on this. It may mean that some of the increased demand for Nvidia GPUs is artificially sustained by Nvidia itself.
  - svnt 3y ago
    People think it is a problem because with AI startups most of the money in these investments comes right back to nvidia as revenue. So nvidia gets to do this: 1) start with $100 M 2) invest in startup 3) get investment worth at least $120 M (investment at discount) 4) reflect 20% gain on books 5) receive $80 M in guaranteed revenue (H100s) So before the inevitable long-term failure of 90% of these startups, nvidia gets to reflect a nearly immediate 100% gain on any money they run through this. Then they use the gain to invest in more startups where the only thing guaranteed is the purchase of nvidia chips. When the startups go to zero and the market is flooded with used H100s they probably believe they will release a new arch and repeat.
    - datadrivenangel 3y ago
      It's an investment/gamble that is realized as revenue now, but is cashflow negative. This may be competitive with throwing that money at additional sales/marketing activities, but long term creates the risk that they have to write off a lot of equity and the whole program will have been a loss.
      - 8ytecoder 3y ago
        Cashflow shouldn't be affected - might even be positive(?). If they invest $X in a startup, it reduces the cash asset but they'll have an offsetting "other investments" based on the valuation of the startup - which should be at least 100% of the total investments the startup has received. I'm guessing here, but, there's a good chance that it'll be cash flow positive as is. Not to mention the fact that most of the money from this investment flows back to Nvidia, adding to the cash flow as revenue.
- verdverm 3y ago
  not sure about that, but maybe becoming "too big to fail"
- VerminOctopus1 3y ago
  This line of reasoning makes no sense to me. This is a strategy to further entrench their product in the industry, not a ponzi scheme.
1-6 3y ago
So all this ‘pent up demand’ for AI (as investors) is basically the company that builds the tool? Imagine if Levis Strauss back in the gold rush days was the mysterious whale that bought most of the gold. Could Satoshi Nakamoto be Jensen Huang? I’m just posting silly tinfoil hat theories bit this is interesting…
- ramesh31 3y ago
  > So all this ‘pent up demand’ for AI (as investors) is basically the company that builds the tool? They make the gold, not the tool. Ounce for ounce, a wafer of top end NVIDIA chips is the most valuable substance on earth.
  - matmulbro 3y ago
    cringe
    - deleted 3y ago
      [deleted]
  - civilitty 3y ago
    > Ounce for ounce, a wafer of a top end NVIDIA chips is the most valuable substance on earth. I think that would still be Californium. Even if NVIDIA could fit 300 H100 on a 300mm wafer at $40,000 a GPU a wafer would be worth $12,000,000 which would be in the same ballpark as a single gram of Californium. Technically anti-matter would cost orders of magnitude more but there's no demand for it so it's not really valuable, whereas Californium is tightly rationed for scientific research. </silly-nitpick>
- vineyardmike 3y ago
  > Could Satoshi Nakamoto be Jensen Huang? This image is really funny. I think your Levi’s analogy is underselling it. I don’t know what % of gold income went to buying pants but I doubt it’s as high as an AI startups GPU costs. It’s really interesting that NVidia could be getting a huge chunk of this investment money back as revenue. This investment plan would probably be profitable just from driving up valuations and getting other investor’s money as sales revenue even if their equity positions go to zero. Really though, they probably invest by giving GPUs or future-looking GPU commitments at-cost so they get equity at a discount equal to whatever margin they have in their chips.
heavyarms 3y ago
This makes sense on a number of fronts. 1. If you have capital to invest, you could do worse than AI startups at the moment. 2. Nvidia's long-term threat is not just direct competitors (AMD, Intel), but the big cloud-players going to in-house chips. Supporting the next wave of your customers makes sense. 3. Using Nvidia is the path of least resistance right now. If you only invest in startups using your products (and you are an active investor), you give startups another reason to avoid taking a risk on the alternative. edit: typo
- shihab 3y ago
  But this also means if another AI winter were to come, Nvidia will be hit on two fronts.
  - bugglebeetle 3y ago
    Nothing venture-capitalized, nothing gained!
  - MPSimmons 3y ago
    Okay but we could always go back to GPU mining, right? ;-)
- deleted 3y ago
  [deleted]
- deleted 3y ago
  [deleted]
crest 3y ago
Here's a bunch of money to buy our products with?!?

44 points by kjhughes 3y ago

h2odragon 3y ago

https://archive.ph/LOgzq https://archive.ph/LOgzq

pie420 3y ago

Ponzi Scheme

garyfirestorm 3y ago
can you elaborate? why do you think so? not trying to be hostile, i want to fully understand your point of view. I am under the impression AI is solving many problems, more start ups...requires money... nvidia has money.... why is it a ponzi scheme?
- vineyardmike 3y ago
  Presumably, this person thinks so because a lot of the cost of running an AI company is buying GPUs, which is mostly going to NVidia. The implication with this headline is that NVidia is propping up sales or driving demand by giving money to startups who will combine it with other investors money and eventually pay it back to NVidia. Is it a Ponzi scheme? Not strictly, but is interesting to see a company investing in their customers. There’s nothing wrong with doing so, but it’s interesting to see it at a time when demand is so high it can’t be sated.
- tsimionescu 3y ago
  I don't agree with the GP, but I tthink the logic is that most of the money that AI startups pay is ultimately going to Nvidia. So, if most of the money is coming from Nvidia and going back to Nvidia, then Nvidia is self-dealings to some extent and artificially increasing their own valuation. Of course, this doesn't make it a Ponzi scheme, it would at best be a different type of fraud. And it ignores the fact that the money isn't moving so directly - the AI companies are typically buying GPU compute power from a cloud provider, and it is the cloud provider paying Nvidia. Still, if you're investing in Nvidia, you should keep an eye on this. It may mean that some of the increased demand for Nvidia GPUs is artificially sustained by Nvidia itself.
- svnt 3y ago
  People think it is a problem because with AI startups most of the money in these investments comes right back to nvidia as revenue. So nvidia gets to do this: 1) start with $100 M 2) invest in startup 3) get investment worth at least $120 M (investment at discount) 4) reflect 20% gain on books 5) receive $80 M in guaranteed revenue (H100s) So before the inevitable long-term failure of 90% of these startups, nvidia gets to reflect a nearly immediate 100% gain on any money they run through this. Then they use the gain to invest in more startups where the only thing guaranteed is the purchase of nvidia chips. When the startups go to zero and the market is flooded with used H100s they probably believe they will release a new arch and repeat.
  - datadrivenangel 3y ago
    It's an investment/gamble that is realized as revenue now, but is cashflow negative. This may be competitive with throwing that money at additional sales/marketing activities, but long term creates the risk that they have to write off a lot of equity and the whole program will have been a loss.
    - 8ytecoder 3y ago
      Cashflow shouldn't be affected - might even be positive(?). If they invest $X in a startup, it reduces the cash asset but they'll have an offsetting "other investments" based on the valuation of the startup - which should be at least 100% of the total investments the startup has received. I'm guessing here, but, there's a good chance that it'll be cash flow positive as is. Not to mention the fact that most of the money from this investment flows back to Nvidia, adding to the cash flow as revenue.
verdverm 3y ago
not sure about that, but maybe becoming "too big to fail"
VerminOctopus1 3y ago
This line of reasoning makes no sense to me. This is a strategy to further entrench their product in the industry, not a ponzi scheme.

1-6 3y ago

So all this ‘pent up demand’ for AI (as investors) is basically the company that builds the tool? Imagine if Levis Strauss back in the gold rush days was the mysterious whale that bought most of the gold. Could Satoshi Nakamoto be Jensen Huang? I’m just posting silly tinfoil hat theories bit this is interesting…

ramesh31 3y ago
> So all this ‘pent up demand’ for AI (as investors) is basically the company that builds the tool? They make the gold, not the tool. Ounce for ounce, a wafer of top end NVIDIA chips is the most valuable substance on earth.
- matmulbro 3y ago
  cringe
  - deleted 3y ago
    [deleted]
- civilitty 3y ago
  > Ounce for ounce, a wafer of a top end NVIDIA chips is the most valuable substance on earth. I think that would still be Californium. Even if NVIDIA could fit 300 H100 on a 300mm wafer at $40,000 a GPU a wafer would be worth $12,000,000 which would be in the same ballpark as a single gram of Californium. Technically anti-matter would cost orders of magnitude more but there's no demand for it so it's not really valuable, whereas Californium is tightly rationed for scientific research. </silly-nitpick>
vineyardmike 3y ago
> Could Satoshi Nakamoto be Jensen Huang? This image is really funny. I think your Levi’s analogy is underselling it. I don’t know what % of gold income went to buying pants but I doubt it’s as high as an AI startups GPU costs. It’s really interesting that NVidia could be getting a huge chunk of this investment money back as revenue. This investment plan would probably be profitable just from driving up valuations and getting other investor’s money as sales revenue even if their equity positions go to zero. Really though, they probably invest by giving GPUs or future-looking GPU commitments at-cost so they get equity at a discount equal to whatever margin they have in their chips.

heavyarms 3y ago

This makes sense on a number of fronts. 1. If you have capital to invest, you could do worse than AI startups at the moment. 2. Nvidia's long-term threat is not just direct competitors (AMD, Intel), but the big cloud-players going to in-house chips. Supporting the next wave of your customers makes sense. 3. Using Nvidia is the path of least resistance right now. If you only invest in startups using your products (and you are an active investor), you give startups another reason to avoid taking a risk on the alternative. edit: typo

shihab 3y ago
But this also means if another AI winter were to come, Nvidia will be hit on two fronts.
- bugglebeetle 3y ago
  Nothing venture-capitalized, nothing gained!
- MPSimmons 3y ago
  Okay but we could always go back to GPU mining, right? ;-)
deleted 3y ago
[deleted]
deleted 3y ago
[deleted]

crest 3y ago

Here's a bunch of money to buy our products with?!?